EU Passes CSR Reporting Rules

Thursday, 27 February, 2014

After much wrangling, the EU passed a law yesterday requiring mandatory CSR reporting from large companies in their annual reports.

Despite several EU member states against the proposal, the result allegedly came from a ‘last minute compromise’ between member states and the EU Parliament. The report means companies with 500 or more employees must report their impacts on human rights, social and environmental factors.

The European Coalition for Corporate Justice coordinator, Jerome Chaplier said that “they will have to release details of important risks to people and to the environment. This means a listed large oil company will have to report on its oil spills and the health risks from gas flaring for example, or a listed clothing retailer will have to consider risks in its supply chain.”

Despite this advance, the ECCJ described it as a ‘timid step forward’ who suggested that loopholes in the law would allow for some companies to avoid the new reporting standard.

According to the president of the EU’s Competitiveness Council, it is the first legislation on non-financial information reporting, saying “Corporate social responsibility is an enabling tool for business productivity and contributes to a smart and sustainable growth. It is not only for shareholders but also for stakeholders and citizens that it adds value.”

It is estimated that the law will apply to around 6000 companies in the EU, with the ECCJ adding that “guidelines for companies on how to report under the new reform, including on water use, land use, greenhouse gas emissions and use of materials, are expected from the European Commission within the next two years. The legislation is expected to be reviewed after four years.”

The final call from civil society was for an avoidance of ‘greenwash’ whereby companies exaggerate or mislead on their social and environmental credentials. Without any kind of regulatory body, companies around the world have been flagged up by NGOs and journalists for being misleading in their CSR reporting, which is mostly voluntary:

“The European Commission must be ambitious in the way this reform is implemented and ensure that misleading information provided by companies can be challenged,” Chaplier concluded.