The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 (SI 2016/1245) (the Regulations) which transpose the minimum requirements of the EU NFR Directive will apply to the financial years of companies and qualifying partnerships, within scope of the Regulations, beginning on or after 1 January 2017.

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 provide a non-financial statement that discloses relevant and material environmental and social information, employee matters, respect for human rights, and anti-corruption and bribery matters in their annual report. It also introduces disclosures relating to business model, principal non-financial risks and non-financial key performance indicators. Public interest companies are those with securities admitted to a regulated market in the EU together with credit institutions and insurance undertakings.

The EU NFR Directive also requires those within scope to provide further information in the corporate governance statement 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. If a company does not have a diversity policy it must explain why this is the case. In November 2016, the Financial Conduct Authority (FCA) made amendments to the Disclosure and Transparency Rules (DTR) to implement this part of the EU NFR Directive as the requirements for a corporate governance statement are implemented in the UK through the DTR of the FCA.

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 and qualifying partnerships 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 requirements of the EU NFR Directive have been implemented into company law with the effect that:

• Large PIEs will apply the requirements of the EU NFR Directive. Large PIEs that are also quoted companies will also apply any existing requirements for the Strategic Report which are not covered by the EU NFR Directive e.g. discussion of community issues.
• Quoted companies that are not large PIEs (due to having fewer than 500 employees) will continue to apply the existing requirements for the Strategic Report.
• All other companies and qualifying partnerships will continue to apply the other applicable disclosure requirements in the Strategic Report that are unrelated to the NFR Directive (e.g. disclosure of strategy). 

BEIS had used the consultation to “take a wider, strategic look at reporting in the UK”, particularly focusing on the scope for deregulation for example considering whether non-financial information could be published in solely electronic format on a company’s website and whether any existing UK or EU reporting requirements could be repealed in order to remove any unnecessary reporting. BEIS is not taking forward any of these de-regulatory measures at this time.

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.

Further information:

• A link to the Regulations
• Consultation on the implementing the EU NFR Directive
• Our news stories on:
• Amending the DTR to implement the diversity requirements of the EU NFR Directive
• The European public consultation on non-binding guidance
• BEIS response to feedback from its consultation on implementation of the EU non-financial reporting directive
• Our Need to Know publication