European Parliament Requires Sustainability Reporting

A new law passed by the European Parliament will require the largest companies to include sustainability as part of their annual financial report. 

A 599-55 vote applies to publicly-traded with more than 500 employees that must address “policies, risks and results” in relation to “social, environmental and human rights impact, diversity and anti-corruption policies” in their annual report.

Currently, 2,500 companies voluntarily produce sustainability reports and that will rise to nearly 7,000 by 2017, when the law goes into effect.

These “public interest companies” must:

• Report on environmental, social and employee-related, human rights, anti-corruption and bribery matters
• Describe their business model, outcomes and risks of their policies regarding these topics, as well as their diversity policy for management and supervisors.

Companies will be encouraged to use standardized, recognized frameworks, such as the Global Reporting Initiative, Sustainability Reporting Guidelines and the UN Guiding Principles on Business and Human Rights.

Small businesses are exempt, but the large companies are required to report information on their supply chains, which is expected to have an effect on smaller companies.