Additional Non-Financial Disclosure Requirements for EU Companies in Effect This Year

Starting this year, large companies based in the European Union will need to disclose additional non-financial information in their annual reports, specifically policies, risks and outcomes related to environmental issues, respect for human rights and anti-corruption.

This mandate is a result of a 2014 directive regarding company disclosure of non-financial and diversity information. The directive specifically applies to companies that are public interest entities with more than 500 employees.

Official guidelines for non-financial reporting are expected to be published by this spring, and the directive requires companies to begin collecting data this month.

In many cases, companies that already have adopted policies for sustainable and socially responsible operations should be compliant with the new reporting requirements.  Many well-known EU companies, such as Volvo, BP Pic, Eni S.P.A., and Mondi Pic, have publicized policies and programs that meet or exceed the new EU mandated non-financial disclosures.

These guidelines are expected to follow many established protocols, such as ISO 2600 for social responsibility and OCED’s guidelines for multinational enterprises.  Each EU member country will also need to adopt legal requirements and establish the level of detail that companies are required to report.

In general, annual reports for 2017 should include a brief description of a company’s policies and business practices in the following key areas: environmental protection, human rights, anti-corruption and employee protection.  Companies will also be required to report on due diligence and outcomes in these areas and explain the key risks for each.  In non-financial disclosures, companies will likely need to report on how risks are being managed.

It’s likely that companies will uncover many risks in their supply chains, especially since it can be difficult to gain visibility into the supply chain beyond tier one. In recent news reports, several EU companies have already been linked to corruption, modern-day slavery and environmental issues due to poor supplier performance.

Source Intelligence is monitoring the new directive and other regulations and standards in the European Union. For EU-based companies concerned about the new directive and other regulatory requirements, Source Intelligence can provide a preliminary assessment with actionable recommendations. For more information, you can contact Source Intelligence  directly or visit their resource center here.