Directive for disclosure of non-financial and diversity information

On September 29th 2014, the Council of the European Union adopted a directive (following the European Parliament which had done so on April 15th 2014) for the disclosure of non-financial and diversity information by certain large companies (the "Disclosure Directive"). The Disclosure Directive was published in the Official Journal of the European Union on November 15th 2014 and introduces a number of amendments to the Directive 2013/34/EU on annual financial statements, consolidated financial statements and related reports of certain types of undertakings.

The Disclosure Directive introduces additional non-financial disclosure requirements for large public interest entities (this would include listed companies as well as some unlisted companies, such as banks, insurance companies and other companies so designated by the Member States because of their activity, size or number of employees) with more than 500 employees to include a non-financial statement in their management report containing information on environmental matters, social and employee related aspects, respect for human rights, and anti-corruption and bribery issues. The statement should include a brief description of the undertaking's business model, a description of its policies, including due diligence processes implemented, the outcomes of those policies, related risks and how the undertaking manages same and non-financial key performance indicators relevant to the undertaking.

An undertaking that does not pursue policies in one or more of these areas is required to explain why this is not the case. Furthermore, the Disclosure Directive provides undertakings with flexibility to disclose relevant information in the way that they consider most useful, or in a separate report. Undertakings may use international, European or national guidelines which they consider appropriate (various examples are listed in the Disclosure Directive including the UN Global Compact, OECD Guidelines for Multinational Enterprises and the Global Reporting Initiative).

The Disclosure Directive also requires large listed public interest undertakings to disclose their diversity policies in relation to their administrative, management and supervisory bodies, including information on the age, gender, educational and professional backgrounds of their members. The diversity related information should be included in the corporate governance statement and should contain the objectives of such a policy, its implementation and the results obtained. If no such policy is applied, it should be explained why this is the case.

"Member States will have two years to transpose the Directive into national legislation."

Therefore, companies concerned will have significant time to adapt to the new requirements, and will start reporting as of their financial year 2017. The Commission shall prepare non-binding guidelines on methodology for reporting non-financial information which shall be published by December 6th 2016. The Commission shall also submit a report to the European Parliament and to the Council on the implementation of the Disclosure Directive which shall be published by December 6th 2018 and shall be accompanied, if appropriate, by legislative proposals.