eu directive on disclosure of non-financial & diversity information

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EU Directive on Disclosure of Non-Financial & Diversity Information

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Today’s Presenters

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Travis MillerAssent ComplianceGeneral Counsel

Kristen SullivanDeloitte & Touche LLPPartner - Sustainability







Agenda

What Is It?

What Do We Know?

What Don’t We Know?

Legal Framework

Predicting the Impact

Q&A

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[email protected] / www.assentcompliance.com / 1 866 964 6931 / © Assent Compliance 2016 3












INTRODUCTION

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Assent Product SuitesOur Market Leading Platform

Ethical Sourcing

Materials Management

Supplier Information Management

InspectionsConfigurable Surveys & Declarable Substance

Lists

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Feature PresentationPRESENTER, TITLE & COMPANY What Is the EU Directive on Disclosure of Non-Financial & Diversity Information?

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Why Was This Directive Passed?

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⬥ The Directive aims at improving the transparency of certain large EU companies’ non-financial information

⬥ A fundamental goal is to enhance the consistency and comparability of non-financial information disclosed throughout the EU

⬥ While the Directive is intentionally non-prescriptive, the consultation documents offer perspective in relation to an expectation that companies will leverage recognized international standards, consider responsible minerals sourcing, and disclose minimum relevant non-financial information

There Has Been a Push to Standardize CSR Reporting







⬥ In reaction to corporate disclosure practices, regulatory and standard setting bodies have advanced requirements and initiatives seeking to normalize disclosures.


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Most large cap companies in Europe currently produce annual corporate social responsibility reports








The EU Accounting Directive

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⬥ The Directive on disclosure of non-financial and diversity information (2014/95/EU) entered into force in December 2014

⬥ The EU Directive requires member states to transpose the Directive into their own law by December 6, 2016

⬥ The law is now in effect, so there are going to be reporting obligations and downstream effects

⬥ The EC detailed guidance has been delayed

A Mandatory Non-Financial Report







⬥ The law’s basic premise is to require annual corporate on CSR matters.

⬥ These reports must feature disclosures concerning social impacts and risks related to:⬦ Environmental matters⬦ Social and employee aspects⬦ Respect for human rights⬦ Anti-corruption and anti-bribery issues⬦ Diversity in their board of directors

The EU Accounting DirectiveA Mandatory Non-Financial Report







⬥ A company must align to a recognized international reporting standard, including, but not limited to:⬦ The UN Global Compact⬦ The OECD Guidelines for Multinational

Enterprises⬦ ISO 26000⬦ The Global Reporting Initiative (GRI)

The EU Accounting DirectiveA Mandatory Non-Financial Report







With That Background...

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Assent Is Thrilled to Introduce the Expert

Kristen SullivanDeloitte & Touche LLPPartner - Sustainability







Feature PresentationPRESENTER, TITLE & COMPANY What Do We Know?

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15 Copyright © 2017 Deloitte Development LLC. All rights reserved.

What we do know about the EU NFI Directive

A brief description of the company’s business model.

A description of the policy adopted by the company with regards to non-financial aspects, including the applied due diligence procedures.

The results of this policy.

The main risks connected to those aspects, related to the company’s activities, also with reference to, when suitable, its commercial relationships, products and services that can have negative impacts in such fields, in addition to the related management systems adopted by the company.

The fundamental non-financial performance indicators related to the specific activity of the company

The elements of non-financial reporting

Required disclosure aspects: environment, social and employee-related policies, human rights and anti-corruption, diversity policies and other possible additional information considered as suitable to be reported.


Some key points

«Comply or

explain» approach

Annual Report or separate report

Group of entities

Deadlines for publication of the

report

The company that doesn’t have any specific policy on one of the non-financial areas is required to give a clear and reasonable explanation of such absence

When included in a separate report, the non-financial information must be available on the company’s website within six months from the end of the reporting year

If a group of entities discloses non-financial information with reference to the consolidation boundaries, subsidiary companies will be exempted from the obligation



Role of auditors

Member states require that auditing companies control the accomplishment of the presentation of non-financial information.

Member states could require (within the adoption of the Directive in the national law) non-financial information to be verified by an independent provider of auditing services.

Issued by the Directive

At discretion of member states



Select reporting frameworks

OECD Guidelines (Organisation for Cooperation and Economic Development) are addressed to multi-national organizations

Three-pronged declaration on principles regarding multi-national companies and the social policy, issued by the International Labour Organization

The Guidelines on enterprises and human rights, issued by UN, represent a global rule for the prevention of human rights risks

Global Compact is a UN initiative that has developed universal principles in relations to human rights, work practices, environment and anti-corruption

SASB (Sustainability Accounting Standards Board) develops sustainability accounting standards that help corporations discloseuseful information to investors

IIRC (International Integrated Reporting Council) developed a framework for integrated financial and non-financial reporting

ISO 26000 is the standard thatprovides guidelines for responsible, ethical and transparent management of an organization

GRI Standards(Global Reporting Initiative) are an international standard for sustainability reporting



Feature PresentationPRESENTER, TITLE & COMPANY What Don’t We know?

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What we don’t know about the EU NFI Directive

Some key questions:• Will my GRI report suffice for compliance with the EU NFI Directive?

• What is the external assurance requirement?

• Will the effective date of the EU NFI Directive be postponed due to the delayed EC guidance?

• Will member state-specific regulation be different even after the EC detailed guidance is issued?


Feature PresentationPRESENTER, TITLE & COMPANY

Considerations for Companies

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Considerations for companiesSustainability report: contents

Lette

r to

the

stak

ehol

ders

Organization’s profile

Ethics Governance and

Transparency

Econo

mic res

pons

ibilitySocial responsibility

Environmental responsibility

Sustainability Report

•Company overview•Stakeholder mapping•Sustainability approach

•Medium- and long-term objectives and main results in the field of sustainability

•Labor practices•Human rights•Diversity and gender balance•Local community•Health & safety•Customer satisfaction

•Governance framework•Competence and diversity of Governance bodies

•Compensation and incentives•Anti-corruption

•Economic performance•Direct economic impacts•Policy on suppliers

•Raw materials•Energy•Water and other natural resources•Emissions and waste•Transportation and logistics


Reporting complexity challenges companies in prioritizing investments

CustomersInvestors

GovernmentNGOs

CommunitiesSuppliers

Engaging stakeholders to validate materiality and report focus/direction

Coordinating internal resources to identify material issues and compile and analyze ESG data

Finance

Sustainability/ESG reporting

Operations/functions

Risk management

Public policy/Investor relations

Rationalizing an increasing number of reporting frameworks, ratings schemes, and other requests for ESG data

External stakeholdersReporting outletsInternal resources

• Range of webpages

• Online downloadable GRI reports

• Separate stakeholder-focused reports

• Responses to investor surveys: CDP, Dow Jones Sustainability Index, etc.

Considerations for companies


2. Design 3. Capture 4. Record 5. Calculate 6. Compile 7. Report

1. Governance

How is the overall reporting program set up to meet regulatory and management reporting requirements?

How are all relevant data captured timely and accurately?

How are source data recorded and documented enabling traceability of the data?

How are source data and emissions factors being utilized to calculate emissions?

How are data compiled and prepared for reporting by the data owner(s)?

How is information reviewed, validated, self-certified, and presented; how often and for what purpose(s)?

8. Supporting infrastructure

Internal controls

Considerations for companies

Reporting processes and controls are critical to improving reporting quality


Feature PresentationPRESENTER, TITLE & COMPANY Predicting the Impact

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Predicting the Impact

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⬥ Most public companies have CSR disclosures they make in the form of annual sustainability reports

⬥ However, not all CSR disclosures align to an internationally recognized framework

⬥ Many Assent clients who believe they will be obligated to disclose have begun the process of identifying a framework and aligning practices to that framework

A Few Pragmatic Recommendations







How Do You Assess Gaps?

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Step 1: Find An Appropriate Reference for Your Standard Example: GRI

⬥ The first step is to review what you should be disclosing under your chosen standard

⬥ If you are not covering each of the identified topics, you will need to address or close those gaps








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Step 2: Review What You Have Said in the Past

⬥ Next, the obligated party must look at the required statements covered by the act

⬥ Any identified gaps related to required disclosures need to be addressed








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Step 3: Ensure Your Statements Are Properly Formatted

⬥ The organization of your disclosure will matter, especially as a core focus of the Directive is standardization

⬥ Be sure to include all necessary attributes for each disclosed topic, for example with GRI you should include both General Disclosures and Management Approaches for each topic specific disclosure








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Step 4: Ensuring All Stakeholders Are Included

⬥ Different topics will draw in different stakeholder groups, and different standards will drive engagement

⬥ This process often reveals strong interrelationships between the stakeholders and the disclosures

Materials in Product

Disclosures

Suppliers Surveys Onboarding Supplier Assessment

Employees Safety Training Exposure Mitigation Environmental compliance

Customers Labelling Customer Health and Safety

Example: Materials








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Step 5: Closing the Gaps ⬥ Most organizations will find some gaps

when going through these processes

⬥ The EU Directive makes addressing these gaps largely a binary activity◇ Address the gap and close it:

■ If you are required to survey suppliers, do so

■ If you need a policy, complete one and roll it out

◇ Explain why you have not addressed it in your disclosure








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There are a number of tools at your disposal Example: GRI Content Index Tool








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Assent’s View

Economic Environmental Social







Upcoming Events: Webinars & Conferences

Learn more about Assent events:www.assentcompliance.com/events

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[Webinar] Compliance Essentials: Conflict Mineral ComplianceThursday, January 19th | 1PM EST

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Q&A Discussion

Questions?

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