In September 2013, the European Council officially adopted the reform of non-financial reporting. The new reporting rules will require some of the 6,000 biggest European companies to disclose how they address the principal environmental and human rights risks linked to their activities, their due diligence policies and the outcomes of these policies.
Despite some loopholes (such as the absence of sanction in case of non-compliance) and excessive flexibility left to companies on what to report and how to report, this is an important way forward as these new transparency requirements should provide much needed information on companies’ impact people’s lives and the environment.
If for some countries this is not new – France has been requiring companies to disclose this type of information for years now – for most European countries this creates a new obligation for companies. The publication in the European Official Journal on the 15th November has launched the two-years count down for Member States to translate these new rules into national law. Some countries, like the Netherlands, the UK and Denmark have already started.
The European rules set the floor, Member States can go beyond. There are several important areas for improvement. The scope should encompass more companies, not only companies listed on the stock exchange. The definition of risk, reporting on impacts and the supply chain coverage are essential elements which can be strengthened. States should establish strong monitoring and enforcement mechanisms. They also should decide to limit as much as possible the exemptions to report which are proposed in the European text.
There is no clear guidance yet on what exactly companies should report, and as part of the new rules the Commission will have to come up with recommendations on methodology for reporting. ECCJ will actively engage in this process to ensure that issues that matters for society and the environment are included and companies are disclosing the right information.
The first full year of company reporting in accordance with the new requirements will be 2017, with reports expected in first semester 2018. The revision of the Directive is planned for the same year.