Campaigners say European non-financial reporting proposal is insufficient

Criticism from European Campaign for Corporate Justice

The European Union’s proposals to make large companies report on non-financial issues has been branded “insufficient” by corporate responsibility group the European Campaign for Corporate Justice (ECCJ).

The ECCJ, a network of civil society organisations working on corporate accountability and responsibility, acknowledges that the European authorities have the opportunity to take an important step by adopting a strong mandatory framework for the disclosure of non-financial information.

But it says: “ECCJ welcomes this first legislative initiative to make non-financial reporting mandatory, but regrets that the Commission’s proposal leaves too much flexibility.”

The European Commission published a legislative proposal in April this year to require large companies to include a non- financial statement within their annual report covering environmental, social, human rights, anti- corruption and bribery and diversity matters.

However, the ECCJ argues that the Commission’s “comply or explain” approach allows companies to simply explain away why they do not report on some aspects. With companies able to report against whatever guidelines they consider appropriate there will be “no set of common indicators”.In addition, the group is concerned that there are no monitoring or sanction mechanisms to make sure firms respect the legislation and provide accurate information.

The ECCJ argues that the legislation should build on the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises or risk “fragmentation and incomparability”.

And, crucially, the ECCJ says verification and enforcement mechanisms are fundamental to combat non-compliance or the disclosure of misleading information. It states: “This legislation cannot succeed in the absence of legal mechanisms to ensure compliance and disclosure of relevant information.” So measures for monitoring, verification and sanction should be introduced.

The draft legislation, the Brussels-based group says, “must be strengthened if it is to benefit the environment, people and businesses by making companies genuinely accountable and transparent”.

Last month, RI reported that the ECCJ was seeking links with socially responsible investors as part of its new strategic plan. The coalition includes 10 national bodies as well as campaign groups such as Friends of the Earth Europe. Link to ECCJ position paper