Faculty of law blogs / UNIVERSITY OF OXFORD

2017 Heralds New Non-Financial Reporting Requirements Across Europe


Allen & Overy


Time to read

2 Minutes

For many large companies across Europe, 2017 marked the introduction of new non-financial reporting requirements addressing issues such as human rights and corruption for financial years beginning on or after 1 January 2017.

Member States were required to introduce the provisions of the Non-Financial Reporting Directive 2014/95/EU (the Directive) by 6 December 2016. The Directive amends and expands the reporting requirements in Directive 2013/34/EU (the Accounting Directive). It also seeks to harmonise EU-wide corporate reporting requirements, and requires certain large companies to report on a range of non-financial matters relating to their business, including human rights, the environment, employee protections, anti-corruption and bribery, and the diversity of management boards.

In most Member States, a certain level of non-financial reporting has been in place since the implementation of the Accounting Directive, but adjustments will have to be made to accommodate these new requirements. In addition, the Directive is at different stages of implementation across the EU. As a result, companies operating in multiple European jurisdictions may be required to comply with slightly differing requirements.

Who is caught?

The European Commission’s impact assessment suggests that only 2,500 large companies within the EU currently prepare a non-financial report. It estimates that approximately 18,000 companies will fall within the scope of the new requirements.

The Directive introduces non-financial reporting requirements on certain large undertakings (i.e. those with more than 500 employees on average during the financial year) which are also “public interest entities” (PIEs).

PIEs are defined as being companies that are:

  • admitted to trading and issue transferable securities on an EU regulated market;
  • credit institutions;
  • insurance undertakings; or
  • designated as a PIE by a Member State due, for example, to the size, type of business or number of employees.

The new requirements

The key provision of the Directive is contained in Article 1 (inserted as Article 19a of the Accounting Directive), which requires that large undertakings “include in the management report a non-financial statement containing information to the extent necessary for an understanding of the undertaking’s development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters”.

The information must include a brief description of the company’s business model, a description of the policies pursued by the company in relation to the non-financial matters, the outcome of these policies, a description of the principal risks relating to non-financial matters and how the company manages those risks. If the company does not pursue policies in relation to one or more of the non-financial matters, it must give a clear and reasoned explanation for not doing so.

The Directive provides undertakings with some flexibility in a number of areas, including the precise form in which disclosures should be made.

For detail on implementation of the Directive in individual Member States, and on the steps that companies should be taking now, see here.


This post comes to us from Allen & Overy. It has been authored by Matthew Townsend (Partner) and Emily Turnbull (Associate). 


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