CSR directive requires large companies to disclose non-financial information:
The EU directive 2014/95/EU (so-called CSR-directive) must be implemented into German law by 6th December of this year. This directive requires all large companies to disclose their strategies for sustainable development in the areas of
- Environmental Concerns
- Social and Employee Affairs
- Respect for Human Rights
- Combatting Corruption and Bribery
- Diversity in Management and Control Bodies (listed companies)
The reporting obligation will come into force for financial years as from 31st December 2016, meaning that the 2017 financial year will have to be reported on for the first time in 2018.
In spring 2016, the German Federal Ministry of Justice and Consumer Protection (BMJV) have brought forward a proposal for the implementation of the EU directive into German law. In concrete terms, this involves changes to the German Commercial Code (HGB) and/or management reports and group management reports of large companies.
According to the EU directive or draft bill, all capital market-oriented companies with more than 500 employees, a balance sheet total of 20 million euros or sales in excess of 40 million euros and which are of public interest (including banks and insurance companies) will be affected.
In order to comply with the reporting obligation, the affected companies are expected to request relevant information from their suppliers along the supply chain. Thus, the directive is also relevant to many smaller and medium-sized enterprises.
The principle of ‘comply or explain’ applies to the reporting process. This means if a company does not supply information on a specific area, a detailed explanation will be required.
There are no specifications about the reporting format. The required information can be integrated into the business review (or another report format) or be published as a separate report. Affected companies can orientate themselves to international, European or national reporting frameworks (e.g. OECD guidelines for multinational enterprises, Global Reporting Initiative, German Sustainability Code). Only the presence of the required information is examined. No review is undertaken of its actual content. A content review could of course take place at any given time by an independent auditor. In the event of breaches of the reporting obligation, fines may be imposed.
Arqum recommends those companies affected to check by end of 2016 at the very latest what gaps there are in the content requirements of the directive. Measures required can thus still be added in the reporting for 2017. Arqum provides a gap analysis for this purpose. Arqum is also training partner of the German Sustainability Code (DNK) and supports reporting in accordance with the German Sustainability Code.