The European Commission has published non-binding guidelines on the methodology to be adopted for reporting non-financial information by certain large companies and groups.
The guidelines—which the European Commission was required to produce pursuant to Art 2 of the Directive 2014/95/EU, amending the Accounting Directive on the disclosure of non-financial and diversity information—aim to help companies disclose high-quality, relevant and consistent non-financial information in a way that will encourage growth and provide transparency to key stakeholders.
Paul Davies, partner in Latham & Watkins’ London office, said that elements of non-financial information which should be disclosed include: a company’s business model; strategy and principal risks; main sectoral issues; interests and expectations of relevant stakeholders; the actual and potential impact of the company’s activities; and public policy/regulatory considerations.
Material information should relate to: environmental, social, and employee matters; human rights; and anti-corruption and bribery matters. Companies should review these materiality assessments regularly.
The guidelines require that disclosure must:
- contain all contextualised material information;
- be fair, balanced and understandable;
- be comprehensive and concise;
- be strategic and forward-looking;
- be stakeholder orientated; and
- be consistent and coherent.
Davies added: “The European Commission designed the guidelines to be practical, business-orientated, and impact-driven. The European Commission envisaged also that companies will use the guidelines to better integrate environmental and social information in their business cycle and that companies will adapt their reporting to the individual circumstances of their business.
“As companies start applying the requirements of the Directive in 2018 (on 2017 information), the European Commission will closely monitor this process, as required by Art 3 of the Directive.”