European Union consults on corporate non-financial reporting methodology

The European Commission, the executive arm of the European Union, has launched a consultation as it looks to prepare non-binding guidelines for how corporate non-financial information should be disclosed, ahead of a deadline for the new directive on the issue to be transposed into member states’ national legislation.

European rules governing the disclosure of non-financial and diversity information by large undertakings (Directive 2014/95/EU) came into force in December 2014. It was an amendment to the earlier directive on annual financial statements.

The new requirements apply to large ‘public interest’ entities with more than 500 employees – including listed companies as well as some unlisted companies such as credit institutions. Company disclosures cover environmental matters, social and employee aspects, respect for human rights, anticorruption and bribery issues, and board diversity.

“Investors are more and more interested in non-financial information in order to have a comprehensive understanding of a company’s position and performance,” the commission says in the preamble to the consultation. The aim is to enhance the consistency and comparability of non-financial information.As enshrined in the directive, there’s a lot of flexibility in how companies disclose: they can rely on national frameworks, or structures such as the UN Global Compact or the OECD Guidelines for Multinational Enterprises, or even ISO standards.

“Investors are more and more interested in non-financial information.”

The commission is developing non-binding guidelines on methodology for reporting non-financial information by December 2016 – given that member states have to transpose the directive into national legislation by December 6. The Commission is even organizing transposition workshops to assist national authorities.

The consultation, organized by the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), runs until April 15. The nine-page document covers four areas: general principles; content; interaction with other frameworks; and disclosures related to board diversity policy. Link