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Nonfinancial Company Reporting

The triple (environmental, social and governance) crisis has lent new urgency to the debate on requirements for companies to extend their reporting beyond financial aspects to include their environmental and social impacts. The current system of non-financial reporting, which (with some exceptions) is based on voluntary disclosure in sustainability or corporate responsibility reports, does not allow for an adequate comparison of social and environmental performance across companies or within companies over time. A broad coalition of trade unions, NGOs and experts have therefore raised the demand for the implementation of mandatory standards for non-financial reporting by companies.

 

 

 

The issue of social reporting by companies extends back to at least the 1970s. However, the debate has intensified in the last decade, driven by factors such as the climate crisis, pressure on working conditions due to increased globalization and competition, and spectacular failures in corporate governance. Greater pressure on institutional investors to invest more ethically and responsibility has also driven the demand to know more about what companies are doing and what potential 'reputational risks' they and their supplier chain are facing. Although private initiatives for voluntary disclosure have emerged (e.g. the Global Reporting Initiative) and some countries require disclosure of some information by certain types of companies, on the whole it is not possible to seriously benchmark companies' impact in these areas. Under the motto 'the first step to improving a company's performance is to know what it is doing', more and more organizations and individuals are demanding a binding requirement on companies to provide a comprehensive spectrum of information on their policies and performance in the environmental and social (including employment and working conditions) areas. This reporting must be done on the basis of clearly-defined standards in order to ensure credibility and comparability between companies and over time.

Within the European Commission, DG Enterprise organized a series of workshops for stakeholders on the issue of non-financial reporting in 2009/2010 and DG Internal Market held a public consultation on the issue at the turn of the year 2010/2011. The Commission also published a communication on CSR at the end of 2011, including a new and stronger definition of CSR, and announced that they will publish a proposal for CSR reporting in the course of 2012.

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