EU Mandatory CSR Moves Closer

Posted:  May 13th, 2011 by:  The Environment Site comments:  0

I wanted to headline this “EU Mandatory CSR Confirmed” .. but the trouble is I can’t confirm it.

The European Coalition for Corporate Justice (ECCJ) released this statement last week:

Last week, (the EU) confirmed in the Single Market Act that they would address non-financial disclosure by private companies through a legislative proposal, due before the end of the year.

(my emphasis).

This is the clearest sign yet that the EU is preparing to make non-financial reporting mandatory.  The trouble is, I cannot find a source closer to the EU than the ECCJ for the story.

At the beginning of April the EU released 12 priorities for the Single Market Act (which is due to be issued by the end of the year).  This didn’t directly address non-financial reporting … instead it contained this intriguing priority:

8. Social entrepreneurship
As well as legitimately seeking financial profit, certain businesses also choose to pursue the general-interest objectives of social, ethical or environmental development. This sector generates growth and employment. To encourage this, we need to take full advantage of the formidable financial tool which is the European asset management industry. We will propose a European framework for mutual investment funds, so as to amplify the effect of the existing national initiatives by offering these funds the opportunities provided by the Single Market.

… which brings us pointing more in the direction of SRI and sustainable stock exchanges than disclosure rules.  However, another priority also catches my eye:

11. Regulatory environment for business
Businesses still too often view the Single Market as an area of constraints, not of opportunities. Their lives must be simplified by reducing regulatory and administrative constraints. To achieve this, the Commission is therefore proposing a simplification of the accounting Directives as regards financial reporting obligations, and a reduction of the administrative burden, especially for SMEs.

Now, I wonder whether the EU is preparing the way for integrated reporting proposals; lifting the burden of financial reporting but broadening the scope to include non financial metrics?

To be honest, this would surprise me.  I favour integrated reporting as an end goal, but I don’t believe non-financial reporting is anywhere near mature enough yet.

However, this appears to be the way the EU is thinking.  It’s probably motivated by this consultation on non-financial disclosure (PDF) which found that only companies and standard setters supported the status quo and EVERYONE supported integrated reporting.

In other mandatory CSR news, it appears India hasn’t quite given up on its proposal that a mandatory minimum of 2 percent of corporate profits be spent on CSR .

This was it’s intention at the start of the year, but in the face of overwhelming business opposition it had to retrench and opt for a “pay or explain” model under which companies who don’t spend at least 2 percent of profits are obliged to explain why not.

Now the Indian government has introduced new proposals which will force the mining sector to spend at least 2 percent of its profits on CSR projects.  This is ontop of proposals which demand that mining companies share 26 percent of their profits with a mine’s local community!

Quite where India is going with this I’m not sure (and am not the best person to comment).  However, it’s clear that there are moves afoot in some of the world’s largest economies to make CSR mandatory.  And that can only be a good thing.

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