Filip Gregor
Head of the Responsible Companies Team
A proposal released today by the European Commission to require large European companies to report on environmental and social issues will not guarantee ethical corporate behaviour according to the European Coalition for Corporate Justice (ECCJ). [1]
The group, representing 250 organisations in 15 countries, has been saying for years that new rules to improve corporate transparency are needed. It says that whilst the proposal is a welcome initial step because it requires companies to be more transparent on the impacts of their activities, the current wording leaves companies too much flexibility. As it stands the proposal is a missed opportunity to ensure the needed transparency of European companies.
The Commission aims to oblige large companies to include a ’non-financial report’ in their annual report. It proposes to require companies to disclose their risks and policies related to the environment, social and human rights, but only in as far as the risks endanger the company and shareholders – not communities or the environment. The proposal would allow companies too much discretion about how to report and what on, it lacks concrete indicators and does not include sanctions to ensure companies actually comply with the requirement.
Jerome Chaplier, ECCJ coordinator, said: “There is a strong need for legislation with teeth – according to recent opinion polls 62% of European citizens do not feel well enough informed about the impacts of companies on the environment and their lives, and more than 4 out of 10 think companies have a negative impact on society overall. We fear companies will only identify and disclose the risks that affect their economic performance, and won’t take responsibility for the impacts they have on the people and the planet.” [2]
“Without clear guidance and sanctions attached to the proposal, the accuracy and reliability of the information companies provide cannot be guaranteed and citizens’ trust in companies cannot be restored,” he added.
Disclosure of environmental and human right impacts can make a big difference to the environment, people and businesses. However many European companies still do not integrate these considerations into their practices and reports in a meaningful way.
Examples include: Dutch oil company Shell which does not inform communities in the Niger Delta about the exact amount and status of pollution, and continues to mislead stakeholders about the cause of oil spills in its reports [3], food companies like Findus whose reputations have been damaged by the recent horse meat scandal associated with a lack of transparency in supply chains [4], and the European clothing industry which is also lacking in transparency– recent tragic fires in Bangladesh and reports in India show that it includes very serious safety issues and involves child labour. [5]
Richard Dyer, resource use campaigner at Friends of the Earth Europe, said: “Companies consistently fail to report on the issues that matter. We have discovered that the biggest smart phone brands are using tin that is damaging livelihoods and the environment in Indonesia, full supply chain reporting would have exposed this earlier. Europe needs to improve transparency and accountability for European companies wherever they operate.” [6]
Contact
Jerome Chaplier, ECCJ coordinator
coordinator at corporatejustice.org
Tel.: +32 (0) 289 310 26 mob. +32 (0) 477 184 753
Richard Dyer, Resource use campaigner at Friends of the Earth Europe
richard.dyer at foe.co.uk
Tel.: + 44 (0) 7940 850 328
Links
[1] http://ec.europa.eu/internal_market/accounting/docs/non-financial-report...
[2] http://ec.europa.eu/public_opinion/flash/fl_363_en.pdf
[3] http://www.foeeurope.org/Watershed-Dutch-court-ruling-against-Shell-300113
[4] http://www.guardian.co.uk/sustainable-business/supply-chain-transparency...
[5] Fatal Fashion: http://somo.nl/news-en/somo-news/companies2019-blind-faith-in-failed-aud... and Time for transparency: http://somo.nl/news-en/somo-news/time-for-transparency-in-the-garment-in...
[6] http://www.foeeurope.org/mining-smartphones-true-cost-tin-261112
The European Parliament has adopted the Corporate Sustainability Reporting Directive (CSRD), which clarifies transparency obligations for large companies operating in the EU on their sustainability impacts, risks, and opportunities. Pursuant to the CSRD, companies across all sectors will report against the European Sustainability Reporting Standards, which were developed by the European Financial Reporting Advisory Group (EFRAG), submitted to the European Commission and published on 22 November.
NGOs and civil society groups will only support an ambitious first set of sector-agnostic ESRS that closely builds on the EFRAG drafts adopted last November. They urge the Commission to follow EFRAG’s technical advice alongside 60+ companies and investors worth 651bn USD, and caution against making significant changes at this stage, as this would risk discrediting the process so far and undoing a good compromise.
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