On sustainable corporate governance
JURI-PR-655848
Committee on Legal Affairs · Rapporteur: Pascal Durand
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A draft report by Parliament's Legal Affairs Committee calls for a review of the Non-Financial Reporting Directive (NFRD) and for new duties on company directors to pursue sustainability.¶¶ It asks to widen the NFRD's scope to all large listed and non-listed undertakings, and possibly to small and medium enterprises in high-risk sectors.¶ It wants a single EU reporting framework with mandatory sector-specific standards, a harmonised location for statements, a free EU-wide digital platform and mandatory audits of non-financial statements.¶¶¶ It calls on the Council to resume negotiations on country-by-country tax reporting and on the Women on Boards proposal.¶¶ It proposes that directors of limited liability companies be collectively responsible for defining, disclosing and monitoring a sustainability strategy with measurable targets, and that companies engage stakeholders through advisory committees.¶¶¶
Committee position. The rapporteur proposes that Parliament call for a revised NFRD with wider scope, EU standards, mandatory audits and a digital platform, and for new directors' duties to define and monitor a sustainability strategy with stakeholder advisory committees.¶¶¶
Key points
- Welcomes the Commission's commitment to review the NFRD and asks that the revision be consistent with the Disclosure Regulation and the Taxonomy Regulation.¶
- Calls for the NFRD to cover all listed and non-listed large undertakings in the Union as defined in Article 3(4) of the Accounting Directive, and to consider including SMEs in high-risk sectors.¶
- Says environmental matters in the NFRD should follow the Taxonomy Regulation, and that social and employee matters, human rights and anti-corruption should be defined precisely.¶
- Considers materiality should cover issues affecting long-term value creation and matters beyond purely financial performance.¶
- Calls for a comprehensive EU framework with clear, comparable, verifiable disclosures, including mandatory sector-specific standards where relevant.¶
- Asks the Commission to harmonise where the non-financial statement is published and to set up a free, publicly accessible EU-wide digital platform for publishing it.¶
- Considers non-financial statements should be subject to a mandatory audit, depending on company size and field of activity, conducted under the future EU framework.¶
- Calls for certain EU companies to publish an annual country-by-country report for each tax jurisdiction, and urges the Council to resume negotiations on the 2016 tax disclosure proposal.¶
- Urges the Council to start negotiations on the Women on Boards proposal to correct the imbalance between women and men in top company decision-making.¶
- Considers directors should integrate long-term interests and sustainability risks, impacts, opportunities and dependencies into company strategy.¶
- Calls on the Commission to propose that board members of limited liability companies be collectively responsible for defining, disclosing and monitoring a sustainability strategy, taking account of affected stakeholders.¶¶
- Says the strategy should set measurable, time-bound, science-based targets aligned with EU international commitments, include gender equality, employee rights and fair salary policies, and link directors' variable pay to the targets; companies should engage stakeholders through advisory committees that can request an internal inquiry.¶¶¶
Who is affected
- Large listed and non-listed companies in the EU would have to report under a widened NFRD; SMEs in high-risk sectors could be included.¶
- Company directors would gain a duty to define, disclose and monitor a sustainability strategy, with variable pay tied to its targets.¶¶
- Shareholders, employees' representatives and affected external stakeholders would take part in advisory committees on the strategy.¶¶
- Assurance service providers would audit non-financial statements under the future EU framework.¶
- The Council is asked to resume negotiations on tax disclosure and to start talks on the Women on Boards proposal.¶¶