In March 2016, the Federation of European Accountant (“FEE”), issued a position paper, EU Directive on Disclosure of Non-Financial and Diversity Information: Achieving Good Quality and Consistent Information, (the “Position Paper”) that:
- Highlights the requirements of the 2014 EU directive on disclosure of non-financial and diversity information (the “EU Directive”),
- Addresses issues that might contribute to inconsistent application of the EU Directive,
- Offers positive recommendations on ways to achieve consistent, high quality reporting about non-financial information and
- Contributes to the development of the non-binding guidelines that the European Commission is required to produce.
Issued in 2014, the EU Directive requires certain large publicly accountable companies, i.e. those with more than 500 employees, to disclose relevant and material environmental and social information in their annual reports. The EU Directive went into effect for companies’ fiscal years beginning after January 1, 2017.
The FEE Position paper gives an excellent overview of the requirements of the non-financial disclosures required by the EU Directive and relates those requirements to the numerous reporting frameworks that address all or some part of ESG reporting.
The paper also offers comments about the efficacy of the various reporting frameworks at providing interested stakeholders the type of consistent high-quality ESG/non-financial information that stakeholders have been requesting.
Further, the Position Paper provides example disclosures from several companies that FEE believes exhibit good practices related to ESG disclosures.
The disclosures included in the paper are from:
- Aggerko Plc, a leader in temporary power and temperature control solutions;
- Unilever, a multinational consumer goods company;
- ARM Holdings Plc, a leading semiconductor intellectual property supplier;
- Gold Fields, one of the world’s largest gold mining firms;
- Energie Baden-Württemberg AG, a publicly traded electric utilities company; and
- The Crown Estate, a collection of lands and holdings in the United Kingdom.
Each of these companies has been acclaimed for some facet of their ESG/non-financial information reporting.
Lastly, the Position Paper concludes with recommendations for improving the consistency and comparability of non-financial information disclosures.