New transparency rules on social responsibility for big companies

BITCI News - Oct 03, 2014

Last week saw another step towards mainstreaming responsible and sustainable business practices. The Council of the European Union officially adopted reforms on the disclosure of non-financial and diversity information by certain large companies and groups.  Tina RocheCompanies where the average number of employees exceeds 500, and exceeds either a balance sheet total of EUR 20 million or a net turnover of EUR 40 million are required to draw up, on a yearly basis, a statement concerning environmental, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. The statement, which will be included in the management report – or in a separate report corresponding to the same financial year- will have to include a description of policies, outcomes and the risks related to the above mentioned areas. They would also have to disclose details about the diversity of their board of directors. All of this is classified as non-financial reporting. The new requirements which EU member states have two years to incorporate into domestic law, which will be applicable in 2017, aim to strengthen the company’s transparency and accountability.

Corporate responsibility situates businesses in relation to their employees, customers, local communities and citizens in general and assesses what these stakeholders expect from business. Therefore, business impact (beyond the traditional shareholder return and job creation roles) is a central tenet of what corporate responsibility and sustainability is about.  Indeed, research produced by Business in the Community Ireland (BITCI), Ireland’s leading organisation dedicated to corporate responsibility shows overwhelmingly that CR matters to consumers, potential employees, communities, CFOs and CEOs. In a 2012 BITCI/Deloitte survey of CFOs, 93% believe there is a direct link between sustainability programmes and business performance and a 2013 BITCI/Amárach survey revealed over 72% of Irish adults have stated that they consider a company’s reputation when buying their products or services.

Therefore, the appetite for non-financial information is very real and external pressure from shareholders, customers, regulators and the media leads many companies to focus on ways to collect and disclose non-financial data. The strong business case for comprehensive and comparable non-financial reporting is now widely recognised with KPMG’s 2013 Survey of Corporate Responsibility Reporting revealing that CR reporting is now undeniably a mainstream business practice worldwide, undertaken by 71% of the companies surveyed. For business, the benefits of reporting and due diligence processes include increased competitiveness and improved transparency. It is also an essential management tool that improves risk identification and long-term social, environmental as well as financial performance.

Founded in 2000, Business in the Community Ireland (BITCI) is the national non-profit business network that drives CR practices by providing specialised advice to 70 of Ireland’s largest companies to develop, manage, measure and report on their corporate responsibility.

In our experience, increasing numbers of companies are seeking advice on reporting of their sustainability performance alongside their financial performance within the Global Reporting Initiative (GRI) framework. In 2010 Business in the Community Ireland launched the Business Working Responsibly Mark. The Mark, audited by the NSAI, and based on ISO 26000, not only gives third party endorsement of practices, it provides an inventory, gap analysis and a roadmap for a company’s sustainability journey identifying risks and opportunities. Crucially, under the proposed reporting reforms companies may use any existing guidelines such ISO 26000 or the GRI to fulfil their reporting requirements.

We all know that our economy, society, and the environment are changing very fast and enterprises which are most attuned to changing societal expectations are likely to be those that are most successful. The message is clear: ensuring that companies take a good look at and report on how they are doing in non-financial areas makes a real difference to how they behave. Good reporting is therefore a fundamental tool for building better and more effective communication channels between a company and its stakeholders, making it transparent and more accessible. Therefore, every company should look at how they report their CR activities, as once the concept of mandatory CR reporting beds down; non-financial elements of company reporting are likely to offer an opportunity to companies to really tell their story.

Business in the Community Ireland is holding a conference on Trust, Reputation and Culture on November 11th in Dublin Castle where key trends in ethics, reputation and sustainability will be discussed.

Tina Roche, CEO, Business in the Community Ireland