European Commission proposals: an important milestone on the journey towards Integrated Reporting
The European Commission announced proposals on April 16 to amend the Fourth and Seventh Accounting Directives, opening the way for increased disclosure by large European companies on non-financial matters. The Commission’s aim is to improve business transparency and performance on social and environmental issues and the measures are likely to impact around 18,000 businesses across the EU.
Businesses will be required to disclose information on policies, risks and results relating to environmental, social and employee-related aspects, human rights, anti-corruption and bribery and diversity on boards of directors.
Commenting on the European Commission's proposals Paul Druckman, Chief Executive Officer of the International Integrated Reporting Council (IIRC), said:
“The next step needs to be the integration of information that is material to value creation into the strategic decision-making and reporting processes of the business. We look forward to working with the European Commission, European Parliament, businesses, investors and other stakeholders across the European Union to advance the case for improved disclosure and transparency as part of the journey towards Integrated Reporting”.
Importantly, the proposals do not require businesses to adhere to new EU-wide measurement metrics. Rather, they enable businesses to use existing recognised national and international frameworks to reduce the potential cost and improve comparability and consistency.
The proposals come at an important time for the IIRC, which itself launched a 90-day consultation on the draft of the International Integrated Reporting Framework on 16 April.
Paul Druckman added:
“We believe the Commission’s proposals are an intelligent and logical milestone on the continuing journey towards Integrated Reporting as part of the evolution in corporate reporting globally. The production by businesses of non-financial information is the essential first step in equipping providers of financial capital with the data they need to make efficient and effective capital allocation decisions.
“But we know this is not enough on its own. For investors to have confidence in the resilience of the business model, companies need the right reporting framework to enable them to integrate processes and decision-making, reduce silos and trigger board discussions that reduce risks and improve the long-term prospects of the business".
Source: IIRC press release