Most large companies are unaware of the new environmental reporting requirements which will need action to be taken in 2017. The Non-Financial Reporting (NFR) Directive requires European Union (EU) Member States to mandate disclosure of environmental and social policies, risks and outcomes for large Public Interest Entities. Member States must transpose the rules on non-financial reporting into national legislation by 6th December 2016. The UK government has made it clear that until the UK has officially exited the EU, it will continue to comply with Directives and their requirements. This means that, for at least the next two years, many businesses will be expected to fully comply and it is likely that the UK will continue with this in the long term once it is enshrined in UK Law.

The Non-Financial Reporting Directive applies to large listed undertakings that average over 500 employees across the financial year and will include listed firms, banks, insurance companies and other organisations that are so designated. Companies for which qualification may vary year to year will be given the option to comply voluntarily but there will be no UK ‘gold-plating’ – only those that fall within the requirements of the Directive will be required to comply.

The UK’s implementation of the Directive has not yet been enacted but will be in place for the December deadline and will be effective starting 1st January 2017. This will mean that annual reports will be required to include the information necessary for compliance from 2018 onwards. Whilst this may seem like a long way off, it is essential that companies examine the qualification criteria to identify if there is a requirement to comply and act now to ensure that the relevant information and data is gathered from the commencement of the 2017 financial year.

The Directive requires companies to disclose information about:

  • Environmental matters;
  • Social and employee aspects;
  • Respect for human rights;
  • Anticorruption and bribery issues;
  • Diversity in their board of directors.

Companies would be expected to report on their policies, risks and results in these areas. There is expected to be a reasonable level of flexibility, with companies being required to report on the issues that are most material to their business. There is also no indication at this time that there will be any requirement for independent verification.

There are many measurement tools that provide the data required to report on non-financial environmental matters. ISO 14001 is a British Standard with a set of requirements to help organisations create an effective Environmental Management System (EMS), allowing them to benchmark current environmental performance (e.g. energy use, recycling rate, waste created) and set out ways to improve on it. The ISO 14001 process examines environmental policies, identifies risks and provides targets for improvement for the coming year, encouraging a positive ethos of continual improvement, so an organisation’s EMS will continue to evolve. ISO 14001 provides a certified recognition of an organisation’s environmental credentials, year on year environmental improvement leading to cost savings and compliance with the NFR Directive.

For companies that fall outside of the scope of the NFR Directive, considering your environmental and social risks and opportunities can still be hugely beneficial. Investors are increasingly concerned about these issues and how they might affect businesses in the long-run. Having a holistic view of these issues will ensure that businesses are well-positioned in the face of future sustainability risks and trends.

To establish whether you qualify, to understand the risks and opportunities or to find out how you can achieve the ISO14001 accreditation, please complete the contact form or call Melanie Kendall-Reid on 01252 878722.

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