YOUR HEADING HERE10.05.2011

Legal insight- what the EU Directive on mandatory sustainability reporting means for your company

September 2014

Key objectives

• increase transparency and increase relevance, consistency and comparability of non financial information

• increase diversity in boards of companies• increase the company’s accountability and

performance

Legal elements of the Directive

1.to amend the Accounting Directives1.1 to amend article 46 and 46a of the Fourth Directive and Article 36 of the Seventh Directive 2. the legal basis for the proposal is based on

article 50(1) of the Treaty, which is the legal basis for adopting EU measures

3. ratified on 15 April 2014

What must be covered?

• Article 46 1(b) will require large companies to disclose a statement in their Annual Report including material information relating to : – environmental – social– employee-related matters – respect of human rights– anti-corruption and bribery

•

What must the statement include?

1.a description of its policies2.results 3.risk-related aspects

What can companies rely on?

• Companies can rely on the:– UN Global Compact,– UN Guiding Principles on Business and Human

rights,– OECD guidelines for MEs, – ISO2600, • They must disclose which framework they have

relied on

What if companies don’t do this?

• Where companies do not pursue policies in relation to ONE of more of these matters, it must provide an explanation why it has not done so

• Implication is that companies will need a policy and procedures in place to meet the requirements of the Directive

• Member states to determine enforcement measures

What companies are covered by the obligations?

• The obligation applies only to those companies:

o whose employees exceeds 500 AND o exceeds a balance sheet total of 20 million

euros OR a net turnover of 40 million euros

Listed companies diversity requirements

• Large listed companies are to provide information on their diversity policy, including aspects concerning age, gender, geographical diversity and educational and professional background – this must be included in the corporate governance statement. Where companies do not have a diversity policy they will be obliged to explain why this is the case

What about third party verification?

• The report would also contain a report of the statutory auditors opinion concerning the consistency or otherwise of the annual report, including non-financial information contained in the annual report

When will the Directive come into force?

• 2015-2016• member states have 2 years to transpose the

Directive into national legislation

How does it differ from current UK reporting standards?

• the UK Companies Act 2006 (Strategic Report and Directors) Regulations 2013 requires listed, large and medium sized companies to report on their non-financial information. Only listed companies have to provide KPIs.

• there is therefor a possibility that more large companies will be caught by the provisions of the EU proposal.

• for more information on the regulatory requirements for UK Companies see our guide at www. Clt-envirolaw.com

Questions to ask your board?

• Does your company have more than 500 employees? Is it listed? Where?

• What is the annual turnover? • What policies do you have in place for

environmental, social, human rights and bribery issues?

• Does the company have a diversity policy?• Have you considered how to get the report

audited?

Help needed?

• Email us at info@cltenvirolaw.com

• We would love to have a chat!

www.clt-envirolaw.com