EU launches non-financial reporting consultation: UK MPs call to bolster OFR

The European Commission (EC), the executive body of the European Union (EU), has launched an online public consultation on non-financial disclosure by companies, which observers believe could herald a shift to greater ESG disclosure in corporate reporting. The deadline for replies to the consultation is 24 January, 2011. Speaking recently at RI’s ESG Europe 2010 conference in Amsterdam, Thomas Dodd, CSR co-ordinator at the Enterprise and Industry DG of the European Commission, said ESG disclosure rules were increasingly likely to be taken on board by the Commission. The EC is currently involved in a number of major investment and CSR reviews in the wake of the financial crisis, including a highly anticipated green paper on corporate governance, expected to be finalised early next year. The announcement of the latest EU consultation on non-financial reporting came at the same time as a group of UK Members of Parliament (MPs) from all 3 major parties tabled a parliamentary motion calling for social and environmental risks that “pose financial risks” to be integrated fully into company reporting. The MPs welcomed a commitment by the coalition government to reinstate an Operating and FinancialReview(OFR) to ensure that directors’ social and environmental duties have to be covered in company reporting. Proposals by the former UK government to introduce a statutory requirement for listed companies to publish an OFR were abandoned in 2006. However, the MPs said that unless the latest OFR included clear specific requirements it was unlikely to deliver on its intentions. The MPs said they were concerned that the proposed OFR legislation would be insufficient to tackle systemic failings in reporting that prevent companies and their investors anticipating problems such as those that led to BP’s oil spill. John Cruddas, a Labour MP supporting the motion said: “It is vital that the government lives up to its commitments so that companies can be held properly accountable.” Duncan Exley, campaigns director at FairPensions, the London-based lobby group, said “The coalition’s commitment to reinstate the OFR is welcome, but its effectiveness will be limited unless specific requirements are included, such as reporting future risks rather than past issues, and independent auditing to ensure information is accurate and useful”.
Link to EC consultation on non-financial disclosure