Press release

European agreement improves company transparency

UK government welcomes measures from the European Parliament which look to improve the transparency of companies’ non-financial reporting.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

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:

  1. More information on the European Council proposal can be found here - http://ec.europa.eu/internal_market/accounting/non-financial_reporting/index_en.htm.

  2. 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.

  3. 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.

Published 15 April 2014