A new EU directive calls for more transparency from major companies

More than 6,000 big companies from the European Union will have to increase the amount of non financial information they release, because of a new EU directive addressed to private enterprises. This new rule has been greatly water down by the pressure of lobbies in Brussels, but it will improve public access to the impacts of these companies’ activities over the environment, social issues, diversity, respect to human rights, corruption and bribes.

The directive still needs to be ratified by the Council in May. It is expected to be adopted by national governments in 2016, so companies will start releasing these data in 2017. The EU wants to increase the amount of information they provide on issues such as their greenhouse emissions, oil spills, or human rights abuses.

These are good news for journalists who struggle to find stories in companies’ Corporate Social Responsibility (CSR) reports, but the legislation comes with some shortcomings (if you’re one of them here you can find five tips to make sense of them). The main one: it does not include sanctions to those companies which do not meet its provisions. Legal experts have shown their skepticism, but some hope it will raise a burning question: should Corporate Social Responsibility (CSR) be compulsory or voluntary? Lobbies, included Business Europe -the largest in the EU-, fear that this directive could become the first of a series of rules to regulate CSR, which could expose further wrongdoings and cost hundred of thousands of pounds in auditories.

Most European companies of this size already publish reports on CSR, but there are huge differences among them on the level of details provided, and the clarity and amount of the information given. Under this norm, companies should include a description of their policies, the results obtained and the risk management applied. Besides, they should include further information on their diversity policy, explaining, for instance, the age, gender, geographic origin, education and professional level of their employees and members of their board of directors. The directive also tries to standardize those reports by recommending following the UN Global Compact, the guidelines of the OECD for multinational companies, the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, the ISO 26000, and the Global Reporting Initiative.

The rule will apply to enterprises that employ more than 500 workers and a net turnover exceeding 40 million euros (33 million pounds). This threshold has been one of the issues water down by lobbies and a number of governments who opposed this call for transparency. The original draft included the pymes as well, raising the total of companies to 18,000 but, eventually, it will affect to a third of that number.

France, Denmark and Belgium asked for a strong and mandatory policy, while the UK, Poland and other eastern European countries preferred a limited one. Germany did not want any intervention at all.

“It isn’t perfect,” writes Richard Howitt, MEP and rapporteur on Corporate Social Responsibility, in a letter to The Guardian. “Nevertheless, the number of companies undertaking ESG reporting will more than double compared to existing voluntary arrangements, and they will do so on their “policies, risks and results” in relation to society, the environment and human rights. The report must be included within the company’s management statement. All of this represents a real step forwards to the aim of Integrated Reporting”.

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