EU Commission ‘should be firm on companies in non-financial reporting proposals’

Advisor points to areas where the EC might tighten reporting requirements.

The European Commission should hold a firm line on non-financial reporting by corporations operating in Europe when its expected proposals are issued by the end of March, according to an advisor within DG Internal Market and Services, the department overseeing the new regulations. Speaking in a personal capacity at Agrion’s Energy & Sustainability conference in Brussels recently, Nicolas Bernier Abad, Policy Officer, DG Internal Market and Services at the European Commission said the Commission was looking at its proposals through a lens of “growth and employment”. He said that Michel Barnier, the European Commissioner for Internal Market and Services, saw clarity and transparency for investors and stakeholders on social and environmental issues, including their response to difficult issues such as corruption, as vital for corporate sustainability and long-term growth. A draft proposal on non-financial reporting would likely be out by the end of March, he said. Bernier Abad said most European companies had been publishing basic information on non-financial issues since 2003 under the Fourth Company Law Directive, which was amended to require companies to include, where appropriate, key performance indicators (KPIs) relating to environmental and employee matters in their annual report. Under that Directive, Member Statescould exempt small and medium-sized (SME) companies from the disclosure obligation. Bernier Abad said he believed implementation of the 2003 rules needed “clarity” and that while he didn’t think the Commission should be “proscriptive” on non-financial reporting, he said published information would have to be “relevant”, “material” and, more importantly “should actually be done.” He said: “Sometimes, as with financial information, companies have to send out bad news. I believe that remedying the current transparency deficit is important and that large companies and SMEs would have a lot to gain from providing better information.” He said information should be applied at ‘group level’ to give a holistic view of the company’s non-financial issues to stakeholders. He said verification of company non-financial reporting could be made via existing references such as the OECD guidelines on multinationals complaint mechanism.
Bernier Abad said he believed the costs involved for companies in meeting new reporting requirements would be ‘marginal’ and that transparency would be “good for business”. The proposed rules on corporate social and environmental information by companies are part of The European Commission’s Single Market Act communication adopted in April 2011: Link to consultation