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
Investors, asset managers and civil society organisations call for the prompt implementation of the reform on corporate sustainability reporting and EU standards
Frank Bold together with other leading NGOs working on corporate sustainability and sustainable finance raised strong concerns about the delay in the publication of the Sustainable Corporate Governance initiative, as well as the lack of information explaining such new delay.
Due diligence is a precondition for the sustainable activities as defined by the EU Taxonomy and green financing under the Sustainable Finance Disclosure Regulation, including green bonds. Particular ESG due diligence requirements will be regulated by the forthcoming Sustainable Corporate Governance Directive. To help companies better understand its scope and to clarify its requirements, Frank Bold is hosting a webinar. It will feature international experts from companies such as Ericsson and outdoor clothing manufacturer Vaude. We invite you to join us on 26 January at 10 am CET.
