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EU Directive on non-financial reporting and diversity
Willem Wassink
Agenda • Introduction • Objective of the Directive • To whom does it apply and when • Non-financial information • Diversity • Reporting • Assurance • Questions
Introduction
Objective of the Directive
Increase transparancy to make companies more resilient, increase performance and engage with stakeholders through:
- relevance
- consistency
- comparability
of non-financial information.
Who and when
Who: public-interest entities having an average number of employees in excess of 500 When: Companies concerned will start applying the Directive as of 2018, on information relating to the 2017 financial year.
Transposition into national law
Minimal: The Netherlands require disclosure for Public-interest entities when they have at least 500 employees and either assets over € 20 million or net sales of over € 40 million Extended: Denmark and Sweden included also non-listed companies in scope and already require entities with over 250 employees to disclose. National transposition measures are communicated by the Member States and can be found at http://eur-lex.europa.eu/legal-content/EN/NIM/?uri=CELEX:32014L0095&qid=1507009568793
Non-financial information Disclose relevant non-financial statements, the minimum should include::
• Environmental matters
• Social and employee matters
• Respect for human rights
• Anticorruption
• and bribery matters.
Non-financial information continued The Directive also establishes that the non-financial statement shall include:
1. a brief description of the undertaking’s business model;
2. a description of the policies pursued by the undertaking in relation to those matters, including due diligence processes implemented;
3. the outcome of those policies;
4. the principal risks related to those matters linked to the undertaking’s operations including, where relevant and proportionate, its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the undertaking manages those risks;
5. non-financial key performance indicators relevant to the particular business.
Apply or explain: Where the undertaking does not pursue policies in relation to one or more of those matters, the non-financial statement shall provide a clear and reasoned explanation for not doing so.
Diversity To disclose diversity policies in relation to the administrative, management and supervisory bodies with regard to aspects such as:
• Age;
• Gender or;
• Educational and professional backgrounds Why: Diversity of competences and views of the members enables them to constructively challenge the management decisions and to be more open to innovative ideas. It contributes to effective oversight.
Guidance on reporting The Commission prepared non-binding guidelines on methodology for reporting non-financial information which can be found online at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52017XC0705(01)
Reporting Frameworks The Directive has been designed in a nonprescriptive manner, and leaves significant flexibility for companies to disclose relevant information in the way that they consider most useful. They may rely on national, Union-based or international frameworks, and if they do so, undertakings shall specify which frameworks they have relied upon.
To link the Directive to GRI Standards
Source: https://www.globalreporting.org/standards/resource-download-center/linking-gri-standards-and-european-directive-on-non-financial-and-diversity-disclosure/?g=a693dcb9-4b90-49a2-b9d1-4b06fe7cc938
Global Reporting Initiative – Food Processing Sector Disclosures
• Helping to make safe, healthy and affordable food available • Impacts on climate change and risks posed to resource base by climate change • Involvement in rural areas of developing countries • Complex, global supply chains • Vulnerability and capacity of small producers in the food supply chains • Involvement of governments • Influence on the health and wellbeing of consumers • Impacts on natural resource depletion and dependence on natural resources • Consequences of depletion of scarce natural resources • Fair and ethical trade practices • Use of packaging and associated impacts on environment and health
Source: https://www.globalreporting.org/resourcelibrary/GRI-G4-Food-Processing-Sector-Disclosures.pdf
Supply Chain • The non-financial statement should also include information on the due diligence processes
implemented by the undertaking, also regarding, where relevant and proportionate, its supply and subcontracting chains, in order to identify, prevent and mitigate existing and potential adverse impacts. Source: https://www.magazine.bayer.com/en/keeping-the-juice-on-the-table.aspx
UN Sustainable Development Goals The disclosure requirements arising from the Directive make an important contribution towards the Sustainable Development Goals
Assurance • Statutory auditors and audit firms should only check that the non-financial statement or the
separate report has been provided.
• In addition, it should be possible for Member States to require that the information included in the non-financial statement or in the separate report be verified by an independent assurance services provider.
