European agreement improves company transparency
15 Apr 2014 03:52 PM
UK government welcomes measures from the
European Parliament which look to improve the transparency of companies’
non-financial reporting.
The
UK government has today (15 April 2014) welcomed measures from the European
Parliament which look to improve the transparency of companies’
non-financial reporting.
As
a result, businesses’ annual reports will need to include information on
environmental, social and employee matters and any issues relating to human
rights and bribery. These disclosures are crucial for investors and of interest
to customers as they help explain a company’s developments in the past
financial year and its strategy for the future.
The
new framework, which amends the new Accounting Directive, will affect all large
public companies, of which there are about 500 in the UK.
Business Minister Jenny Willott said:
The
UK already has a world-class corporate governance structure. However, I welcome
any efforts to improve transparency in the way companies are managed and
controlled.
It’s really important that these measures cover
the whole EU and I believe that they strike the right balance between ensuring
companies report useful information whilst avoiding imposing unnecessary
burdens on businesses. This is a real step forward.
The
proposals will amend the recently agreed Accounting Directive that already
requires all companies (private and listed) to include some environmental and
employee related non-financial information in annual reports.
They will now need to be formally adopted by the Council
of Ministers. Following this the UK will aim to bring these into force by
2016.
Steve Waygood, Chief Responsible Investment Officer at
Aviva Investors, said:
This new legislation could be the start of a brave new
world for corporate transparency. This legislation should hugely increase the
amount of information available to investors and the general public on how
sustainable a company’s operations are. Well run companies will want to
avoid the embarrassment of having to explain why they have failed to deliver
the data. This information is absolutely crucial for long term investors as
many of the new factors to be reported upon are key to whether a company is
successful in the long run.
Teresa Fogelberg, Deputy Chief Executive, Global
Reporting Initiative, said:
This directive is the vital catalyst needed to usher in
a new era of transparency in the largest economic region in the world. This is
a truly historic moment and I am confident that this is just the beginning of a
new era for transparency and sustainable and inclusive growth in the EU. The
Global Reporting Initiative is committed to continue supporting the European
institutions, the Member States and companies in this
endeavour.
Notes to editors:
-
More information on the European Council proposal can be
found here -http://ec.europa.eu/internal_market/accounting/non-financial_reporting/in
dex_en.htm.
-
The
UK had recently introduced similar requirements for all quoted companies,
regardless of their size. The domestic regulations, which came into force in
October 2013, streamline companies’ annual reports which over the years
had become unhelpfully too long and complex to read and introduce new
non-financial reporting requirements on human rights, gender breakdown and
greenhouse gas emissions.
-
The
government’s economic policy objective is to achieve ‘strong,
sustainable and balanced growth that is more evenly shared across the country
and between industries’. It set 4 ambitions in the ‘Plan for
Growth’:
- to
create the most competitive tax system in the G20
- to
make the UK the best place in Europe to start, finance and grow a
business
- to
encourage investment and exports as a route to a more balanced
economy
- to
create a more educated workforce that is the most flexible in
Europe
Work is underway across government to achieve these
ambitions, including progress on more than 250 measures as part of the Growth
Review. Developing an Industrial
Strategy gives new impetus to this work by providing businesses,
investors and the public with more clarity about the long-term direction in
which the government wants the economy to travel.