OECD updates its Guidelines for Multinational Enterprises, includes disclosure

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31 May 2011

The Organisation for Economic Co-operation and Development (OECD) has published a 2011 update to its Guidelines for Multinational Enterprises.

The Guidelines were last updated in 2000 and include recommendations for responsible business conduct that 42 adhering governments encourage their enterprises to observe wherever they operate.

The 2011 update includes specific consideration of the need for entities to comply with disclosure requirements, both from a financial and non-financial perspective. An extract from the guidelines follows:

General policies

The Principles call on the board of the parent entity to ensure the strategic guidance of the enterprise, the effective monitoring of management and to be accountable to the enterprise and to the shareholders, while taking into account the interests of stakeholders. In undertaking these responsibilities, the board needs to ensure the integrity of the enterprise's accounting and financial reporting systems, including independent audit, appropriate control systems, in particular, risk management, and financial and operational control, and compliance with the law and relevant standards. ...

Disclosure

Enterprises should apply high quality standards for accounting, and financial as well as non-financial disclosure, including environmental and social reporting where they exist. The standards or policies under which information is compiled and published should be reported. An annual audit should be conducted by an independent, competent and qualified auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the enterprise in all material respects.

Disclosure is addressed in two areas. The first set of disclosure recommendations calls for timely and accurate disclosure on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company. ... The Guidelines also encourage a second set of disclosure or communication practices in areas where reporting standards are still evolving such as, for example, social, environmental and risk reporting. This is particularly the case with greenhouse gas emissions, as the scope of their monitoring is expanding to cover direct and indirect, current and future, corporate and product emissions; biodiversity is another example.

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