Non-financial accounting of European companies

What do we know about the companies that trade and produce in Europe? Information on companies' financial performance is (in principle) public, but it is not what investors and- what concerns us more directly- communities and other stakeholders might need to know when dealing with a firm. 

Companies can of course release more information on a voluntary basis, but not many of them take this chance to shine. 

For this reason, last week the Commission put forward a proposal to amend two directives in the field of company law, with the following key objectives:

"(1) To increase the transparency of certain companies, and to increase the
relevance, consistency, and comparability of the non-financial information
currently disclosed, by strengthening and clarifying the existing requirements.
(2) To increase diversity in the boards of companies through enhanced
transparency in order to facilitate an effective oversight of the management and
robust governance of the company.
(3) To increase the company's accountability and performance, and the efficiency
of the Single Market" (explanatory note, p. 3)

If the proposal passes, companies with more than 500 employees will be required to disclose information on a number of "non-financial" aspects of their activity: environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors. Within these areas, the statement will include (i) a description of its policies, (ii) results and
(iii) risk-related aspects.

Even though the proposal is quite clear that the target is "business-relevant" information, more information will available to (associations of) consumers as well, hopefully hoping those of us who want to make considerate consumption choices.

Human rights in business

This week, the European Commission's DG for Enterprise and Industry announced that it has selected three business sectors for a year-long project aimed at developing sector-specific guidance on the corporate responsibility to respect human rights. One of them is the ICT sector. The Commission indicates that:

'The guidance developed through this project will be based on the UN Guiding Principles on Business and Human Rights. The European Commission identified the development of sector-specific guidance as one of the priority actions in its recent communication on corporate social responsibility.

Extensive consultations with enterprises and all concerned stakeholder groups are planned as part of the project process. Shift and IHRB will coordinate this process on behalf of the European Commission. The development of the guidance is due to be completed by the end of 2012.'

From a private law perspective, it will be interesting to see whether the human rights guidance that is expected to result from this project will consider the development of private law remedies for consumers, employees and third parties (e.g. liability under contract or tort law) alongside voluntary commitment to human rights standards by ICT businesses. Insofar as internet users are concerned, the recent proposal for a General Data Protection Regulation (on which we posted earlier) might serve as an example, since its Article 77 establishes a right to compensation for damage from a controller or processor who infringes data protection law.

Finally, here is some recommended further reading...
...on the history of human rights: 'The last Utopia' by Samuel Moyn
...on human rights and EU-based businesses: Alexandra Gatto's book on 'Multinational enterprises and human rights'
...on contract law and human rights (for those of you who read Dutch and from this group especially those reading this on an Apple computer): a news paper article by Lyn Tjon Soei Len.