EU set to propose rules on companies’ non-financial information disclosure

With Integrated Reporting draft due as well, a red-letter day for sustainability reporting

The European Commission, the executive arm of the European Union, is set to unveil its draft legislation covering how large companies disclose non-financial and diversity information tomorrow (April 16).
The move is aimed at improving the current “unclear and ineffective” legislation, according to an EU agenda item.
Relevant major companies will need to disclose information on policies, risks and results on environmental matters, human rights, anti-corruption and bribery and boardroom diversity.
Current EU rules, especially the Fourth Company Law Directive, which relates to company annual reports, already address the disclosure of non-financial information. “However, the requirements of the existing legislation have proved to be unclear and ineffective and applied in different ways in different Member States,” the EU says. It points out that fewer than 10% of the largest companies in the bloc disclose such information regularly.
“Yet it is well known that companies which are transparent deliver consistently higher economic performances over time, have lower financing costs, attract and retain talented employees, and ultimately are more successful.“Investors and consumers also increasingly demand this kind of information.”
Some EU member states have introduced increased disclosure requirements and the Commission is trying to “improve the situation EU-wide”.
Internal Markets Commissioner Michel Barnier is set to announce the full proposals in Strasbourg tomorrow afternoon, European time.
The new European proposals follow a consultation that took place from November 2010 to January 2011. Eurosif, the European Sustainable Investment Forum, had argued the case for mandatory sustainability reporting while the Global Reporting Initiative spoke of going “beyond laissez-faire reporting” and towards a European ESG disclosure framework.
They also follow new rules on extractives transparency that the EU released earlier this month.

It will cap would could prove a watershed moment for corporate sustainability reporting, with the International Integrating Reporting Committee (IRRC) also set to unveil its long-awaited consultation draft as well tomorrow.