# EUR-Lex - 52013PC0207 - EN

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# 52013PC0207

**Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of non-financial and diversity information by certain large companies and groups /* COM/2013/0207 final - 2013/0110 (COD) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

The Accounting Directives[1] (hereafter the
"Directives") deal with the preparation of annual and consolidated
financial statements and related reports. In particular, Article 46 (1) (b) of
the Fourth Directive provides that, where appropriate and to the extent
necessary for an understanding of the company's development, performance or
position, the annual report shall also contain non-financial information,
including information relating to environment and employee matters.

In addition, Article 46a of this Directive
sets rules for the content of the corporate governance statement to be prepared
by listed companies.

The opportunity to improve the transparency
of the social and environmental information provided by companies in all
sectors, in order to ensure a level playing field, has been acknowledged by the
Commission in the Single Market Act[2].
and was reiterated in the Communication "A renewed strategy 2011 – 2014
for Corporate Social Responsibility"[3].
This proposal delivers on one of the principal commitments of the renewed
strategy.

The Communication defines CSR as “the
responsibility of enterprises for their impact on society". It
acknowledges that its development should be led by enterprises themselves, and
that companies should have a process in place to integrate social and
environmental concerns into their business operation and strategy.
Non-financial transparency is therefore a key element of any CSR policy.

Enhanced transparency may help companies to
better manage non-financial risks and opportunities, and thus improve their
non-financial performance. At the same time, non-financial information is used
by civil society organisations and local communities to assess the impact and
risks related to the operations of a company. Moreover, it allows investors to
take better account of sustainability considerations and long term performance.

However, consultations have shown that only
a limited number of EU large companies regularly disclose non-financial
information, and the quality of the information disclosed varies largely,
making it difficult for investors and stakeholders to understand and compare
companies’ position and performance.

This proposal sets therefore a requirement
for certain large companies to disclose relevant non-financial and diversity
information, ensuring a level playing field across the EU.

Nevertheless, it takes a flexible and
non-intrusive approach. Companies may use existing national or international
reporting frameworks and will retain their margin of manoeuvre to define the
content of their policies, and flexibility to disclose information in a useful
and relevant way. When companies consider that some policy areas are not
relevant for them, they will be allowed to explain why this is the case, rather
than being forced to produce a policy.

The European Parliament, in its two
resolutions on respectively,“Corporate Social Responsibility: accountable,
transparent and responsible business behaviour and sustainable growth”[4] and “Corporate Social
Responsibility: promoting society’s interests and a route to sustainable and
inclusive recovery”[5],
acknowlegded the need to increase transparency in this field and called the
Commission to bring forward a legislative proposal.

Against this background, this proposal pursues
the following key objectives:

(1)
To increase the transparency of certain
companies, and to increase the relevance, consistency, and comparability of the
non-financial information currently disclosed, by strengthening and clarifying
the existing requirements.

(2)
To increase diversity in the boards of companies
through enhanced transparency in order to facilitate an effective oversight of
the management and robust governance of the company.

(3)
To increase the company's accountability and
performance, and the efficiency of the Single Market

The current approach to the disclosure of
non-financial information in the Accounting Directives has not been
sufficiently effective. A majority of stakeholders consulted considered that the
obligation set by the Accounting Directives lacks clarity and may prejudice legal
certainty.

Clearer requirements and stronger focus on
topical issues important for the company's long-term success are therefore necessary.
Some Member States have developed national legislation that goes beyond the
requirements of the Accounting Directives. However, national requirements are
significantly diverse, which adds to the lack of clarity for companies and
investors who operate across the Internal Market.

Some Member States have privileged
"report or explain" models, where companies can choose between the
actual reporting, or, alternatively, disclosing the reasons for not doing so.
Others establish an outright legal requirement, which may be quite
prescriptive. Some Member States target large companies, while others focus on
certain listed companies or government-owned companies only. Some Member States
refer to international guidelines (although often different ones), while others
are developing their own national reporting guidelines. This varied pattern has
led to a fragmentation of the legislative frameworks across the EU. That is why
this proposal aims at ensuring a level playing field, at limiting costs for
enterprises operating in more than one Member State, and ensuring easier and
more widespread investors’ access to key, useful information

In addition, insufficient diversity in the
boards may lead to a similarity of views of the members of the board of
directors (the so-called phenomenon of "group think") and more resistance
to innovative ideas. This can lead to a negative impact on the challenge and
oversight of the management by the board of directors and therefore on the
performance of companies. Enhanced transparency on diversity policies could
also make a considerable contribution to the promotion of equal treatment and
to the fight against any discrimination in decision-making bodies of the
companies concerned and beyond. Discrimination on grounds of religion or
belief, disability, age or sexual orientation as regards employment or
occupation is prohibited by Directive 2000/78/EC. Discrimination on grounds of
sex is prohibited in employment and occupation according to Directive
2006/54/EC. Discrimination on grounds of racial or ethnic origin in employment
is prohibited by Directive 2000/43/EC.

The identified problems may affect the
overall performance of companies, their accountability, the ability of
investors to assess and factor appropriately and timely all relevant
information, and the efficiency of the EU financial markets. As a consequence,
the Single Market potential for sustainable growth and employment may not always
be fully exploited.

2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

Consultation of stakeholders and
interested parties

The Commission services have maintained
regular and wide dialogues with stakeholders throughout the procedure leading
to this proposal for amendment. The objective was to gather views from all
interested parties, including preparers, users, non-governmental organisations,
etc. The dialogue took place through:

–
Two public consultations, respectively on "Disclosure
of non-Financial information by companies" and on the "EU corporate
governance framework. On non-financial information, an overall majority of
stakeholders supported the need to improve the current legislative framework,
as this could be beneficial for both preparers and users of information. On
diversity most of the respondents to the consultation on the "EU Corporate
Governance Framework" showed a clear support for the disclosure of
companies' diversity policies. They considered that enhanced transparency would
enable investors to make more informed decisions and would help reducing the
phenomenon of "group think".

–
An ad hoc Experts' group composed of 16 members
with diverse experience and background, and

–
Several meetings with stakeholders and Member
States' representatives

Impact assessment

The impact assessment undertaken by the Commission
services identified two main issues concerning (1) the inadequate transparency
of non-financial information and (2) the lack of diversity in the boards of
directors.

Inadequate Transparency of
Non-Financial Information

Certain companies have failed to adequately
meet growing demand from stakeholders (including investors, shareholders,
employees and civil society organisations) for non-financial transparency. Specific
issues have been highlighted with regard to both quantity and quality of
information.

–
Quantity of information: it is estimated that only ~ 2500 out of the total ~ 42000 EU large
companies formally disclose non-financial information on a yearly basis

–
Quality of information: overall the information disclosed by
companies does not adequately meet the needs of users.

The analysis carried out by the Commission
services has identified both a market and regulatory failure as underlying
causes of the problem. First, market incentives appear insufficient or uneven.
Despite the increase in demand for non-financial information, the benefits
related to non-financial disclosure are perceived by some stakeholders as
long-term and difficult to quantify in a precise manner, while short-term costs
are more apparent and easily measurable. Some companies, although conceptually
acknowledging the benefits of non-financial reporting, may be less inclined to
actively pursue policies in this field due to this perception.

Second, the regulatory responses, both at
EU and at Member States' level, have not been effective enough in addressing
this problem.

A number of options have been considered to
improve the current situation, including strengthening the existing
requirement, introducing new requirements for detailed reporting, or setting up
an EU Standard. In light of the assessment of these policy options, it appeared
that the preferred option would be strengthening the existing obligation, by
requiring a non-financial statement within the Annual Report.

Insufficient
board diversity

Company boards with members who have a
similar educational and professional background, geographical origin, age or
gender may be dominated by a narrow "group think". This can contribute
to the failure of an effective challenge of the management decisions, as the lack
of diverse views, values, and competences may lead to less debate, ideas and
challenge in the boardroom. It can also lead to a harder acceptance of
innovative ideas proposed by the management. The insufficient board diversity
is linked above all to insufficient market incentives for companies to change
the situation. In this respect, inadequate recruitment practices for board
members drawing often on a too narrow pool of people contribute to perpetuating
the selection of members with similar profiles. Another element reinforcing the
problem is the inadequate transparency on board diversity, as the level of
information and the extent to which this information is available to the public
at large is often insufficient.

This insufficient board diversity and lack
of transparency can therefore result in companies that are less well managed,
less inclusive and less innovative, so they contribute less to growth. In the
light of the EU 2020 objectives of inclusive and sustainable growth the
Commission has therefore considered a number of options to address these
problems. In the light of the assessment of these policy options, it appeared
that the most appropriate option at this stage would be the disclosure of
diversity policy. It is also the option that is preferred by most
stakeholders compared to other options such as a compulsory diversity policy or
to an action focusing only on recruitment policy.

Complementary to these provisions, the
Commission has already proposed on
14 November 2012 legislation with the aim of attaining a
40% objective of the under-represented gender in non-executive board-member
positions in publicly listed companies, with the exception of small and medium
enterprises.[6]

3.           LEGAL ELEMENTS OF THE
PROPOSAL

Proposed amendment of the Directives

The proposal takes the form of an amendment
to Article 46 of the Fourth Directive and to Article 36 of the Seventh
Directive dealing with disclosure of non-financial information. Concerning the
new requirement on diversity in the boards, it is proposed to amend Article 46a
of the Fourth Directive.

The Accounting Directives regulate the
information provided in the financial statements of all limited liability
companies which are incorporated under the law of a Member State or European
Economic Area (EEA). As Article 4(5) of the Transparency Directive refers to
Article 46 of the Fourth Directive and to Article 36 of the Seventh Directive,
the amendements proposed to these provisions will also cover companies listed
on EU regulated markets even if they are registered in a third country.

Legal basis, subsidiarity and
proportionality

The proposal is based on Article 50(1) of
the Treaty, which is the legal basis for adopting EU measures aimed at
achieving an Internal Market in company law. The proposal provides that large companies
should disclose non-financial information under a set of requirements devised
to increasing transparency with the objective of strengthening the company's transparency
and accountability, while limiting any undue administrative burden.

According to the principle of subsidiarity
the EU should act only where it can provide better results than intervention at
Member State level and action should be limited to what is necessary and
proportionate in order to attain the objectives of the policy pursued. Several
Member States have recently adopted legislation requiring additional disclosure
in this field. However, national requirements appear significantly diverse,
leading to difficulties to benchmark companies across the Internal Market. The
objectives of this amendment are such that they cannot be fulfilled by unilateral
action at the level of the Member States.

Futher transparency should not translate
into undue administrative burden. Smaller companies face more difficulties to
collect and analyse information. According to the "think-small-first"
principle, the disclosure requirements under this Directive should not apply to
companies whose size is below a defined threshold.

As far as large companies are concerned,
disclosure of non-financial information needs to be made more available,
useful, and consistent at EU level, as the activities of these companies are
often EU-wide and relevant to investors and other stakeholders throughout the
internal market. Nevertheless, over and above a harmonised requirement of
consistent information common across the Single Market, Member States should
have a degree of flexibility as far as additional reporting requirements are
concerned. To this end, an amendment to the Accounting Directives is the most
appropriate legal instrument as it allows a certain flexibility for Member States.
Amending the Directives also ensures that the content and form of the proposed
EU action does not go beyond what is necessary and proportionate in order to
achieve the regulatory objective.

Detailed Explanation of the Proposal

Non-financial
information

The current
obligation set by Art 46 (1) (b) provides that large companies disclose
non-financial information, including relating to environmental and employee
matters. This measure is designed to deliver significant benefits for
companies, investors and other stakeholders operating in the Single Market,
and, therefore, contribute to inclusive and sustainable long-term growth and
employment..

Article 1 (a) of the
proposal will require certain large companies to disclose a statement in their Annual
Report including material information relating to at least environmental,
social, and employee-related matters, respect of human rights, anti-corruption
and bribery aspects. Within these areas, the statement will include (i) a
description of its policies, (ii) results and (iii) risk-related aspects.

In providing this
information, without prejudice to possible more ambitious requirements set at
Member States level, the company may rely on national, EU-based or
international frameworks, such as the UN Global Compact, the Guiding Principles
on Business and Human Rights implementing the UN “Protect, Respect and Remedy”
Framework, the OECD Guidelines for Multinational Enterprises, ISO 26000, the
ILO Tripartite Declaration of
principles concerning multinational enterprises and social policy, and the
Global Reporting Initiative, and disclose which framework they have relied
upon. A company that does not apply a specific policy in one or more of these
areas will be required to explain why this is the case.

As such, the measure
targets business-relevant information, useful for decision-making purposes
within the company as well as for investors and other stakeholders. The measure
allows for significant flexibility and avoids unnecessary administrative burden
on companies, in particular on the smallest ones, which are not subject to new
disclosure requirements. Costs associated with the required disclosures for
large companies are commensurate to the value and usefulness of the information
and the size, impact and complexity of the undertakings.

In particular, as
specified in Article 1 (a), the obligation will only apply to those companies
whose average number of employees exceeds 500, and exceeds either a balance
sheet total of 20 million euros or a net turnover of 40 million euros. This
threshold, higher than the one currently applied within the Accounting
Directives (i.e.: 250 employees) is balanced since it limits any undue
administrative burden and ensures an appropriate scope of the non-financial
reporting obligations. It is estimated that, on this basis, the new requirement
would cover around 18.000 companies in the EU.

Moreover, as
specified in Article 1 (b), those companies that prepare a report corresponding
to the same financial year shall be exempted from the obligation to provide the
non-financial statement, provided that the report: (i) covers the same topics
and content required by Article 1 (a), (ii) relies on national, EU-based or international
frameworks, and (iii) is annexed to the Annual Report.

Finally, Article 1
(c) will exempt subsidiaries companies from the obligation set out by paragraph
1 (a), provided that the exempted company and its subsidiaries are consolidated
in annual report of another company, and that consolidated annual report fulfils
the requirements set out under Article 1 (a).

Diversity

The new paragraph 1(g) will require large
listed companies to provide information on their diversity policy, including aspects
concerning age, gender, geographical diversity, and educational and professional
background. The information will be included in the corporate governance statement
and will have to contain the objectives of such a policy, its implementation
and the results obtained. Companies not having a diversity policy will only be
obliged to explain why this is the case.

4.           BUDGETARY IMPLICATION

The proposal has no implications for the
Community budget.

2013/0110 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

amending Council Directives 78/660/EEC and
83/349/EEC as regards disclosure of non-financial and diversity information by
certain large companies and groups

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 50 (1) thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[7],

Having regard to the opinion of the
Committee of the Regions[8],

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)       In its Communication to
the European Parliament, the Council, the Economic and Social Committee and the
Committee of the Regions entitled 'Single Market Act Twelve levers to boost
growth and strengthen confidence "Working together to create new
growth"',[9]
adopted on 13 April 2011, the Commission identifies the need to improve the
transparency of the social and environmental information provided by companies
in all sectors, in order to ensure a level playing field.

(2)       The necessity to improve
company disclosure of social and environmental information, by presenting a
legislative proposal in this field, was reiterated in the Communication from
the Commission to the European Parliament, the Council, the Economic and Social
Committee and the Committee of the Regions entitled “A renewed EU strategy
2011-14 for Corporate Social Responsibility”[10]
adopted on 25 October 2011.

(3)       The European Parliament
has, in its resolutions of 6 February 2013 on, respectively, “Corporate Social
Responsibility: accountable, transparent and responsible business behaviour and
sustainable growth”[11]
and “Corporate Social Responsibility: promoting society’s interests and a tour
to sustainable and inclusive recovery”[12],
acknowledged the importance of businesses divulging information on
sustainability such as social and environmental factors, with a view to
identifying sustainability risks and increasing investor and consumer trust,
and called the Commission to bring forward a proposal on non-financial
disclosure by companies.

(4)       The coordination of
national provisions concerning the disclosure of non-financial information in
respect of large undertakings with limited liability is of importance for the interests
of companies, shareholders and other stakeholders alike. Coordination is
necessary in those fields because most of these undertakings operate in more
than one Member State.

(5)       It is also necessary to
establish a certain minimum legal requirement as regards the extent of the
information that should be made available to the public by undertakings across
the Union. Annual reports should give a fair and comprehensive view of an
undertaking's policies, results, and risks.

(6)       In order to enhance
consistency and comparability of non-financial information disclosed throughout
the Union, companies should be required to include in their annual report a
non-financial statement containing information relating to at least
environmental matters, social and employee-related matters, respect for human
rights, anti-corruption and bribery matters. Such statement should include a
description of the policies, results, and the risks related to those matters.

(7)       In providing this information,
companies may rely on national frameworks, EU-based frameworks such as the
Eco-Management and Audit Scheme (EMAS), and international frameworks such as
the United Nations (UN) Global Compact, the Guiding Principles on Business and
Human Rights implementing the UN “Protect, Respect and Remedy” Framework, the Organisation
for Economic Co-operation and Development (OECD) Guidelines for Multinational
Enterprises, the International Organisation for Standardisation (ISO) 26000, the
International Labour Organization (ILO) Tripartite Declaration of principles concerning multinational
enterprises and social policy, and the Global Reporting Initiative.

(8)       Paragraph 47 of the final
declaration of the United Nations Rio +20 conference, "The Future We Want"[13], recognises the importance of
corporate sustainability reporting and encourages companies, where appropriate,
to consider integrating sustainability information into their reporting cycle.
It also encourages industry, interested governments and relevant stakeholders
with the support of the United Nations system, as appropriate, to develop
models for best practice and facilitate action for the integration of financial
and non-financial information, taking into account experiences from already
existing frameworks.

(9)       Investors' access to
non-financial information is a step towards reaching the milestone of having in
place by 2020 market and policy incentives rewarding business investments in
efficiency under the Roadmap to a Resource Efficient Europe[14].

(10)     The European Council of 24
and 25 March 2011 called for the overall regulatory burden, in particular for
small and medium-sized enterprises ("SMEs"), to be reduced at both
European and national levels and suggested measures to increase productivity
while the Europe 2020 Strategy for smart, sustainable and inclusive growth aims
to improve the business environment for SMEs and to promote their internationalisation. Thus, according to the
"think-small-first" principle, the disclosure requirements under
Directive 78/660/EEC and Directive 83/349/EEC should only apply to certain
large undertakings and groups.

(11)     The scope of these
non-financial disclosure requirements should be defined by reference to the average
number of employees, total assets and turnover. SMEs should be exempted from
additional requirements, and the obligation to disclose a non-financial
statement in the annual report should only apply to those companies whose
average number of employees exceeds 500, and exceed either a balance sheet
total of EUR 20 million or a net turnover of EUR 40 million.

(12)     Some of the companies and
groups falling under the scope of Directive 78/660/EEC and Directive 83/349/EEC
already prepare non-financial reports on a voluntary basis. Those companies
should not be subject to the obligation to provide a non-financial statement in
the annual report, provided that the report corresponds to the same financial
year, covers at least the same content required by this Directive, and is
annexed to the annual report.

(13)     Many of the undertakings which
fall under the scope of Directive 78/660/EEC are members of groups of
undertakings. Consolidated annual reports should be drawn up so that the information
concerning such groups of undertakings may be conveyed to members and third
parties. National law governing consolidated annual reports should therefore be
coordinated in order to achieve the objectives of comparability and consistency
of the information which undertakings should publish within the Union.

(14)     As required by Article 51a
(e) of Directive 78/660/EEC, the report of the statutory auditors should also
contain an opinion concerning the consistency or otherwise of the annual
report, including non-financial information contained in the annual report,
with the annual accounts for the same financial year.

(15)     Diversity of competences
and views of the members of administrative, management and supervisory bodies
of companies facilitates a good understanding of the business organisation and
affairs. It enables members of these bodies to exercise a constructive
challenge of the management decisions and to be more open to innovative ideas, addressing
the similarity of views of members, the "group-think" phenomenon. It
contributes thus to effective oversight of the management and a successful
governance of the company. It would therefore be
important to enhance transparency regarding the diversity policy companies have
in place. This would inform the market of corporate
governance practices and thus put indirect pressure on companies to have more
diversified boards.

(16)     The obligation to disclose
their diversity policies for their administrative, management and supervisory
bodies with regard to aspects such as age, gender, geographical diversity,
educational and professional background should only apply to large listed
companies. Therefore small and medium-sized companies that may be exempted from
certain accounting obligations under article 27 of Directive 78/660/EEC should
not be covered to by this obligation. Disclosure of the diversity policy should
be part of the corporate governance statement, as laid down by Article 46a of
Directive 78/660/EEC. Companies not having a such a diversity policy should not
be obliged to put one in place, but they should clearly explain why this is the
case.

(17)     Since the objective of this
Directive, namely to increase the relevance, consistency and comparability of
information disclosed by companies across the Union, cannot be sufficiently
achieved by the Member States, and can therefore by reason of its effect be
better achieved at Union level, the Union may adopt measures in accordance with
the principle of subsidiarity as set out in Article 5 of the Treaty on European
Union. In accordance with the principle of proportionality, as set out in that
Article, this Directive does not go beyond what is necessary to achieve the
pursued objective.

(18)     This Directive respects the
fundamental rights and observes the principles recognised in particular by the
Charter of Fundamental Rights of the European Union, including the freedom to
conduct a business, respect for private life and the protection of personal
data. This Directive has to be implemented in accordance with these rights and
principles.

(19)     Directives 78/660/EEC and 83/349/EEC
should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Amendments to Directive 78/660/EEC

Directive 78/660/EEC is amended as
follows:

(1)
Article 46 is amended as follows:

(a)
Paragraph 1 is replaced by the following:

'1. (a)   The annual report shall include a
fair review of the development and performance of the company's business and of
its position, together with a description of the principal risks and
uncertainties that it faces.

The review shall be a balanced and comprehensive
analysis of the development and performance of the company's business and of
its position, consistent with the size and complexity of the business.

(b) For companies whose average number of
employees during the financial year exceeds 500 and, on their balance sheet
dates, exceed either a balance sheet total of EUR 20 million or a net turnover
of EUR 40 million, the review shall also include a non-financial statement
containing information relating to at least environmental, social and employee
matters, respect for human rights, anti-corruption and bribery matters,
including:

(i) a description of the policy pursued by the
company in relation to these matters;

(ii) the results of these policies;

(iii) the risks related to these matters and
how the company manages those risks.

Where a company does not pursue policies in
relation to one or more of these matters, it shall provide an explanation for
not doing so.

In providing such information the company may rely
on national, EU-based or international frameworks and, if so, shall specify
which frameworks it has relied upon.

(c)        To the extent necessary for an
understanding of the company's development, performance or position, the
analysis shall include both financial and non-financial key performance indicators
relevant to the particular business.

(d)        In providing its analysis, the
annual report shall, where appropriate, include references to and additional
explanations of amounts reported in the annual accounts.'

(b)
Paragraph 4 is replaced by the following:

'4. Where a company prepares a comprehensive
report corresponding to the same financial year relying on national, EU-based
or international frameworks and which covers the information provided for in
paragraph 1(b), it shall be exempt from the obligation to prepare the
non-financial statement set out in paragraph 1(b), provided that such report is
part of the annual report.'

(c)
The following paragraph 5 is added:

'5. A company which is a subsidiary company
shall be exempt from the obligations set out in paragraph 1(b), if the company
and its subsidiaries are consolidated in the financial statements and annual
report of another company and that consolidated annual report is drawn up in
accordance with Article 36(1) of Directive 83/349/EEC.'

(2)
Article 46a is amended as follows:

(a)
In paragraph 1, the following point (g) is added:

'(g) a description of the company's diversity
policy for its administrative, management and supervisory bodies with regard to
aspects such as age, gender, geographical diversity, educational and
professional background, the objectives of this diversity policy, how it has
been implemented and the results in the reporting period. If the company has no
such policy, the statement shall contain a clear and reasoned explanation as to
why this is the case. '

(b)
The following paragraph 4 is added:

'4. Point (g) of paragraph 1 does not apply to
companies within the meaning of Article 27. '

(3)
Article 53a is replaced by the following:

'Article
53a

Member States shall not make available the
exemptions set out in Article 1a, 11, Article 27, points (7a) and (7b) of
Article 43(1), Article 46(3), Article 47 and Article 51 of this Directive in
the case of companies whose securities are admitted to trading on a regulated
market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC.'

Article 2

Amendments to Directive 83/349/EEC

Directive 83/349/EEC is amended as
follows:

(1)
Article 36 is amended as follows:

(a)
Paragraph 1 is replaced by the following:

'1.         The consolidated annual report
shall include a fair review of the development and performance of the business
and of the position of the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and uncertainties
that they face.

The review shall analyse in a balanced manner
the development and       performance of the business and the position of the
undertakings included      in the consolidation taken as a whole, consistent
with the size and complexity        of the business.

For parent undertakings of undertakings to be
consolidated that together exceed an average number of 500 employees during the
financial year, and, on their balance sheet dates, exceed either a balance
sheet total of EUR 20 million or a net turnover of EUR 40 million, the review
shall also include a non-financial statement containing information relating to at least environmental, social and employee matters, respect
for human rights, anti-corruption and bribery matters, including the following:

–
(i) a description of the policy pursued by the
company in relation to these matters;

–
(ii) the results of these policies;

–
(iii) the risks related to these matters and how
the company manages those risks.

Where the undertakings included in the
consolidation taken as a whole do not pursue policies in relation to one or
more of these matters, the company shall provide an explanation for not doing
so.

In providing such information the consolidated
annual report may rely on national, EU-based or international frameworks and if
so, shall specify which frameworks it has relied upon.

To the extent necessary for an understanding of
such development,         performance or position, the analysis shall include
both financial and non-       financial key performance indicators relevant to
the particular business.

In providing its analysis, the consolidated
annual report shall, where appropriate, provide references to and additional
explanations of amounts reported in the consolidated accounts. '

(b)
The following paragraphs 4 and 5 are added:

'4. Where a parent undertaking prepares a comprehensive
report corresponding to the same financial year, referring to the whole group
of consolidated undertakings, relying on national, EU-based or international
frameworks and covering the information provided for in the third
subparagraph of paragraph 1, the parent undertaking shall be exempt from the
obligation to prepare the non-financial statement set out in the third
subparagraph of paragraph 1, provided that such comprehensive report is part of
the consolidated annual report.

5. A parent undertaking which is also a
subsidiary undertaking shall be exempt from the obligations set out in the
third subparagraph of paragraph 1, if the exempted undertaking and its
subsidiaries are consolidated in the financial statements and annual report of
another undertaking, and that consolidated annual report is drawn up in
accordance with the third subparagraph of paragraph 1. '

Article 3

Transposition

1.           Member States shall bring
into force the laws, regulations and administrative provisions necessary to
comply with this Directive by [...][15]
at the latest. They shall forthwith communicate to the Commission the text of
those provisions.

Member States may provide
that the provisions referred to in the first subparagraph shall first apply to
undertakings governed by the law of a Member State whose transferable
securities are admitted to trading on a regulated market of any Member State
within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC of the
European Parliament and of the Council of 21 April 2004 on markets in
financial instruments for the financial year starting on 1 January 201_[16], and to all other undertakings
within the scope of Articles 1 and 2 for the financial year starting on 1
January 201_[17]

When Member States adopt
those provisions, they shall contain a reference to this Directive or be
accompanied by such a reference on the occasion of their official publication.
Member States shall determine how such reference is to be made.

2.           Member States shall
communicate to the Commission the text of the main provisions of national law
which they adopt in the field covered by this Directive.

Article 4

Entry
into force

This Directive shall enter into force on
the twentieth day following that of its publication in the Official Journal
of the European Union.

Article 5

Addressees

This Directive is addressed to the Member
States.

Done at Strasbourg,

For the European Parliament                       For the Council

The President                                                 The
President

[1]               Fourth Council Directive of 25 July 1978 on the
annual accounts of certain types of companies (78/660/EEC); Seventh Council
Directive of 13 June 1983 on consolidated accounts (83/349/EEC).

[2]               "Single Market Act-Twelve levers to boost growth
and strengthen confidence", COM (2011) 206, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0206:FIN:EN:PDF,
p 15.

[3]               COM(2011) 681 final of 25 October 2011

[4]               Report on corporate social responsibility:
accountable, transparent and responsible business behaviour and sustainable
growth (2012/2098(INI)); Committee on Legal Affairs. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0017+0+DOC+PDF+V0//EN&language=EN

[5]               Report on Corporate Social Responsibility: promoting
society’s interests and a route to sustainable and inclusive recovery (2012/2097(INI));
Committee on Employment and Social Affairs. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0023+0+DOC+PDF+V0//EN&language=EN

[6]               Proposal for a Directive of
the European parliament and the Council on improving the gender balance among
non-executive directors of companies listed on stock exchanges and related
measures, COM(2012) 614 final.

[7]               OJ C , , p. .

[8]               OJ C , , p. .

[9]               COM(2011) 206 final of 13 April 2011.

[10]             COM(2011) 681 final of 25 October 2011.

[11]             Report on corporate social responsibility: accountable,
transparent and responsible business behaviour and sustainable growth
(2012/2098(INI)); Committee on Legal Affairs. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0017+0+DOC+PDF+V0//EN&language=EN

[12]             Report on Corporate Social Responsibility: promoting
society’s interests and a route to sustainable and inclusive recovery (2012/2097(INI));
Committee on Employment and Social Affairs. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0023+0+DOC+PDF+V0//EN&language=EN

[13]             United Nations, “The Future We Want”, Outcome Document
of the United Nations Conference on Sustainable Development RIO+20,
A/CONF.216/L.1

[14]             COM(2011) 571 final of 20
September 2011

[15]             Two years after entry into force

[16]             First year after the transposition deadline

[17]             Second year after the transposition deadline