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FAST FORWARD TO A TRANSPARENT AND SUSTAINABLE FUTURE
03 December 2014
Fast Forward to Transparent Future

​The European Directive on disclosure of non-financial information was adopted in September 2014 and will come into force in December 2014, after which European member states will transpose it into national laws. ​​
According to the Directive, 6,000 large public interest enterprises will have to report on a number of sustainability matters, including environmental, social and employee issues, respect for human rights, anti-corruption and bribery matters. We interviewed one of the key actors in the development of this legislation - Nicolas Bernier-Abad, Policy Officer at the European Commission. Mr. Bernier-Abad has been responsible for developing the policy within the Commission, first developed by former Commissioner for Internal Market and Services, Michel Barnier.
 
The requirements set by the Directive are meant mainly for large European companies, although some foreign companies will also be covered. Is it accurate to say that any large company (regardless of its main headquarters) will have to comply with the requirements provided it is listed in the EU market?

The scope of application of the Directive includes certain large companies and groups. According to Article 1 of the Directive, the new disclosure requirements on non-financial information apply to large public-interest entities with more than 500 employees. The concept of public-interest entities is defined in Article 2 of the Accounting Directive (2013/34/EU), and includes companies listed in EU markets, as well as some unlisted companies such as credit institutions, insurance companies, and other companies, that are designated by Member States because of their activities, size, or number of employees. Although large companies listed in EU-regulated markets, but registered in Third World countries were included in the scope of the initial European Commission proposal, they have not been reflected in the final text. It is estimated that around 6,000 companies will be subject to the new requirements.
 
 

The Directive requires credit and insurance undertakings to comply with the new reporting requirements, as these sectors are considered to be public interest. Is it correct to assume that large companies that belong to these sectors have to comply with the requirements if they are not listed in any EU member state, but operate in the EU?

Large credit institutions and insurance companies subject to the Accounting Directive with more than 500 employees will have to comply with the new disclosure requirements, whether they are listed or not.

If a company that falls under the scope of the Directive is a subsidiary of a foreign company, can this subsidiary be considered in compliance if its parent company in a foreign country produces a report that is in line with the EU requirements and includes information about that specific subsidiary?

This is an essential element of flexibility, which aims to avoid undue administrative burden. The Directive clearly sets out that subsidiaries will be exempted, provided they are included in the consolidated management report or the separate report of the parent company drawn up in accordance with the Directive.

Companies are required to report on, where proportionate and relevant, the risks associated with their operations and due process policies in place in their supply or subcontracting chains. Will this form the basis for more stringent requirements addressing issues in the supply chain?

This is a significant novelty introduced by the Directive. Article 3 of the Directive mandates the Commission to prepare a report by the end of 2018, and review its implementation. All aspects will be reviewed in a comprehensive and balanced manner.

The Commission will publish non-binding guidelines to help companies comply with the new requirements set by the Directive, due by 2016. What should companies expect from them?

This point was very important for the European Parliament and the Council. Article 2 of the Directive mandates the Commission to prepare non-binding guidelines on methodology by the end of 2016. Relevant aspects will be considered in a thorough and balanced manner, including comprehensive consultation with stakeholders.

GRI believes that sustainability disclosure is key to encouraging sustainable and responsible decisions by companies. In this sense, how does the Commission see the Directive’s contribution to the overall EU priority towards sustainable development and growth?

I hope this legislative initiative will have a significant effect on improving the overall transparency and performance of EU companies, and will ultimately translate into more sustainable growth and jobs.