EU firms up its plans to legislate on non-financial disclosure

Investor input to Commission expert group

The European Commission has confirmed it plans a “legislative proposal” on corporate disclosure of non-financial information in the first half of 2012.

It has convened an expert group – including representatives from institutional investors such as APG and Aviva Investors as well as Eurosif and France’s Vigeo – to help it assess the issues.
The Commission is currently preparing an impact assessment of the plans but a working document says any proposal “could aim at improving transparency, comparability and relevance” of non-financial information.

“The Commission intends to present in 2012 a legislative proposal on the transparency of the social and environmental information provided by all companies in all sectors,” according to a Commission working paper circulated at a meeting of the expert group last month. The proposal is planned for the first half of the year.

The September 12 meeting was chaired by Jeroen Hooijer, Head of Unit, Financial Reporting and Accounting at the Commission’s Internal Market Directorate.Attendees included Claudia Kruse, Head of Corporate Governance at APG Investments (representing the International Corporate Goverenance Network, ICGN), Aviva’s Head of Sustainability Research & Engagement Steve Waygood, Eurosif’s Executive Director François Passant and Nicole Notat of Vigeo.

A key topic of the meeting was whether a disclosure requirement should be obligatory or on a ‘comply-or-explain’ basis.

The meeting report says most experts supported the idea of a principles-based approach rather than a detailed, rules-based one. But some experts said the voluntary approach to non-financial reporting had “failed to provide the market with a satisfactory level of transparency”.

The EU thinks the current framework is fragmented at member state level, which “hampers benchmarking between companies and translates into a lack of completeness and consistency”. The discussion paper continues: “It hinders the “capacity of investors to build relevant non-financial information into their valuation models”.