The European Commission (the Commission) has announced a proposed new directive which would amend the Accounting Directives (Fourth and Seventh Accounting Directives on Annual and Consolidated Accounts, 78/660/EEC and 83/349/EEC respectively), concerning the disclosure of non-financial and diversity information by certain large companies.

The objective of the directive is to increase EU companies' transparency and performance on environmental and social matters. The proposed new directive will only apply to large companies with more than 500 employees.

According to the Commission, the companies concerned will be required to disclose in their annual reports, relevant and material information on policies, results and risks concerning environmental aspects, social and employee-related matters, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors. Companies will retain significant flexibility to disclose relevant information in the way they consider most useful. They may use international or national guidelines according to their own characteristics or business environment.

Boardroom Diversity

In relation to disclosure around boardroom diversity, it is planned that large listed companies will be required to provide information on their diversity policy concerning age, gender, geographical diversity, and educational and professional background.

Companies must set out the objectives of the policy, how it has been implemented, and details of the results. The Commission says that companies will not be required to have a boardroom diversity policy, but when they do not have it, they will have to explain why not.

The Commission describes this proposal, and its recent initiative to increase the presence of women on boards of directors, as "complementary", saying that this proposed directive covers other aspects of diversity, such as the educational and professional backgrounds, ages or geographical diversity of directors.

Timetable

It is anticipated that this new proposed directive will become operative in 2016, with companies publishing their first reports in 2017. Member States may grant non-listed companies, which currently may be less used to reporting practices, the possibility of an additional transition year.