Companies in the European Union are revealing very little data about what they are doing on non-financial issues such as climate change and human rights performance, claimed a new report released by the Alliance for Corporate Transparency.
According to the Non-Financial Reporting (NFR) Directive of the EU, companies are mandated to disclose information about their efforts in the areas of environment, social and governance aspects.
One of the issues with this new law that was enacted in the EU in 2018 is a lack of mentioning of specific elements and concrete statistics that companies need to specifically disclose and in the NFR reporting.
Brussels is now being pushed by the civil society organisations to create a better sustainability reporting framework because such data is important for investors, employees and government agencies.
The latest report was based on analysis of a 1,000 companies from 11 sectors. The same agency had prepared a similar report two years ago covering only 105 companies in three sectors. Hence this latest report is a more comprehensive one compared to the earlier one.
This new study has been backed by Frank Bold, the Czech Republic-based public-interest law company which has a non-profit wing that deal with corporate accountability. The firm aims to better EU legislation in this respect so that companies are forced to use and report specific and relevant figures.
“The EU is developing an agenda on sustainable finance. To tackle climate change and transition the economy fast enough, there needs to be a major shift in the way capital markets and banks handle lending,” said Filip Gregor, head of the responsible companies section at Frank Bold.
“[Brussels] is taking leading steps in getting this information into actual decision-making. That’s the political context,” Gregor said in an interview to a television news channel.
“They want to build a standard, define the minimum information that should be disclosed, and pave the way for international development in other countries,” he added.
Financial data about the performance of a company is regularly published by firms in because that is the clearest way that companies can deliver financial data to their stakeholders, Gregor said. However in the case of ESG data, most companies simply provide qualitative data and descriptions in text narratives even while the information type often significantly varies between companies.
The latest report was made public almost at the same time that the EU Commission is initiating key reforms and “after [European Commission] Executive Vice President Valdis Dombrovskis announced plans to create EU standards for corporate sustainability reporting”, the organizations said in a press release.
“Companies mostly supply boilerplate risks, with no idea of the time horizon,” Gregor said, suggesting that much of the material is created for public relations purposes.
“These results show that mandatory business transparency is a necessary, but insufficient, condition for change,” said Phil Bloomer, executive director at the Business & Human Rights Resource Center, which along with groups such as the World Wildlife Fund and Transparency International also participated in the research.
(Adapted from AlJazeera.com)