EU ministers back new ‘business transparency’ directive

Out-Law News | 01 Oct 2014 | 12:16 pm | 1 min. read

Large listed companies will have to report on social and environmental matters from 2017 after EU ministers adopted a new directive.

The directive, adopted by the Council of the EU on 29 September, requires some companies to disclose in their management report “relevant and material information on policies, outcomes and risks, including due diligence that they implement, and relevant non-financial key performance indicators concerning environmental aspects, social and employee-related matters, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors”.

The directive is also a “first step” towards the implementation of measures for further transparency on tax matters and for ensuring country-by-country reporting by large companies and groups (9-page / 128 KB PDF), the Commission said.

The directive will enter into force after being published in the EU Official Journal. Member states will have two years to transpose the directive into national legislation, with companies expected to start reporting as of financial year 2017.

The Commission said the directive will apply to listed companies with more than 500 employees, of which there are around 6,000 in the EU.

“The approach taken ensures that administrative burden is kept to a minimum. Smaller companies will have no new requirements,” the Commission said. “Companies in the scope of the directive will disclose relevant, useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than detailed reports.”

The Commission said. “Furthermore, the directive provides companies with significant flexibility to disclose relevant information in the way that they consider most useful, or in a separate report. Companies may use international, European or national guidelines which they consider appropriate.”

The large listed companies will be required to provide information on their diversity policy, “such as age, gender, educational and professional background” to help increase diversity on company boards,  the Commission said.

The directive provides for further work by the Commission “to develop non-binding guidelines in order to facilitate the disclosure of non-financial information by companies, taking into account current best practice, international developments and related EU initiatives”.

EU commissioner for the internal market and services Michel Barnier said: “I am pleased that the Council has adopted this directive, which will drive the long-term performance of the EU's largest companies by significantly improving their transparency and, concretely, the disclosure of material non-financial information. Companies, investors and society at large will benefit from this increased transparency. This is important for Europe’s competitiveness and the creation of more jobs."