The EU Non-Financial Reporting 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 BIS consultation was published in February 2016.

The ACCA comments that the non-financial disclosures required under the EU Non-Financial Reporting Directive should be provided in the strategic report.  It believes that “the placement of non-financial information is linked to the application of materiality” and indicates that information should only be included within the strategic report where it is material to shareholders’ decision making.  The ACCA comments that “immaterial supplementary information or regulatory disclosures can be reported separately, for example on company websites”.  Further the ACCA comments that entities should be permitted flexibility to make judgements about what information should be reported in the strategic report and what information should be reported separately and “encourages the Government and FRC to provide clear, practical guidance around the application of materiality in reporting non-financial information”.

Regarding scope, the ACCA indicates that the scope of the existing strategic reporting requirements in the UK should be extended to include all of those additional requirements under the EU Non-Financial Reporting Directive (for example anti-corruption and bribery disclosures).  It also comments that the requirements should then apply to all listed companies as well as unlisted public interest entities.  The ACCA comments

We acknowledge that this approach would exceed the intended scope of the EU NFR Directive by extending the enhanced non-financial reporting requirements to quoted public companies with less than 500 employees. However, in our opinion the benefits outweigh the incremental costs, especially as these quoted public companies already comply with the Strategic Report requirements under CA 2006

The ACCA does not believe in the introduction of additional mandatory requirements for verification of non-financial information by an independent assurance service provider.  It comments that “demand for additional assurance should be market led, and not mandated by legislation”.

Finally, the ACCA indicates that “practical guidance around the implementation of the EU NFR Directive is urgently needed”.  Specifically it mentions guidance would be required around the framework for non-financial reporting and materiality.  The European Commission has recently issued a public consultation on non-binding guidance on the methodology for reporting of non-financial information and the ACCA “would urge the Government to push for the EU Commission to make the non-binding guidelines as helpful and practical as possible for companies applying the Directive”.  As well as providing comments to the BIS consultation on UK implementation, the ACCA has also provided its comments on the European Commission’s consultation on non-binding guidelines which can be downloaded below.

Click for:

• Press release (link to ACCA website)
• ACCA response to BIS on the UK implementation of the EU Non-Financial Reporting Directive (link to ACCA website)
• ACCA response to the European Commission on non-binding guidance on the methodology for reporting of non-financial information (link to ACCA website)
• Our previous UK Accounting Plus news item on the BIS consultation
• Our previous UK Accounting Plus news item on the European Commission consultation