BIS consults on disclosure of non-financial and diversity information

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16 Feb, 2016

The Department for Business Innovation and Skills (BIS) has issued a consultation on the UK implementation of the EU Non-Financial Reporting Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups (the BIS consultation). The aim of the EU non-financial reporting Directive (EU NFR Directive) is to improve the transparency of certain EU companies as regards non-financial and diversity information.

The EU NFR Directive was approved by the council of the European Union in September 2014. It requires large public-interest companies with more than 500 employees to disclose relevant and material environmental and social information in their annual report. Public interest companies are those with securities admitted to a regulated market in the EU together with credit institutions and insurance undertakings.

Those within scope will also be required to provide information on their diversity policy, covering age, gender, geographical diversity, and educational and professional background. Disclosures shall set out the objectives of the policy, how it has been implemented, and results.

The European Commission has recently launched a public consultation to collect views from stakeholders on the form and content of non-binding guidance for reporting non-financial information.

The new rules complement the narrative reporting regulations in the UK.  Through complying with the narrative reporting regulations UK quoted companies will already be disclosing specific information on the company’s strategy, business model, human rights and gender diversity in their strategic report and disclosing information on greenhouse gas emissions in their directors’ report.  The new NFR Directive will extend the level of disclosures required on diversity (for example policies on age, gender, educational and professional background and professional background) and will specifically require reporting on bribery and corruption matters for the first time.  However, for some large non-quoted UK companies that fall within the definition of a Public-interest entity, the Directive may bring about significant new disclosures in their annual reports that were previously not required by regulation. 

The BIS consultation asks for views on the following:

  • whether an option should be available to allow companies to disclose non-financial information in a separate report, outside the annual report;
  • what options should be considered regarding implementation. Specifically BIS has asked for views on the options to update the existing UK reporting framework for the disclosure requirements for large PIEs, or, to reduce the scope of the existing UK reporting requirements for all quoted companies and limit it to those required by the EU NFR Directive; and
  • whether companies should be required to verify the non-financial information in their annual report by an independent assurance service provider.

In addition, BIS has used the consultation to “take a wider, strategic look at reporting in the UK”, particularly focusing on the scope for deregulation. The main topics of consultation are:

  • whether non-financial information could be published in solely electronic format on a company’s website and wider considerations in respect of electronic publication;
  • guidance on the definition of the term ‘senior manager’ for the purposes of numerical disclosures on gender diversity, which as currently defined in the Companies Act 2006 has “proved challenging” in compliance;
  • whether any existing UK or EU reporting requirements could be repealed in order to remove any unnecessary reporting; and
  • the cost of preparing an annual report, as well as the expected costs and benefits of adopting the EU NFR Directive.

The EU NFR Directive must be incorporated into UK law by 6 December 2016, with a view to these regulations applying to reporting years beginning on or after 1st January 2017.

Comments are requested by 15 April 2016. 

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