New rules may force large companies to tighten up reporting on such issues as board qualifications and environmental and diversity matters
Many large European companies may have to bolster their disclosure on environmental, social and diversity issues under an amendment to European Union (EU) accounting regulations that will come to a vote in April.
The European Parliament is scheduled to vote in plenary next month on an amendment to existing accounting legislation that would oblige about 6,000 large companies to start reporting on diversity of board directors, environmental issues, human rights, anti-corruption efforts and other matters.
The change would affect reporting by companies that have more than 500 employees and are deemed ‘large public-interest entities’ by EU member states. While most such entities are publicly traded, the amendment will also affect some private companies, as well as most financial institutions and insurance companies.
‘Companies will be required to disclose concise, useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than a fully fledged and detailed report,’ notes a European Commission statement. Only about 10 percent of the companies affected currently report on these issues, it adds.
Many of the details and methods of reporting will be left up to the individual companies.
‘The draft directive has been designed with a non-prescriptive mind-set, and leaves significant flexibility for companies to disclose relevant information in the way they consider most useful, or in a separate report,’ the commission says. ‘Companies may use international, European or national guidelines that they consider appropriate.’
Regarding diversity on boards of directors, companies will have to disclose age, gender and the educational and professional backgrounds of members, as well as the objectives of their board diversity policies. Companies without a diversity policy will be obliged to explain why they don’t have one.
The proposal was endorsed by the EU Council of Permanent Representatives late last month after it received preliminary approval from the European Council and the European Parliament. ‘Europe needs modern and useful rules on transparency of non-financial information by certain large companies,’ says Michel Barnier, commissioner for the internal market and services, in a press release. ‘I am glad to see the European Parliament and the council agree.’
