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
Date: 2013-04-16
Institutions: European Commission
Subjects: auditing, closing of accounts, dissemination of information, firm governed by commercial law, large business, publication of accounts

EUROPEAN 
COMMISSION 

Strasbourg, 16.4.2013  
COM(2013) 207 final 

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) 

{SWD(2013) 127 final} 
{SWD(2013) 128 final} 

EN 

   EN 

 
 
 
  
 
EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

1. 
The  Accounting  Directives1  (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  Act2.  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 

1 

2 

3 

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). 
"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. 
COM(2011) 681 final of 25 October 2011 

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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 

through  enhanced 
transparency in order to facilitate an effective oversight of the management and 
robust governance of the company. 

the  boards  of  companies 

in 

(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 

4 

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growth 

sustainable 

(2012/2098(INI)); 

Report on corporate social responsibility: accountable, transparent and responsible business behaviour 
Affairs. 
and 
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-
0017+0+DOC+PDF+V0//EN&language=EN 
Report on Corporate Social Responsibility: promoting society’s interests and a route to sustainable and 
and  Social  Affairs. 
inclusive 
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-
0023+0+DOC+PDF+V0//EN&language=EN 

(2012/2097(INI));  Committee  on  Employment 

Committee 

recovery 

Legal 

on 

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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. 

identified  problems  may  affect 

The 
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.  

the  overall  performance  of  companies, 

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 

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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.  

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. 

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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.  

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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.  

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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 Committee7,  
Having regard to the opinion of the Committee of the Regions8,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

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.  

to 

The  necessity 
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 

7 
8 
9 
10 
11 

OJ C , , p. . 
OJ C , , p. . 
COM(2011) 206 final of 13 April 2011. 
COM(2011) 681 final of 25 October 2011. 
Report on corporate social responsibility: accountable, transparent and responsible business behaviour 
Affairs. 
and 
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-
0017+0+DOC+PDF+V0//EN&language=EN 

(2012/2098(INI)); 

sustainable 

Committee 

growth 

Legal 

on 

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(4) 

(5) 

(6) 

(7) 

(8) 

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.  

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. 

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. 

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.  

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. 

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 Europe14. 

12 

13 

14 

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recovery 

(2012/2097(INI));  Committee  on  Employment 

Report on Corporate Social Responsibility: promoting society’s interests and a route to sustainable and 
and  Social  Affairs. 
inclusive 
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-
0023+0+DOC+PDF+V0//EN&language=EN 
United  Nations,  “The  Future  We  Want”,  Outcome  Document  of  the  United  Nations  Conference  on 
Sustainable Development RIO+20, A/CONF.216/L.1  
COM(2011) 571 final of 20 September 2011 

9 

   EN 

                                                 
(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. 

EN 

10 

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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. 

EN 

11 

   EN 

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. 

In  providing  its  analysis,  the  annual  report  shall,  where  appropriate, 
(d) 
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:  

EN 

12 

   EN 

 
(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 

EN 

13 

   EN 

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 
The President 

For the Council 
The President 

15 
16 
17 

Two years after entry into force 
First year after the transposition deadline 
Second year after the transposition deadline 

EN 

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