Crossing the Atlantic: the E.U. Directive Part II
In the first blog in this series, we discussed the new European CSR Reporting Directive and its impact on U.S. companies. The E.U. Directive is flexible with how companies report CSR, as long as the disclosed information is material to the business.
Let's take this one step further and look at the topics of interest to the E.U. authorities, including the Grenelle II Act, and how they can be presented.
CSR reporting was formalized in France in 2001 with the New Economic Regulations Act, requiring listed companies to disclose information relating to environmental, social, and governance performance in their annual reports. Although over 80% of companies complied with the legislation, a study in 2010 showed that highly visible information, such as social dialogue, diversity, and education, was widely reported by companies—while information on internal organization of companies, including wages, restructuring, and subcontracting, was significantly underreported.
The Grenelle II Act was subsequently passed in 2010 to improve the quality of published CSR reports. In addition, it required that all companies, both listed and non-listed, disclose annually. Grenelle II specified a progressive implementation schedule and thresholds for companies, but by 2014 all companies with over 500 employees and total assets/net sales greater than €100 million (approximately $109 million) were covered.
Grenelle II is widely considered to be the most robust and stringent national mandate for CSR reporting yet, requiring companies to comply or provide an explanation on 42 topics related to themes of social and environmental performance, and commitments to sustainable development. In addition, Grenelle II mandates third-party verification of the data.
It's likely that the E.U. Directive will align closely with the Grenelle II Act. One of the main proponents of the new Directive is Michel Barnier, the former French Minister of Agriculture and Fisheries and a key player in the development of Grenelle II.
E.U. officials have already hinted that both listed and non-listed companies with over 500 employees operating in Europe will eventually be required to comply with the Directive. Though in its infancy, it seems likely that the E.U. will follow the strong example set by the French government in terms of reporting criteria and coverage.
Read more in our blog post, Crossing the Atlantic: the E.U. Directive.
In our next blog in this series, we'll explore the Johannesburg Stock Exchange Socially Responsible Investing Index, an initiative by the exchange that parallels South African corporate governance standards.