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European Commission Public Consultation on Disclosure of Non-financial Information by Companies

The European Commission has just published a summary report of the responses received to its public consultation on disclosure of non-financial information by companies.1 report shows that there is strong support for mandatory and standardized reporting by companies on a variety of issues, including human rights and environmental and social impacts.

The public consultation, which ran between November 2010 and January 2011, follows widespread demands for an improvement in the current system of non-financial reporting in Europe. In most Member States, company reporting on most environmental and social impacts takes place on a voluntary basis. Although some large listed companies are doing a good job of disclosure based on the Global Reporting Initiative (GRI) reporting standards, many large companies and most SMEs provide little or no such information. A coalition of trade unions, NGOs and responsible investors stressed the need for reliable and comparable information in a series of workshops on this issue organized by the European Commission in 2009-2010.2

In all 259 responses were received to the consultation, including companies/preparers (24%), users (26%), NGOs/other organizations (including trade unions) (28%), academics/individuals (9%), accountants/auditors (8%) and public authorities and standard setters (5%). On a number of issues the summary document provides a breakdown of opinions by type of respondent, possibly in response to criticisms that previous summaries have not attempted to weight responses by importance.

Roughly half of the respondents think that the current disclosure regime is “poor” or “very poor”. However a breakdown by type of respondent shows major differences between the groups, with only about 20% of companies giving a poor/very poor grade versus about three quarters of academics/individuals and about 60% of users and NGOs/others. This split between the opinions of companies, who are for the most part happy with the current regime, and the rest of society, which is much more critical, was apparent in the answers to a whole range of questions. For example there was very strong societal support for mandatory reporting on human rights policies, including over 80% of users and almost two thirds of NGO/others, versus only about 40 percent of companies.

Most respondents saw the need for exempting small companies from disclosure or using weaker disclosure requirements. A number of respondents also supported mandatory reporting on a “comply or explain” basis. Nevertheless, the responses overall demonstrate widespread support for the demand that the European Union take action to strengthen the current non-financial disclosure regime in Europe.

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