The government has made amendments to the Companies Act and Regulations which came into force on 1 January 2017. ETI’s Ben Rutledge explains that the new regulations require large companies to disclose non-financial information in their annual reports and covers a range of issues from employment matters to environmental concerns and anti-corruption measures. He also says why this is important.
The new Companies Act and Regulations are an amendment to the Companies Act 2006 (Strategic Report and Directors’ Report) and the Company Regulations 2013. They were necessary to ensure the UK complied with the EU Non-Financial Reporting Directive (2014/95/EU), which all EU member states had to transpose into law by the end of 2016.
Increasing corporate accountability and transparency
The Directive is part of a wider drive to increase corporate accountability and transparency and aims to standardise non-financial reporting across Europe. It applies to companies with 500 or more employees and broadly mirrors requirements which already apply to companies listed on the UK Stock Exchange.
Company reporting in the UK is held in high regard, and some of the new requirements are covered by existing legislation. Under the Modern Slavery Act, for example, large companies must report on the actions they are taking to eradicate slavery and human trafficking in their supply chains.
However, these new requirements go further. Reporting requirements now cover corporate due diligence processes on all human rights issues, not just trafficking or forced labour.
Not only could these new regulations improve corporate governance across Europe, they also draw attention to important issues beyond the bottom line. My hope is that companies that need to report on these ‘non-financial’ issues will be more likely to factor them into business strategies and risk models.
There are advantages for shareholders too: they will have more visibility of these important issues and be in a better position to hold companies to account.
ETI Human Rights Due Diligence Framework – and more
Companies will find ETI’s Human Rights Due Diligence Framework very useful. It is available free of charge and provides a practical approach for conducting human rights due diligence, focusing on labour rights. It will help large companies meet the new reporting requirements as well as assisting UK companies that need to comply with the Modern Slavery Act. It can be found here.