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14 Eur. Company L. 15 (2017)
The Non-Financial Information Directive: An Assessment of Its Impact on Corporate Social Responsibility

handle is hein.kluwer/eurcompl0014 and id is 15 raw text is: ARTIICLL The Non-Financial Information Directive: An Assessment of Its Impact on Corporate Social Responsibility DR JOHN OUINN * BARRY CONNOLLY + 1. INTRODUCTION On 6 December 2016, Directive 2014/95 of the European Union (the 'Directive') will come into effect and will require certain companies to disclose non-financial information in a way similar to their financial reporting obligations. Companies that fall under the scope of the Directive will have to publish information on several aspects of their business associated with Corporate Social Responsibility (CSR) includ- ing the environment, social and employee matters and human rights. The rationale underlying the introduction of the Directive appears to be to encourage ethical business practices and corporate accountability.2 The Directive provides that 'non-financial information is vital for managing change towards a sustainable global economy by combining long-term profitability with social justice and environmental protection. In this context, disclosure of non-financial information helps the mea- suring, monitoring and managing of undertakings' performance and their impact on society'.3 The Directive therefore, seems to have two primary goals, firstly to provide greater information in order to foster long-term sustainability and profitability, and secondly to increase transparency in order to improve CSR practices. Prior to the Directive there has been very little focus on non- financial reporting at EU level. The Directive is therefore likely to significantly increase the amount of non-financial information that affected organizations must publish, particularly in Member States with no existing regulations on non-financial disclosures. However, this does not necessarily mean that the primary aims of the Directive will be achieved by mandatory reporting. Traditionally CSR has been carried out on a voluntary basis and there is potential for mandatory CSR reporting to become a box-ticking exercise with companies publishing boilerplate responses. Companies may well respond to the Directive by attempting to reach the minimum standards involved in complying with the regulations, rather than truly operating in a socially responsible manner.5 The aim of this article is to analyse the Directive and assess the likelihood that it will improve CSR practices and achieve its stated goals. The article is divided into three parts. The first describes the requirements contained in the Directive, such as what organizations fall under the scope of the Directive and the type of information that is required to be published. The second will examine how non- financial reporting has operated in the UK, where there is some existing analysis of the issues related to mandatory reporting of non-financial information. The final part analyses the likely impact of the Directive, based on the rules contained in the Directive and through a comparison with the experience in the UK. 2. THE CONTENTS OF THE DIRECTIVE The origins of the Directive can be traced back as far as 2002 and a Commission Communication on CSR6 However, it was not until 2011 that a legislative-based mandatory CSR reporting requirement began receiving serious consideration. The Commission, in two separate com- munications, referred to the benefits in improved transparency through non-financial disclosures' and that a particular focus should be placed on social and environmental information. These communications * Lecturer in Law, School of Law and Government, Dublin City University, email: john.quinn@dcu.ie. f Irish Solicitor at Flynn O'Driscoll, email: barryconnolly@fod.ie. 1 Art. 4, Directive 2014/95/EU, OJ L 330/1. 2 European Parliament Resolution, Corporate Social Responsibility: Promoting Society's Interests and a Route to Sustainable and Inclusive Recovery 2012/2097. Commission Communication, Social Business Initiative - Creating a Favourable Climate for Social Enterprises, Key Stakeholders in the Social Economy and Innovation COM (2011). 3 Recital 3, Directive 2014/95/EU. 4 For a criticism of mandatory corporate social responsibility see, Harish Choudary, Mandatory Corporate Social Responsibility: An Unwarranted Burden on Business, 10(4) Eur. Company L. 156 (2013). 5 Kunnawee Thirarungrueang, Rethinking CSR in Australia: Time for Binding Regulation?, 55(3) Intl. J. L. & Mgt. 173 (2013). 6 See Commission Communication, Corporate Social Responsibility: A Business Contribution to Sustainable Development COM (2002). 7 Commission Communication, Single Market Act - Twelve Levers to Boost Growth and Strengthen Confidence 'Working Together to Create New Growth' COM(2011) 206 Final. 8 Commission Communication, A Renewed EU Strategy 2011-14 for Corporate Social Responsibility COM(2011) 0681 Final. Quinn, Dr John & Connolly, Barry. 'The Non-Financial Information Directive: An Assessment of Its Impact on Corporate Social Responsiblity'. European Company Law Journal 14, no. 1 (2017): 15-21. ) 2017 Kluwer Law International BV, The Netherlands

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