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The European CSR Directive

By 6 December 2016, EU member states must comply with the Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups. This new directive for disclosing non-financial information transposes the provisions into national legislation.

The Directive

The Directive specifies how large public-interest entities should disclose social and environmental information in their annual reports. The new provisions will be applicable to public interest entities over 500 employees. Public interest entities are companies, such as listed undertakings, banks, insurance companies or undertakings which are of significant public relevance because of the nature of their business, their size or their corporate status. Small and medium-sized companies will be exempted from the new reporting obligation. Some 6,000 public interest entities in the EU would fall under the scope of the directive.

The information that should be reported includes policies, main risks and outcomes related to environmental matters, social and employee aspects, respect for human rights, anti-corruption and bribery issues, and diversity on their board of directors. These reports will give shareholders and other stakeholders a comprehensive overview of how the company is performing.

Reducing CO2-emissions and carbon footprint is fast becoming increasingly important as part of companies’ CSR policies. Only through companies’ consistent reporting on energy, can stakeholders evaluate companies’ CO2-emissions and commitment to minimise their carbon footprint. Increasing energy transparency will change energy behaviour.

“Higher transparency through disclosure of non-financial information will enhance the accountability of large firms towards European citizens. It will allow investors to reward socially responsible business conduct, thus promoting sustainable growth,” said the Italian minister of economy and Finance Pier Carlo Padoan.

How to write a CSR report that complies with the Directive

Companies can disclose the non-financial information in the way they consider most useful. Companies already reporting on CSR matters can use existing reports as an annex to the annual management report, given that the report corresponds to the same financial year. The CSR report must also cover, at minimum, the same content required by the Directive.

The Directive suggests using national and international guidelines such as the UN Global Compact, ISO 26000 or the German Sustainability Code. Non-European companies may be requested to report according to the new Directive when they are a part of a European supply chain or selling in the European market.

In order to provide further guidance and help companies implement these provisions the co-legislators have tasked the Commission with the preparation of non-binding guidelines on methodology for reporting non-financial information.