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Innovative implementation of EU Directive on Non-Financial Reporting
07 February 2018

​It is a little over three years since the adoption of EU Directive 2014/95/EU on non-financial disclosure. By now, all EU Member States have transposed these rules into their relevant national legislation, and some innovative and progressive practices have emerged. At GRI, we want to highlight some of the best practices in the application of these state-specific requirements.
In Europe, the corporate non-financial reporting landscape has been decisively shaped by the European Union (EU), particularly with the introduction of the groundbreaking Directive on the disclosure of non-financial and diversity information by certain large undertakings and groups (Directive 2014/95/EU). The Directive charters a clear course towards greater business transparency and accountability on social and environmental issues.
 
By December 2017, all EU Member States had transposed these rules into their relevant national legislation, making use of the state-specific requirements that allowed countries room to interpret the Directive according to local conditions. At GRI, we want to highlight some of the best practices in the application of these state-specific requirements, for example when it comes to understanding what type and size of companies actually must report under the Directive, the company scope.
 
In this regard, the Danish and Greek governments have expanded on the Directive. While the requirements in each case are different, they have increased the pool of companies that are now compelled to do sustainability reporting.
 
Denmark: redefining a large company
Danish regulation mandating businesses to account for human rights and climate impact reduction was put in place in 2012 already. Similar to the EU Directive, the Danish Financial Statements Act is very flexible, only obliging companies to be open about the sustainability choices they make. Danish legislation, however, differs from Directive 2014/95/EU in how it defines a "large undertaking". First, companies with 250 employees are already considered "large" for Danish regulation, in contrast to  the 500 employees required by Directive. Second, the Danish framework not only applies to those companies that fall under the definition of public interest enterprises, but also covers accounting class C and accounting class D enterprises, and certain financial enterprises, such as, institutional investors, mutual funds and other listed financial enterprises that are not subject to the Danish Financial Statements Act.

Since at least most companies that fall under the Directive already had to comply with non-financial reporting requirements under the Financial Statements Act, the Directive imposes  “a very limited administrative burden, while also augmenting the transparency of Danish undertakings’ work on sustainability and CSR”, according to the Danish Business Authority. And, those large companies that already report using the GRI Standards or the UN Global Compact Communication on Progress (COP) principles, are granted automatic compliance with the new reporting requirements, which prevents double work on reporting, while encouraging disclosure.
 
Greece: turnover does matter
Greek policy-makers have gone even one step further, and signaled to their companies that they should be engaging in reporting, regardless of their size. While in Greek legislation a large company is still defined as having more than 500 employees, smaller and medium-sized companies also have a duty to report after the incorporation of the Directive.

Large Greek companies must report on its environmental and human rights performance, as well as on employee, corruption and anti-bribery matters as established in the Directive. But small companies, if they have more than 10 employees, a net turnover of over EUR 700,000 or a balance sheet total of over EUR 350,000 must also engage on reporting, particularly on environmental performance and employee matters. To lessen the potential burden, auditing of the resulting report is not mandatory for the smallest companies in Greece. 
 
This means that when it comes to the immediate social and environmental impacts, Greek companies have to be transparent, regardless of their size. With this measure, Greece acts to move its entire market towards more transparency, and encourages sustainable business practices among those companies that form the largest share of the economy and are often unfamiliar with sustainability reporting. GRI welcomes this forward-thinking measure and encourages small and medium-sized enterprises to report using the GRI Standards.
 
Read more
In Policy & Reporting: Member State Implementation of Directive 2014/95/EU, GRI and CSR Europe provided an overview of member states application of this Directive into their national law. The publication outlines the disclosure requirements per country and establishes a comparison between the different approaches. A revision of this publication by GRI and CSR Europe is planned in the coming months and will be available online.