NEW TRANSPARENCY RULES ON SOCIAL RESPONSIBILITY FOR BIG COMPANIES
The Council of the European Union adopted a directive for the disclosure of non-financial and diversity information by certain large companies. New measures will require certain big EU companies to draw up, on a yearly basis, a statement relating to environmental, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. The statement will have to include a description of the policies, outcomes and the risks related to those matters. Where a company does not pursue policies in relation to these matters, it will have to explain why this is the case.
The new measures are aimed at strengthening the company’s transparency and accountability, while limiting any undue administrative burden, and ensuring a level playing field across the EU.
The Italian minister of economy and Finance Pier Carlo Padoan said: “Firms, in particular large ones, play a role in the EU economy that goes far beyond the mere production of goods and services. With the approval of this directive, EU legislators have acknowledged this fact and reinforced the framework of corporate social responsibility. 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”.
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. Therefore 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.
A description of the diversity policy applied for the undertaking’s administrative, management and supervisory bodies with regard to aspects such as age, gender, educational and professional background, will be added in the corporate governance statement (provided for in article 20 of directive 2013/34/EU).
Country by country reporting on taxes
On a report to be delivered by 21 July 2018 by the Commission, it will have to be considered the possibility of introducing an obligation requiring large undertakings to produce, on an annual basis, a country-by-country report for each member state and third country in which they operate, containing information on profits made, taxes paid on profits and public subsidies received. The report will take into account developments to increase transparency in financial reporting carried out at international level. Country-by-country reporting in the extractives sector has already been legislated by the EU under directive 2013/34/EU.
Member states will have two years to incorporate the new provisions into domestic law, which will be applicable in 2017.