BEIS responds to feedback from its consultation on implementation of the EU non-financial reporting directive

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10 Nov, 2016

The Department for Business, Energy and Industrial Strategy (BEIS) has published its response to feedback received in response to its consultation on the implementation of the EU non-financial reporting directive in the UK.

In February 2016 the Department for Business, Innovation and Skills (the predecessor of BEIS) published a consultation on the implementation of the EU Non-financial Reporting Directive (the Directive) in the UK, which is required by EU law to occur by 6 December 2016.  Despite the result of the referendum on the UK's membership of the EU, government policy is to continue to implement EU legislation in accordance with EU law until the UK formally leaves the EU.

The consultation sought views on a variety of topics, regarding both the implementation of the Directive and other questions relating to UK non-financial reporting. In response to the feedback received, BEIS has set out the following plans for further action.

  • The consultation document proposed implementation of the requirements of the Directive in place of the non-financial elements of the current UK strategic reporting framework for large quoted companies, and the extension of these new requirements to include large unquoted public interest entities (PIEs). It also proposed two options for smaller quoted companies (those within the scope of the non-financial elements of the current UK strategic reporting framework but not the scope of the Directive): retention of the existing requirements; or removal of the existing requirements. Neither of these options were favoured by more than a handful of respondents, with a significant proportion proposing as a third option the application of the new requirements to smaller quoted companies as well. This would create a single regime for all entities rather than requiring implementation of a dual approach. In response to the feedback BEIS is pressing ahead with the first option, as they do not wish to 'gold-plate' EU requirements. However, smaller quoted companies will be given the option to apply the requirements applicable to large quoted companies if they wish to do so.
  • There was little appetite from respondents for reporting non-financial information in a separate report outside the existing annual report, so BEIS will not pursue this option any further. Respondents did, however, express interest in allowing flexibility in the placement of detailed supporting information, as long as the relevant information is still included in the annual report.
  • Although some respondents were in favour of requiring mandatory third-party verification of the information reported, the majority were not, so BEIS will not make such verification mandatory.
  • Respondents were generally in favour of promoting digital reporting and so the Government will look to clarify legislation concerning sending annual reports electronically and to encourage innovative digital reporting.
  • Two approaches to redefining 'senior managers' as currently defined in the strategic report's gender reporting requirements were proposed by respondents. The Government will explore these approaches with business and other stakeholders.
  • The Government will consider further various other suggestions for regulatory reform received from respondents.

The full outcome document can be obtained from the UK Government website.  Draft regulations have also been laid which can be obtained here.

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