# Directive 2014/95/EU of the European Parliament and of the CouncilShow full title

Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards            disclosure of non-financial and diversity information by certain large undertakings and groups (Text with EEA relevance)         

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# Directive 2014/95/EU of the European Parliament and of the Council

# of 22 October 2014

# amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings                        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(1),                        

Acting in accordance with the ordinary legislative procedure(2),                        

Whereas:

(1)In its communication entitled ‘Single Market Act — Twelve levers to boost growth and strengthen confidence — “Working together                              to create new growth”’, adopted on 13 April 2011, the Commission identified the need to raise to a similarly high level across                              all Member States the transparency of the social and environmental information provided by undertakings in all sectors. This                              is fully consistent with the possibility for Member States to require, as appropriate, further improvements to the transparency                              of undertakings' non-financial information, which is by its nature a continuous endeavour.

(2)The need to improve undertakings' disclosure of social and environmental information, by presenting a legislative proposal                              in this field, was reiterated in the Commission communication entitled ‘A renewed EU strategy 2011-14 for Corporate Social                              Responsibility’, adopted on 25 October 2011.

(3)In its resolutions of 6 February 2013 on, respectively, ‘Corporate Social Responsibility: accountable, transparent and responsible                              business behaviour and sustainable growth’ and ‘Corporate Social Responsibility: promoting society's interests and a route                              to sustainable and inclusive recovery’, the European Parliament 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. Indeed, disclosure of 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 measuring, monitoring and managing of undertakings' performance and their impact on                              society. Thus, the European Parliament called on the Commission to bring forward a legislative proposal on the disclosure                              of non-financial information by undertakings allowing for high flexibility of action, in order to take account of the multidimensional                              nature of corporate social responsibility (CSR) and the diversity of the CSR policies implemented by businesses matched by                              a sufficient level of comparability to meet the needs of investors and other stakeholders as well as the need to provide consumers                              with easy access to information on the impact of businesses on society.

(4)The coordination of national provisions concerning the disclosure of non-financial information in respect of certain large                              undertakings is of importance for the interests of undertakings, shareholders and other stakeholders alike. Coordination is                              necessary in those fields because most of those 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 and authorities by undertakings across the Union. The undertakings subject to this Directive                              should give a fair and comprehensive view of their policies, outcomes, and risks.

(6)In order to enhance the consistency and comparability of non-financial information disclosed throughout the Union, certain                              large undertakings should prepare 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, outcomes and risks related to those matters and should be included in the management                              report of the undertaking concerned. The non-financial statement should also include information on the due diligence processes                              implemented by the undertaking, also regarding, where relevant and proportionate, its supply and subcontracting chains, in                              order to identify, prevent and mitigate existing and potential adverse impacts. It should be possible for Member States to                              exempt undertakings which are subject to this Directive from the obligation to prepare a non-financial statement when a separate                              report corresponding to the same financial year and covering the same content is provided.

(7)Where undertakings are required to prepare a non-financial statement, that statement should contain, as regards environmental                              matters, details of the current and foreseeable impacts of the undertaking's operations on the environment, and, as appropriate,                              on health and safety, the use of renewable and/or non-renewable energy, greenhouse gas emissions, water use and air pollution.                              As regards social and employee-related matters, the information provided in the statement may concern the actions taken to                              ensure gender equality, implementation of fundamental conventions of the International Labour Organisation, working conditions,                              social dialogue, respect for the right of workers to be informed and consulted, respect for trade union rights, health and                              safety at work and the dialogue with local communities, and/or the actions taken to ensure the protection and the development                              of those communities. With regard to human rights, anti-corruption and bribery, the non-financial statement could include                              information on the prevention of human rights abuses and/or on instruments in place to fight corruption and bribery.

(8)The undertakings which are subject to this Directive should provide adequate information in relation to matters that stand                              out as being most likely to bring about the materialisation of principal risks of severe impacts, along with those that have                              already materialised. The severity of such impacts should be judged by their scale and gravity. The risks of adverse impact                              may stem from the undertaking's own activities or may be linked to its operations, and, where relevant and proportionate,                              its products, services and business relationships, including its supply and subcontracting chains. This should not lead to                              undue additional administrative burdens for small and medium-sized undertakings.

(9)In providing this information, undertakings which are subject to this Directive may rely on national frameworks, Union-based                              frameworks such as the Eco-Management and Audit Scheme (EMAS), or 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's ISO 26000, the International Labour Organisation's Tripartite Declaration of principles                              concerning multinational enterprises and social policy, the Global Reporting Initiative, or other recognised international                              frameworks.

(10)Member States should ensure that adequate and effective means exist to guarantee disclosure of non-financial information by                              undertakings in compliance with this Directive. To that end, Member States should ensure that effective national procedures                              are in place to enforce compliance with the obligations laid down by this Directive, and that those procedures are available                              to all persons and legal entities having a legitimate interest, in accordance with national law, in ensuring that the provisions                              of this Directive are respected.

(11)Paragraph 47 of the outcome document of the United Nations Rio+20 conference, entitled ‘The Future We Want’, recognises the                              importance of corporate sustainability reporting and encourages undertakings, 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.

(12)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.

(13)The European Council, in its conclusions 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, in accordance with the ‘think small first’ principle,                              the new disclosure requirements should apply only to certain large undertakings and groups.

(14)The scope of those non-financial disclosure requirements should be defined by reference to the average number of employees,                              balance sheet total and net turnover. SMEs should be exempted from additional requirements, and the obligation to disclose                              a non-financial statement should apply only to those large undertakings which are public-interest entities and to those public-interest                              entities which are parent undertakings of a large group, in each case having an average number of employees in excess of 500,                              in the case of a group on a consolidated basis. This should not prevent Member States from requiring disclosure of non-financial                              information from undertakings and groups other than undertakings which are subject to this Directive.

(15)Many of the undertakings which fall within the scope of Directive 2013/34/EU of the European Parliament and of the Council(3) are members of groups of undertakings. Consolidated management 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 management 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.

(16)Statutory auditors and audit firms should only check that the non-financial statement or the separate report has been provided.                              In addition, it should be possible for Member States to require that the information included in the non-financial statement                              or in the separate report be verified by an independent assurance services provider.

(17)With a view to facilitating the disclosure of non-financial information by undertakings, the Commission should prepare non-binding                              guidelines, including general and sectoral non-financial key performance indicators. The Commission should take into account                              current best practices, international developments and the results of related Union initiatives. The Commission should carry                              out appropriate consultations, including with relevant stakeholders. When referring to environmental aspects, the Commission                              should cover at least land use, water use, greenhouse gas emissions and the use of materials.

(18)Diversity of competences and views of the members of administrative, management and supervisory bodies of undertakings facilitates                              a good understanding of the business organisation and affairs of the undertaking concerned. It enables members of those bodies                              to constructively challenge the management decisions and to be more open to innovative ideas, addressing the similarity of                              views of members, also known as the ‘group-think’ phenomenon. It contributes thus to effective oversight of the management                              and to successful governance of the undertaking. It is therefore important to enhance transparency regarding the diversity                              policy applied. This would inform the market of corporate governance practices and thus put indirect pressure on undertakings                              to have more diversified boards.

(19)The obligation to disclose diversity policies in relation to the administrative, management and supervisory bodies with regard                              to aspects such as, for instance, age, gender or educational and professional backgrounds should apply only to certain large                              undertakings. Disclosure of the diversity policy should be part of the corporate governance statement, as laid down by Article 20                              of Directive 2013/34/EU. If no diversity policy is applied there should not be any obligation to put one in place, but the                              corporate governance statement should include a clear explanation as to why this is the case.

(20)Initiatives at Union level, including country-by-country reporting for several sectors, as well as the references made by                              the European Council, in its conclusions of 22 May 2013 and of 19 and 20 December 2013, to country-by-country reporting by                              large companies and groups, similar provisions in Directive 2013/36/EU of the European Parliament and of the Council(4), and international efforts to improve transparency in financial reporting have been noted. Within the context of the G8 and                              the G20, the OECD has been asked to draw up a standardised reporting template for multinational undertakings to report to                              tax authorities where they make their profits and pay taxes around the world. Such developments complement the proposals contained                              in this Directive, as appropriate measures for their respective purposes.

(21)Since the objective of this Directive, namely to increase the relevance, consistency and comparability of information disclosed                              by certain large undertakings and groups across the Union, cannot be sufficiently achieved by the Member States but can rather,                              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 in order to achieve that objective.

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

(23)Directive 2013/34/EU should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

## Article 1U.K.Amendments to Directive 2013/34/EU

Directive 2013/34/EU is amended as follows:

The following Article is inserted:

### ‘Article 19aNon-financial statement

1.Large undertakings which are public-interest entities exceeding on their balance sheet dates the criterion of the average                                    number of 500 employees during the financial year shall include in the management report a non-financial statement containing                                    information to the extent necessary for an understanding of the undertaking's development, performance, position and impact                                    of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption                                    and bribery matters, including:                           

(a)a brief description of the undertaking's business model;                           

(b)a description of the policies pursued by the undertaking in relation to those matters, including due diligence processes implemented;                           

(c)the outcome of those policies;                           

(d)the principal risks related to those matters linked to the undertaking's operations including, where relevant and proportionate,                                    its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the undertaking                                    manages those risks;                           

(e)non-financial key performance indicators relevant to the particular business.                           

Where the undertaking does not pursue policies in relation to one or more of those matters, the non-financial statement shall                                 provide a clear and reasoned explanation for not doing so.                           

The non-financial statement referred to in the first subparagraph shall also, where appropriate, include references to, and                                 additional explanations of, amounts reported in the annual financial statements.                           

Member States may allow information relating to impending developments or matters in the course of negotiation to be omitted                                 in exceptional cases where, in the duly justified opinion of the members of the administrative, management and supervisory                                 bodies, acting within the competences assigned to them by national law and having collective responsibility for that opinion,                                 the disclosure of such information would be seriously prejudicial to the commercial position of the undertaking, provided                                 that such omission does not prevent a fair and balanced understanding of the undertaking's development, performance, position                                 and impact of its activity.                           

In requiring the disclosure of the information referred to in the first subparagraph, Member States shall provide that undertakings                                 may rely on national, Union-based or international frameworks, and if they do so, undertakings shall specify which frameworks                                 they have relied upon.                           

2.Undertakings fulfilling the obligation set out in paragraph 1 shall be deemed to have fulfilled the obligation relating to                                    the analysis of non-financial information set out in the third subparagraph of Article 19(1).                           

3.An undertaking which is a subsidiary undertaking shall be exempted from the obligation set out in paragraph 1 if that undertaking                                    and its subsidiary undertakings are included in the consolidated management report or the separate report of another undertaking,                                    drawn up in accordance with Article 29 and this Article.                           

4.Where an undertaking prepares a separate report corresponding to the same financial year whether or not relying on national,                                    Union-based or international frameworks and covering the information required for the non-financial statement as provided                                    for in paragraph 1, Member States may exempt that undertaking from the obligation to prepare the non-financial statement laid                                    down in paragraph 1, provided that such separate report:                           

(a)is published together with the management report in accordance with Article 30; or                           

(b)is made publicly available within a reasonable period of time, not exceeding six months after the balance sheet date, on the                                    undertaking's website, and is referred to in the management report.                           

Paragraph 2 shall apply *mutatis mutandis* to undertakings preparing a separate report as referred to in the first subparagraph of this paragraph.                           

5.Member States shall ensure that the statutory auditor or audit firm checks whether the non-financial statement referred to                                    in paragraph 1 or the separate report referred to in paragraph 4 has been provided.                           

6.Member States may require that the information in the non-financial statement referred to in paragraph 1 or in the separate                                    report referred to in paragraph 4 be verified by an independent assurance services provider.’.                           

Article 20 is amended as follows:

in paragraph 1, the following point is added:

### ‘(g)a description of the diversity policy applied in relation to the undertaking's administrative, management and supervisory                                             bodies with regard to aspects such as, for instance, age, gender, or educational and professional backgrounds, the objectives                                             of that diversity policy, how it has been implemented and the results in the reporting period. If no such policy is applied,                                             the statement shall contain an explanation as to why this is the case.’;

paragraph 3 is replaced by the following:

‘3.The statutory auditor or audit firm shall express an opinion in accordance with the second subparagraph of Article 34(1) regarding                                             information prepared under points (c) and (d) of paragraph 1 of this Article and shall check that the information referred                                             to in points (a), (b), (e), (f) and (g) of paragraph 1 of this Article has been provided.’;                                    

paragraph 4 is replaced by the following:

‘4.Member States may exempt undertakings referred to in paragraph 1 which have only issued securities other than shares admitted                                             to trading on a regulated market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC from the application                                             of points (a), (b), (e), (f) and (g) of paragraph 1 of this Article, unless such undertakings have issued shares which are                                             traded in a multilateral trading facility within the meaning of point (15) of Article 4(1) of Directive 2004/39/EC.’;                                    

the following paragraph is added:

‘5.Notwithstanding Article 40, point (g) of paragraph 1 shall not apply to small and medium-sized undertakings.’.                                    

The following Article is inserted:

### ‘Article 29aConsolidated non-financial statement

1.Public-interest entities which are parent undertakings of a large group exceeding on its balance sheet dates, on a consolidated                                    basis, the criterion of the average number of 500 employees during the financial year shall include in the consolidated management                                    report a consolidated non-financial statement containing information to the extent necessary for an understanding of the group's                                    development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee                                    matters, respect for human rights, anti-corruption and bribery matters, including:                           

(a)a brief description of the group's business model;                           

(b)a description of the policies pursued by the group in relation to those matters, including due diligence processes implemented;                           

(c)the outcome of those policies;                           

(d)the principal risks related to those matters linked to the group's operations including, where relevant and proportionate,                                    its business relationships, products or services which are likely to cause adverse impacts in those areas, and how the group                                    manages those risks;                           

(e)non-financial key performance indicators relevant to the particular business.                           

Where the group does not pursue policies in relation to one or more of those matters, the consolidated non-financial statement                                 shall provide a clear and reasoned explanation for not doing so.                           

The consolidated non-financial statement referred to in the first subparagraph shall also, where appropriate, include references                                 to, and additional explanations of, amounts reported in the consolidated financial statements.                           

Member States may allow information relating to impending developments or matters in the course of negotiation to be omitted                                 in exceptional cases where, in the duly justified opinion of the members of the administrative, management and supervisory                                 bodies, acting within the competences assigned to them by national law and having collective responsibility for that opinion,                                 the disclosure of such information would be seriously prejudicial to the commercial position of the group, provided that such                                 omission does not prevent a fair and balanced understanding of the group's development, performance, position and impact of                                 its activity.                           

In requiring the disclosure of the information referred to in the first subparagraph, Member States shall provide that the                                 parent undertaking may rely on national, Union-based or international frameworks, and if it does so, the parent undertaking                                 shall specify which frameworks it has relied upon.                           

2.A parent undertaking fulfilling the obligation set out in paragraph 1 shall be deemed to have fulfilled the obligation relating                                    to the analysis of non-financial information set out in the third subparagraph of Article 19(1) and in Article 29.                           

3.A parent undertaking which is also a subsidiary undertaking shall be exempted from the obligation set out in paragraph 1 if                                    that exempted parent undertaking and its subsidiaries are included in the consolidated management report or the separate report                                    of another undertaking, drawn up in accordance with Article 29 and this Article.                           

4.Where a parent undertaking prepares a separate report corresponding to the same financial year, referring to the whole group,                                    whether or not relying on national, Union-based or international frameworks and covering the information required for the                                    consolidated non-financial statement as provided for in paragraph 1, Member States may exempt that parent undertaking from                                    the obligation to prepare the consolidated non-financial statement laid down in paragraph 1, provided that such separate report:                           

(a)is published together with the consolidated management report in accordance with Article 30; or                           

(b)is made publicly available within a reasonable period of time, not exceeding six months after the balance sheet date, on the                                    parent undertaking's website, and is referred to in the consolidated management report.                           

Paragraph 2 shall apply *mutatis mutandis* to parent undertakings preparing a separate report as referred to in the first subparagraph of this paragraph.                           

5.Member States shall ensure that the statutory auditor or audit firm checks whether the consolidated non-financial statement                                    referred to in paragraph 1 or the separate report referred to in paragraph 4 has been provided.                           

6.Member States may require that the information in the consolidated non-financial statement referred to in paragraph 1 or in                                    the separate report referred to in paragraph 4 be verified by an independent assurance services provider.’.                           

In Article 33, paragraph 1 is replaced by the following:

‘1.Member States shall ensure that the members of the administrative, management and supervisory bodies of an undertaking, acting                                    within the competences assigned to them by national law, have collective responsibility for ensuring that:                           

(a)the annual financial statements, the management report, the corporate governance statement when provided separately and the                                    report referred to in Article 19a(4); and                           

(b)the consolidated financial statements, the consolidated management reports, the consolidated corporate governance statement                                    when provided separately and the report referred to in Article 29a(4),                           

are drawn up and published in accordance with the requirements of this Directive and, where applicable, with the international                                 accounting standards adopted in accordance with Regulation (EC) No 1606/2002.’.                           

In Article 34, the following paragraph is added:

‘3.This Article shall not apply to the non-financial statement referred to in Article 19a(1) and the consolidated non-financial                                    statement referred to in Article 29a(1) or to the separate reports referred to in Articles 19a(4) and 29a(4).’.                           

In Article 48, the following paragraph is inserted before the last paragraph:

‘The report shall also consider, taking into account developments in the OECD and the results of related European initiatives,                                 the possibility of introducing an obligation requiring large undertakings to produce on an annual basis a country-by-country                                 report for each Member State and third country in which they operate, containing information on, as a minimum, profits made,                                 taxes paid on profits and public subsidies received.’.                           

## Article 2U.K.Guidance on reporting

The Commission shall prepare non-binding guidelines on methodology for reporting non-financial information, including non-financial                     key performance indicators, general and sectoral, with a view to facilitating relevant, useful and comparable disclosure of                     non-financial information by undertakings. In doing so, the Commission shall consult relevant stakeholders.                  

The Commission shall publish the guidelines by 6 December 2016.

## Article 3U.K.Review

The Commission shall submit a report to the European Parliament and to the Council on the implementation of this Directive,                     including, among other aspects, its scope, particularly as regards large non-listed undertakings, its effectiveness and the                     level of guidance and methods provided. The report shall be published by 6 December 2018 and shall be accompanied, if appropriate,                     by legislative proposals.                  

## Article 4U.K.Transposition

1.Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive                        by 6 December 2016. They shall immediately inform the Commission thereof.                  

Member States shall provide that the provisions referred to in the first subparagraph are to apply to all undertakings within                     the scope of Article 1 for the financial year starting on 1 January 2017 or during the calendar year 2017.                  

When Member States adopt those provisions, they shall contain a reference to this Directive or shall be accompanied by such                     reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.                  

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 5U.K.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 6U.K.Addressees

This Directive is addressed to the Member States.

Done at Strasbourg, 22 October 2014.

*For the European Parliament*                            

*The President*                            

M. Schulz                            

*For the Council*                            

*The President*                            

B. Della Vedova                            

1

OJ C 327, 12.11.2013, p. 47.                           

2

Position of the European Parliament of 15 April 2014 (not yet published in the Official Journal) and decision of the Council                              of 29 September 2014.                           

3

Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated                              financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament                              and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).                           

4

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions                              and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives                              2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338).