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Deadline for Implementation of the Directive on Disclosure of Non-Financial and Diversity Information

Since 2011, the European Commission has indicated in various communications the need to improve the disclosure of social and environmental information. In view of this, on 22 October 2014 the European Parliament and the Council adopted Directive 2014/95 on the disclosure of non-financial and diversity information by certain large undertakings and groups.


Non-financial information

The new non-financial reporting obligations apply to:

  1. large undertakings of public interest (i.e. companies listed on regulated stock markets, credit institutions and insurance institutions) which exceed on their balance sheet date the average number of 500 employees and either a balance sheet total of EUR 20 million or a net turnover of EUR 40 million (on an individual basis); and
  2. public-interest entities which are parent undertakings of a large group which (on a consolidated basis) exceed on their balance sheet date the average number of 500 employees and either a balance sheet total of EUR 20 million or a net turnover of EUR 40 million. 


These undertakings (and groups) should include in their management report a non-financial statement containing information to the extent necessary for an understanding of the undertaking's (or group's) development, performance, position and the impact of its activity. The statement should include, as a minimum, information relating to:

  1. Environmental matters: this information should include details of the current and foreseeable impact of the undertaking's operations on the environment, and, as appropriate, on health and safety, the use of renewable and/or non-renewable energy, greenhouse gas emissions, water use and air pollution.
  2. Social and employee matters: this information may concern actions taken to ensure gender equality, implementation of fundamental conventions of the International Labour Organization, working conditions, social dialogue, respect for the right of workers to be informed and consulted, respect for trade union rights, health and safety at work and dialogue with local communities, and/or the actions taken to ensure the protection and development of those communities.
  3. Respect for human rights, anti-corruption and bribery matters: this information could include information on the prevention of human rights abuses and/or on instruments in place to fight corruption and bribery.

With respect to each of these matters, the company should provide:

  1. a brief description of its business model;
  2. a description of the policies pursued by the company, and the outcome of these policies;
  3. the principal risks related to these matters; and 
  4. the relevant non-financial key performance indicators. 

This information should be disclosed on a comply-or-explain basis: the company is not obliged to pursue policies in relation to the above matters; however, if it does not pursue such policies, it should provide a clear and reasoned explanation for this. 

In providing this information, undertakings may rely on existing national, European or international reporting frameworks, such as GRI, the UN Global CompactOECD Guidelines for Multinational EnterprisesISO 26000 and EMAS. It remains to be seen whether the Belgian and European legislators will support alignment with one or more of these reporting frameworks.

The statutory auditors and audit firms should verify whether a non-financial statement has been provided. Member States may additionally require that the information in the non-financial statements is also substantively verified by an independent assurance provider. 

One of the main questions which arises is in how much detail the non-financial information will have to be disclosed in order to ensure compliance with the Directive (to ensure "the proper understanding of the undertaking's (or group's) development, performance, position and the impact of its activity, relating to the above-mentioned matters"). 


Information on the diversity policy

The Directive also obliges large listed companies to include in their corporate governance statement (which forms part of the annual report) a description of the diversity policy applied in relation to the company's administrative, management and supervisory bodies, with regard to aspects such as age, gender and educational and professional background. If no such policy is applied, the statement should contain an explanation as to why this is not done. 


Implementation and entry into force

Member States should implement the Directive by 6 December 2016.

The Directive leaves Member States inter alia the freedom to:

  1. broaden the scope of application of the Directive to companies and groups other than those currently envisaged by the Directive;
  2. exempt companies from disclosing certain information where such disclosure would be seriously prejudicial to the commercial position of the company (or the group);
  3. assign the verification of the non-financial statement to an independent assurance services provider; and
  4. allow companies and groups to disclose the non-financial statement in a separate report (distinct from the annual report).

The provisions of the Directive will apply for the first time for the financial year starting on or after 1 January 2017.

The European Commission will publish non-binding guidelines by 6 December 2016, which should provide companies with a methodology that will facilitate the disclosure of relevant, useful and comparable non-financial information. 

Hopefully these guidelines, as well as the Belgian implementing act, will provide more clarity on the exact scope of the obligations under the Directive.

At the date of publication of this contribution, neither the draft implementation act nor the Commission's guidelines were yet available.