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New transparency rules on social responsibility for big companies

Two years to get in step
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By P. Capellini

The new text amending Directive 2013/34/EU on disclosure of non-financial diversity information by certain large undertakings and groups has been officially adopted by the European Council on 29 September 2014.

The new measures aim at increasing company’s transparency and accountability and will be incorporated into Directive 2013/34/EU on the annual financial statements and reports of certain types of undertakings.

This new text will require certain large companies to issue every year a statement about all the actions carried out in social responsibility, such as environment, social, human rights, bribery and anti-corruption. Classification of large companies is described in the new text and will include public-interest entities with more than 500 employees; examples of affected companies are banks, insurance companies or undertakings which are of significant public relevance: it seems that around 6000 public-interest entities may be affected by the new measures.

Information required

Affected companies will have to include in their Management Report a chapter dedicated to non-financial information, containing at least all the necessary data and figures necessary to understand company’s investment, performance, position and impact of its activity in social responsibility, relating as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters. The non-financial statement shall include, as prescribed by the new Directive:

-company business model description;

-policies pursued by the company;

-outcome of these policies;

-main possible risks and measures to deal with them;

-non-financial key performance indicators.

If a company does not pursue one or more of the minimum social responsibility’s matters listed above, it shall explain why this occurs.

In particular, for what concerns social and employee matters, the description of the adopted diversity policy shall be included in the non-financial statement with details on employee’s age, gender, education and professional background, objectives of that diversity policy, how it has been implemented and the results obtained in the reported period. To be noted that in case the diversity policy has not been applied, the statement shall contain an explanation of the reasons why.

How to draft the statement

In order to provide some guides, the European Commission will be called to issue non-binding guidelines on the methodology for reporting non-financial information, such as key performance indicators, general and sectorial: before issuing the guidelines, the Commission will consult all the relevant stakeholders.

The new text opens also to the possibility of introducing the obligation of drafting a country-by-country report for each State (within EU or extra-EU) where the company operates, including information on taxes paid, type and amount of investment performed, public subsidies received; whilst country-by-country report is already foreseen by Directive 2013/34/EU for the extractives sector only, the new text may widen this duty to all the companies affected by the new requirements.

Member States will have two years to transpose the requirements of the new text in their national laws, starting from the date of entering into force of new Directive: companies in the scope shall be compliant with the new requirements starting from financial year 2017.

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