BIS consults on implementing non-financial reporting for large undertakings

BIS has published a consultation seeking views on how the UK should implement the requirements of the Non-Financial Reporting Directive. 

Background

The Non-Financial Reporting Directive requires listed companies, credit institutions and insurance undertakings with over 500 employees to prepare a non-financial statement containing information relating to employee, environmental and social matters, respect for human rights and anti-corruption and bribery matters. The statement must include relevant policies and their outcomes, the main risks arising from these matters and non-financial KPIs.

The Directive must be implemented in the UK by December 2016, with a view to it applying to reporting years starting on or after 1 January 2017.

In the UK, companies (other than small companies) are already obliged to prepare a strategic report, as part of their annual report. Quoted companies must include in their strategic report information about the company’s employees, including a breakdown showing at the end of the financial year the number of persons of each sex who were:

• directors of the company;
• senior managers of the company (other than directors) (defined as an employee of the company who has responsibility for planning, directing or controlling the activities of the company, or a strategically significant part of the company);and
• company employees.

The consultation 

BIS is seeking views on:

• Whether the UK should make use of the option in the Directive to allow companies to meet their obligations in a separate non-financial statement, outside of the annual report;
• The different implementation options, including whether the current UK requirements for quoted companies outside of the scope of the Directive should be repealed; and
• Whether the UK should adopt the option which requires the non-financial statement to be independently verified; and the relative advantages and disadvantages of doing so. 

BIS is also seeking feedback on options for wider reforms to the scope of narrative reporting by UK companies, including:

• Whether, as permitted by the Directive, UK companies should be given the flexibility to publish their separate non-financial statements on their websites and if so, what legislative protections are needed; 
• Whether allowing companies to present their separate non-financial statements in a solely electronic format (as permitted by the Directive) would be beneficial for both companies and users of the statements; 
• In relation to gender reporting, it notes that it has received feedback that the definition of “senior manager” has proved challenging for companies to comply with. It therefore asks for suggestions as to how the definition might be improved to better describe this stratum in the company; and
• Whether there are any existing UK or EU narrative reporting requirements that could be repealed on the basis that they have become redundant, or no longer produce useful disclosure. 

Responses to The Non-Financial Reporting Directive – A call for views on effective reporting alongside proposals to implement EU requirements are required by 15 April 2016.