Disclosure alone does not control companies’ social risks, FERMA tells European Commission and the European Parliament

ferma-position-paper-on-disclosurePublic disclosure of a company’s social issues is good, but by itself does not show that the risks are under control, the Federation of European Risk Management Associations (FERMA) has told the European Institutions.

“For numerous large companies, transparency has become a fundamental part of their business strategy. The disclosure of environmental and social information can therefore be viewed in a positive way,” said FERMA President Jorge Luzzi. “But it is disclosure plus good risk management that creates the conditions for transparency and sustainability. By itself, disclosure is not enough.”

He also added a warning. “If the regulations do not take sensitive industry-specific issues into account, they could actually damage competitiveness and so the sustainable performance they are aiming to promote.”

These comments are part of FERMA’s response to a draft directive adopted by the Commission on 16 April 2013 and now at the European Parliament under the leadership of the Legal Affairs Committee. Its aim is to increase the transparency of larger companies through more non-financial reporting.

The proposed directive requires companies with more than 500 employees to disclose information on their policies, risks and results on environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and board room diversity.

Among FERMA’s comments:

  • Disclosure requirements should be flexible enough to take into account industry-specific sensitive areas, market strategy on a global level and competition.
  • Increased non-financial reporting will remain a benefit for businesses only if does not turn into a heavy cost and administrative burden.
  • Sustainability of performance requires a thorough risk management process that involves knowledge and understanding of the risks.
  • Risk management should, therefore, be part of the Parliamentary discussion of the draft Directive.
  • Board diversity and social issues should be treated separately.

Notes to journalists:

The European Commission adopted on 16 April 2013 a proposal for a directive enhancing the transparency of certain large companies on social and environmental matters. This Directive amends the Accounting Directives (Fourth and Seventh Accounting Directives on Annual and Consolidated Accounts, 78/660/EEC and 83/349/EEC, respectively). Its aim is to increase companies’ transparency and performance on environmental and social matters, and, therefore, to contribute effectively to long-term economic growth and employment.
The Legal Affairs committee is the responsible committee at the European Parliament and appointed a rapporteur on 29 May 2013.

Companies concerned will need to disclose information on policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors.

Press release: http://europa.eu/rapid/press-release_IP-13-330_en.htm

FERMA position paper on the proposed Directive on disclosure of Non-Financial and Diversity Information by certain Large Companies and Groups

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