Swedish corporate governance board raises objections to EU non-financial reporting guidance

Panel makes comments to the Swedish Ministry of Justice and European Commission

The Swedish Corporate Governance Board (SCGB) has raised objections on the European Commission’s draft non-binding guidelines determining the methodology for non-financial reporting, which is one part of the soon to be published EU Non-Financial Reporting Directive.

The panel, known as Kollegiet, published its comments to the Swedish Ministry of Justice and to the European Commission earlier this month.

The Board said the proposed guidelines are “too detailed and in many respects prescriptive”.

”This implies a risk,” it says, “that the guidelines will in practice set a strong precedent for how companies apply the rules of the underlying Directive, despite the intention that the guidelines should be non-binding.”

As a result, the SCGB finds that “to fulfil the desired purpose of facilitating relevant, useful and comparable disclosure of non-financial information, the guidelines should be general and provide as much flexibility as possible for each company to decide what information is relevant and should be disclosed”.

The SCGB is chaired by Arne Karlsson, chair at media group Bonnier and its membership includes the likes of Marianne Nilsson, Head of Corporate Governance Issues at Swedbank Robur fonder and PwC’s Peter Clemedtson.

It has emphasised before that companies must be free to choose which non-financial information they submit, arguing that a company’s influence on society is specific to its activities.

Only large public-interest entities with more than 500 employees are affected by the disclosure requirement.In a feedback statement from September 20th, the EC said that “the Directive has been designed in a non-prescriptive manner, and leaves significant flexibility for companies to disclose relevant information in the way that they consider most useful. Companies may use international, EU-based or national guidelines that they consider appropriate.”

However, the EC postponed the issuance of the Directive and the methodology guidelines from December last year to this Spring. After the Task Force on Climate-Related Financial Disclosures (TCFD), a high-level panel convened by the Financial Stability Board (FSB), had published its draft recommendations, it announced that it needed to take its work into account “as far as possible”.

RI reported in December last year that the key question of the Directive will be the scope of reporting it will demand from businesses, limiting it to only requirements that are relevant for the business’ key stakeholders or including also, to some extent, the reporting on each of the four subjects: environment, social and employee, human rights, and issues of anti-corruption and bribery.

For investment analysts, the methodology guidelines will be a help by setting up a consistent approach when analysing a company’s performance, supporting thereby the harmonisation of reporting methodologies EU-wide.

In 2015 the SCGB unveiled a revised corporate governance code calling for board directors to adopt a ‘sustainability perspective’ – though it didn’t include a change requested by several big investors to introduce compulsory elections of individual directors.