EU makes big companies report on environmental impacts
Jerome Chaplier, the coordinator of the European Coalition for Corporate Justice (ECCJ) – a network of more than 250 NGOs, trade unions, consumer groups, and academics promoting greater corporate accountability, has published recently an interesting article explaining that EU member states finally agreed to back reforms that will mean large listed companies are required to report on their environmental and social impacts.
He said that pending final approval by the European Parliament and the European Council, corporate social responsibility has moved from being voluntary to mandatory. So, this deal could be a momentous step forward, despite the fact that there are some loopholes.
The deal done in Brussels will enshrine a duty in law to report on the non-financial impacts of business activities. Some 6,000 large companies will be required to report on their policies on diversity, social issues and on corruption, as well as the risks they pose to human rights and to the environment, including through their supply chains.
But opposition from some member states, particularly Germany, Poland and the UK, mean the requirements will not apply to the majority of large companies – according to estimates just one in seven large companies will be required to report. Companies will also be free to choose which indicators and standards they use for reporting.
Disagreements over whether the reform should be mandatory or voluntary nearly killed the whole package – and the result is a compromise giving companies a huge amount of flexibility in how they comply with the reform. Yet there is little disagreement within business about the value of non-financial reporting. A recent study by PWC showed that three in four CEOs agreed that it contributed to their long-term success. Intelligent business leaders have already recognised that these reforms can be a useful tool that they can use to their advantage. By complying with the new requirements, they will have an enhanced understanding of the risks they face, and will act to reduce these risks. This will not only be of benefit to their reputation, but also benefit their long-term survival business.
So, some companies, including Ikea and Unilever spoke out in favour of the reforms. However there are others, such as BusinessEurope, the Europe-wide lobby group, which argued vociferously that corporate social responsibility can only work if it is voluntary. The German government’s position appeared to echo this line.
ECCJ members have always been very clear that a voluntary approach would not lead to more sustainable and fair society. Corporate social and environmental reporting must be mandatory to be taken seriously.