Companies with more than 500 employees must report now not just on financial matters. They must now also report on how they respect the rights of their workers, protect the environment and fight corruption. The law on the Implementation of the Corporate Social Responsibility Directive (CSR) came into force on April 19, 2017.
Background
The importance of so-called non-financial information has grown in recent years. This information forms an increasingly important part of corporate communications. Investors, companies and consumers demand more and better information about the business activities of companies. They want to be able to decide whether to invest, to enter into delivery relationships or to purchase and use products. This is also due to the increased media coverage of working and living conditions in third-world countries (such as the textile industry in India). This has led to a sensitization of investors, consumers and even the company itself to non-financial interests. People simply want to know with whom they are dealing and whether transactions and purchases with the company are also morally responsible.
Non-financial decision-making factors are becoming more important
Non-financial factors are already important internal decision-making factors. Corporate social responsibility, the responsibility of companies for their impact on society, is a key building block to achieving sustainable development. Companies have been increasingly focusing their business activities on sustainability issues for some time now. They have realized that doing so helps achieve long-term cost savings and a better reputation among customers and on the capital market. In this context, corporate reporting and communication play an increasingly important role. Many companies already voluntarily report on their activities, emphasizing their compliance management systems, or, in sustainability reports, their ideas and engagement. In this way they stake out a position vis-a-vis their competition.
Compulsory reporting
Certain large (in particular listed) companies, credit institutions and insurance companies that have more than 500 employees must report on certain matters. In the Management Report of the Annual Report or in a separate non-financial report, they must present their most significant risks concerning workers’, social and environmental interests, respect for human rights and the fight against corruption. In addition, they must describe what companies are doing in relation to these matters.
Conclusion
Once again, the legislature has created additional documentation and reporting requirements. However, it must be kept in mind that transparency creates trust and that this additional obligation could constitute a difficult task for the company. Since the laws implementing these obligations apply retroactively from January 1, 2017 and are therefore already in effect for the 2017 financial year, now is the time to prepare for this report. Compliance programs have a positive impact on the documentation practices of a company and also facilitate the preparation of these reports.