Study on EU Non-financial reporting directive highlights need for clarification of co's legal duty to report on human rights due diligence

On 4 March 2019, the European Coalition for Corporate Justice together with Clean Clothes Campaign published a new qualitative study on human rights reporting under the EU Non-financial reporting directive (NFRD). Drawing on an in-depth analysis of four case studies of company reporting, the report highlights the need for a clear human rights due diligence reporting module, and calls in particular for the NFRD to endorse the United Nations Guiding Principles on Business & Human Rights reporting framework, along with sanctions for non-compliance and disclosure of meaningful supply chain data.

The study is available below.

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Article
6 January 2020

EU financial markets watchdog recommends EU Commission consider amending NFRD to provide for set of specific disclosure requirements

Author: Susanna Rust, Investments & Pensions Europe

"ESMA backs ESG disclosure as short-termism bulwark", 6 Jan 2020

The EU financial markets watchdog has recommended the European Commission take steps to improve the quality of environmental, social and governance (ESG) disclosure...

It said there were shortcomings in existing EU legislation in terms of providing for comparable, relevant and reliable ESG disclosure, which made it “more difficult for the positive relationship between ESG disclosure and long-term investment to materialise”.

It has advised the Commission to amend the Non-Financial Reporting Directive (NFRD), promote a single set of international ESG disclosure standards, and require the inclusion of non-financial statements in annual financial reports.

The Commission has already said it will review the NFRD this year. According to ESMA’s recommendations the EU executive should consider amending the Directive to allow for the development of binding measures, including to provide for a limited set of specific disclosure requirements...

Adopted in 2014, the NFRD requires listed companies to publish reports on the policies they apply in relation to areas such as environmental protection or treatment of employees, but it misses more specific requirements to prepare both narrative and quantitative disclosures.

ESMA also noted that introducing binding measures covering specific disclosure requirements should allow “better coordination” between the availability of data from investee companies and the disclosure obligations imposed on investors under the new sustainable finance disclosure regulation...

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Report
4 March 2019

A Human Rights Review of the EU Non-Financial Reporting Directive

Author: European Coalition for Corporate Justice, Clean Clothes Campaign

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Article
4 March 2019

ECCJ Study of Non-financial Reporting reveals need for UNGP framework

Author: ECCJ

At present, under the EU Non-financial Reporting Directive (NFRD), companies are required by law to disclosure their human rights risks, impacts and due diligence in their annual reports. However there remains a problem: it is not specified how companies are meant to do this.  Meanwhile, studies continue to reveal companies failing to report properly on their human rights risks, impacts and due diligence.

This report provides a qaulitative study of four cases of company reporting under the NFRD, each with significant and serious human rights risks and impacts. The examples highlight the need to clarify the legal duty to report on human rights due dilignce.

ECCJ, together with the civil society Alliance for Corporate Transparency, endorses the UNGP reporting framework as the human rights reporting framework companies must use. This is because it provides the clearest and most sophisticated common standard for companies as to how to undertake and report on their human rights risks, impacts and due diligence...

[T]he report calls for sanctions for non-compliance with the directive and disclosure of meaningful supply chain data, such as supplier lists, to empower civil society to hold companies account for what they say in their reporting.

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