Non-financial reporting, put simply, is a form of transparency reporting where businesses formally disclose certain information not related to their finances, including information on human rights. It helps organisations to measure, understand and communicate their human rights impacts, as well as set goals, and manage change more effectively. Reporting on human rights forms one of the four steps in human rights due diligence, which is explored in here.
The Commentary to the UN Guiding Principles on Business and Human Rights (UNGPs), Guiding Principle 21, notes:
“The responsibility to respect human rights requires that business enterprises have in place policies and processes through which they can both know and show that they respect human rights in practice. Showing involves communication, providing a measure of transparency and accountability to individuals or groups who may be impacted and to other relevant stakeholders, including investors. Communication can take a variety of forms, including in-person meetings, online dialogues, consultation with affected stakeholders, and formal public reports. Formal reporting is itself evolving, from traditional annual reports and corporate responsibility/sustainability reports, to include online updates and integrated financial and non-financial reports. Formal reporting by enterprises is expected where risks of severe human rights impacts exist, whether this is due to the nature of the business operations or operating contexts. The reporting should cover topics and indicators concerning how enterprises identify and address adverse impacts on human rights. Independent verification of human rights reporting can strengthen its content and credibility. Sector-specific indicators can provide helpful additional detail.”
Sustainable Development Goal 12 on sustainable consumption and production includes a specific target 12.6 to “encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle”.+ Read more
Non-financial reporting also sometimes referred to as sustainability or Environment, Social and Governance (ESG) reporting allows businesses to inform stakeholders on the ‘non-financial’ aspects of operations and disclose human rights policies, risks, and outcomes. It details measures taken by businesses to manage human rights risks, and address human rights abuses where they have occurred.
In an increasing number of jurisdictions non-financial reporting has moved from being a voluntary element of Corporate Social Responsibility (CSR) to become legal requirements. The EU Directive 2014/95/EU lays down the rules on disclosure of non-financial and diversity information by large businesses. EU rules on non-financial reporting apply to large public-interest companies with more than 500 employees. This covers approximately 6,000 large companies and groups across the EU, including listed companies, banks, insurance companies, other companies designated by national authorities as public-interest entities. Under Directive 2014/95/EU, large businesses have to publish reports on the policies they implement in relation to environmental protection, social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery, diversity on company boards (in terms of age, gender, educational and professional background). Directive 2014/95/EU gives businesses significant flexibility to disclose relevant information in the way they consider most useful. Businesses may use international, European or national frameworks to produce their statements – for instance, they can rely on the UN Global Compact, the UN Guiding Principles on Business and Human Rights, the OECD guidelines for multinational enterprises, the Global Reporting Initiative (GRI), ISO 26000. In June 2017 the European Commission published its guidelines to help businesses disclose environmental and social information.
The French 2017 ‘loi sur le devoir de vigilance’ (duty of vigilance law) applies to large limited liability companies (sociétés anonymes) (French businesses headquartered in France employing at least 5000 employees worldwide (including through direct and indirect subsidiaries) and French businesses headquartered outside France, with French subsidiaries, as long as they employ at least 10000 employees worldwide (including through direct and indirect subsidiaries)). These businesses must develop, implement, and publish annual vigilance plans detailing steps they will take to detect human rights risks and prevent serious violations, the health and safety of persons, and the environment, resulting from activities of the business, subsidiary, supplier and subcontractor. Due diligence requirements mandating non-financial reporting are also emerging with regard to specific areas, such as modern slavery or sourcing of minerals form conflict affected areas. For example, the UK Modern Slavery Act 2015 requires that businesses (with a turnover above £36m) prepare a slavery and human trafficking statement for each financial year, which must be signed by a director and approved by the Board before being published in a ‘prominent’ place on the organisation’s website. An interesting aspect of these policy trends is that the instruments have an extra-territorial reach. In addition, the only way to comply with the disclosure requirements is by gathering information from global supply chains. This means that supplier companies not affected by the law still need to produce information so that their buyers can comply.
Financial market regulators and stock exchanges across the world have issued guidance and/or requirements to listed companies on non-financial reporting. Recent examples of instruments include the Nasdaq ESG Reporting Guide 2.0 (2019), the B3 State-Owned Enterprises Governance Program (2017), or the Singapore Stock Exchange Listing Rules from 2016 which requires every listed issuer to prepare an annual sustainability report on a “comply or explain” basis following the adoption of internationally accepted reporting frameworks. The Sustainable Stock Exchanges (SSE) Initiative highlights a range of further instruments.
Asides from legislative measures, socially responsible investors (SRI) have been encouraging increased transparency and reporting in relation to non-financial or ESG issues by investee companies. The Corporate Human Rights Benchmark is an investor-backed initiatives which assesses 101 of the largest publicly traded companies in the world on 100 human rights indicators including transparency.
A range of material has been developed to assist in non-financial reporting:
- The UN Guiding Principles Reporting Framework, developed by Shift and Mazars, a tool to assist businesses in reporting on how they respect human rights;
- The GRI Sustainability Reporting Standards (GRI Standards), which provides a framework for businesses to report on the broad spectrum of sustainability issues, including human rights;
- The International Integrated Reporting Framework, which aims at encouraging better corporate reporting, taking into account financial and non-financial performance;
- The UN Global Compact Communication on Progress.
‘This page was prepared with support from the Global Reporting Initiative.’
Non-financial reporting relates to the following Sustainable Development Goal
12) Responsible Consumption and Production
Examples and analysis of non-financial reporting regulatory instruments:
- European Commission website dedicated to non-financial reporting
- Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups
- The California Transparency in Supply Chains Act of 2010 (SB657)
- The Modern Slavery Act 2015
- KMPMG and GRI, Carrots and Sticks Report, 2016.
Reporting frameworks and guidance
- UN Guiding Principles Reporting Framework. Guidance for companies to report on how they respect human rights in line with the UN Guiding Principles
- UN Global Compact Communication on Progress
- Global Reporting Initiative, “GRI Standards”
- International Integrated Reporting Framework
- UNCTAD Guidance on Corporate Responsibility Indicators in Annual Reports
- Sustainable Stock Exchanges Initiative, Model Guidance on Reporting ESG Information to Investors
- KPIs for ESG – European Federation of Financial Analysts Societies (EFFAS) and DVFA Society of Investment Professionals in Germany
- Carbon Disclosure Project (CDP)
- Greenhouse Gas Protocol (GHG Protocol) Corporate Standard
- EcoManagement and Audit Scheme, EMAS
- Interfaith Center on Corporate Responsibility (ICCR), Christian Brothers Investments Services (CBIS), and Calvert Investments, Effective Supply Chain Accountability: Investor Guidance on Implementation of The California Transparency in Supply Chains Act and Beyond , November 2011
Index and benchmarks
What National Action Plans say on Non-financial reporting
Action point 15
Incorporate the principle of “due diligence” into the management of the company, also in the terms of human rights
This action point focuses on due diligence. The NAP explains that “the OECD, and the EU, wants to make more non-financial information available. In this context, companies are encouraged to make public their policy on corporate ethics, social affairs, human rights, including, where applicable, in their supply chains, the human rights risks identified, their action plans to prevent any negative impacts and to remedy if necessary, and the measured impact of these action plans.” Alongside the federal government, the Wallonia, Flemish and Brussels governments are committed to encouraging the publication of non-financial reporting by large companies.
Action point 16
Promote social reporting, including human rights
This is the main action point covering the issue of non-financial reporting. The NAP explains that given the adoption of the new EU directive 2014/95/EU, some major companies will be required to disclose non-financial information in their annual report relating to the environmental, social and human resource issues, respect for human rights and the fight against corruption and bribery. Companies that meet the conditions for making such a non-financial statement but that do not have a policy on one or more of the above-mentioned issues will be required to provide a clear and reasoned explanation of the reasons for this choice and to include it in this non-financial reporting.
Belgium’s actions will include:
- Firm transposition of the directive 2014/95/EU so that it is quickly and clearly established what is expected from companies as part of the non-financial reporting.
- Consult with stakeholders on this issue. In collaboration with employers’ organizations, clear communication will be put in place to inform large companies about the new obligations that will enter into force from 2017 onwards.
- Insist within the European Commission on support measures, for large enterprises that are obliged to publish reports on this issue, as well as for small and medium-sized enterprises and other organizations that wish to do so on a voluntary basis.
- Regarding reporting by public services, the federal public services will have to draw up a social report every second year, with the objective of cross-cutting sustainable development in management of contracts. This report should be prepared in accordance with the guidelines of the Global Reporting Initiative. The reports will be published, inter alia, through the website: http://www.rs.belgium.be/en/
Pillar 1: The State Duty to Protect Human Rights
Strand 8: Legislation, Policies and Incentives
Action Point 8.1. (page 60)
The Ministry of Economy will support the legal provision committed in the Agenda for Productivity, Innovation and Growth seeking to create a legal framework for social business enterprises, by encouraging the incorporation of business and human rights criteria.
Strand 9: State Business Enterprises
Action Point 9.3 (page 62)
To strengthen coordination between the Ministries forming part of the Inter-Ministerial Working Group, amplify the impact of this Action Plan, and make known its progress, the Group will carry out the following actions: …
2. Encourage the adoption of policies, statements or codes of conduct by business enterprises and urge the implementation of mechanisms of due diligence.
Pillar 2: The Corporate Responsibility to Respect Human Rights
Strand 3: Reports on Human Rights Issues
Action Point 3.1 (page 74)
The Ministry of Economy will:
- Promote, through the Division of Associativity and Social Economy, strategies and mechanisms of accountability and non-financial reporting for cooperatives, which will include the potential risks of their businesses on human rights. To encourage the use of this practice, an electronic template will be developed in 2017, free of charge and freely available, for these bodies to report to the State and their different target audiences.
VIII. FUNDAMENTAL PILLARS
i. Fundamental Pillar 1: The State’s obligation to protect human rights
Strand 9 [Eje nº 9]: The state as economic actor
- The Ministry of Finance and Public Credit will adopt commitments to respect human rights and good reporting practices (GRI methodology) to monitor company performance.
Non-financial reporting [page 21-22]
“Implements Principle 3d
Reporting on the activities of large companies works to the benefit not only of business partners and shareholders, but also other stakeholders. With this in mind, companies are increasingly reporting not only on their financial position, but so on the non-financial aspects of their operations. Information on the impacts that companies’ operations have on the environment, social aspects, human rights and the protection thereof is disclosed in separate non-financial reports or as part of the annual report.
Many companies already engage in non-financial reporting entirely voluntarily because this is regarded as a matter of prestige and an opportunity to improve their market position. Nevertheless, the European Union, having decided to coordinate non-financial information, has issued a Non-financial Reporting Directive. [Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups.]
The non-financial reports drawn up by certain large entities could become an important tool for transparency. The auditor examines whether an entity has drawn up non-financial information and disclosed it in the annual report or consolidated annual report, or whether it has produced a separate report. As non-financial reporting shoulders entities with a heavier administrative burden and extra costs, it is not compulsory for smaller entities, who will be able to decide for themselves whether or not to publish a non-financial report.
Current state of play:
- The Czech Republic has transposed the Non-financial Reporting Directive into Act No 563/1991 on accounting (in particular Part Eight thereof). Non-financial information will be disclosed by large public-interest entities with more than 500 employees. Information on respect for human rights will be a mandatory part of the report.
- The European Commission (DG FISMA [Directorate‑General for Financial Stability, Financial Services and Capital Markets Union]) has produced general guidelines for businesses on how to apply the Non-financial Reporting Directive.
- Publish the European Commission’s general guidelines on the websites of the National CSR Portal, the Ministry of Industry and Trade and the Ministry of Finance, and in Finanční zpravodaj (“Financial Bulletin”).
Coordinator: Ministry for Human Rights, Ministry of Industry and Trade, Ministry of Finance
Deadline: 31 December 2017
- Provide information on the guidelines as part of training courses or in guidance and informational materials on non-financial reporting.
Coordinator: Ministry of Finance
Transparency [page 37-38]
“The Guiding Principles set great store by openness and transparency, which in practice means communication with the public, with employees and with other stakeholders. Businesses should make public the fact that they are mindful of their responsibility, that they are not just assuming this responsibility for show, and that they accept it as part of their business ethics. This ongoing communication could include not only the public, but also investors, business partners and potential employees, for whom the business, by following this path, has become a more attractive partner or place to work. Communication may be one way (e.g. various forms of non-financial reporting) or bidirectional (e.g. public hearings on matters of general interest).
The Government of the Czech Republic recommends that businesses where the activities, products, services or business relationships are associated with risks of serious human rights violations formally provide information on how they are dealing with those risks, even in situations where the law does not require them to do so. The government recommends all companies reporting on human rights to take account of the Reporting Framework for the UN Guiding Principles on Business and Human Rights. Reporting should provide information of relevance without overwhelming the reader. The Government also recommends that large-scale projects with a potential major impact be publicly presented and consulted.”
Voluntary non-financial reporting [page 38-39]
“In the European Union, large companies are required to publish certain non-financial information, including information on human rights matters. Small businesses, however, may report voluntarily, especially if they are active in sectors or in countries where there is a heightened risk of encroachment on human rights. Transparency is highly self-regulatory and makes it easier to appoint a responsible person in complex corporate structures. It enables a business to evaluate and map out risks, while making it clear to the public that the company does not underestimate them.
What should be included in a report? Human rights standards, as opposed to financial reporting, which is governed by sophisticated and internationally reputed respected standards, are still inchoate. Even so, the following information should not be left out of a report:
- Whether a human rights commitment has been made, how it has been devised, whose rights it affects, how it is communicated, and whether and how responsibility for compliance is addressed within the business.
- A specification of key issues, i.e. areas viewed by the company as operationally risky, or in which it is most involved. Information about how such issues have been identified and, if the company has operations in multiple countries, information as to which countries are affected.
- Information on how these risks are addressed and what measures have been taken.
- Significant events that have occurred in the past year.
A business may publish periodic non-financial reports in numerous forms, either as part of the annual report or entirely separately. In any case, they should be posted online on the business’s website. The non-financial report should not be drawn up just for show, but should shed light on significant information relevant to an impact assessment of the business’s operations. On the other hand, it should remain brief and concentrate on matters of relevance. Parent companies should include information on the activities of their subsidiaries.
Human rights commitments cannot always be assessed with precision. Businesses should retain the option of evaluating commitments according to their own internal schemes and criteria. Nevertheless, where possible standardised indicators, including historical developments, should be used. The application of internationally acknowledged standards for non-financial reporting is recommended. These include:
- Non-financial reporting standards based on the Guiding Principles on Business and Human Rights
- Global Reporting Initiative, an independent international organisation specialising in the reporting of the impacts of business operations in the fields of human rights, the environment and corruption
- Integrated Reporting (IR)”
2. The state duty to protect human rights
2.2 Recommendations from the Council for CSR on the state duty to protect [page 10]
“In November 2011, the Danish Council for CSR started working on recommendations to the Government on how the UNGPs on the state duty to protect could be implemented. The council finished its work in January 2012 where the recommendations were handed over to the Government. Among other initiatives, the Council for CSR recommended that the Danish Government:
– Expands the existing Danish corporate non-financial reporting requirement to include mandatory reporting on human rights; …”
2.3 Actions taken
Companies owned or controlled by the state [page 13]
“In 2008 the Danish Government introduced a statutory CSR reporting requirement which obligates all state-owned public limited companies irrespective of their sizes to report on CSR in the management’s review in their annual reports (GP 4)…”
Reporting requirement on human rights impact [page 14]
“Another priority for the Danish Government has been to strengthen the existing legal reporting requirement for the largest Danish companies and all state-owned companies (GP 3d).
Since 2009, large companies including all state-owned companies and institutional investors in Denmark have been required to report on their work on corporate social responsibility. This means that while Danish businesses are free to choose whether or not they wish to have a CSR policy there is a statutory requirement that they must take a position on CSR in their annual reports.
If the company has a CSR policy, the company must account for this policy in their annual reports, including any CSR standards, guidelines or principles the company employs. Secondly, the company must report how these policies are translated into action, including any systems or procedures used. Thirdly, the company must evaluate what has been achieved through the CSR initiatives during the financial year, and any expectations it has regarding future initiatives. If the company does not have any social responsibility policies, this must be reported.
In June 2012, this reporting requirement was expanded so that the largest Danish companies from 2013 expressly must state in their reports what measures they are taking to respect human rights and to reduce their impact on the climate. This means that if a company has a policy on human rights or climate issues, it must report according to the existing structure; what is the policy, how has the policy been translated into action and what has been achieved through the initiatives. If the company does not have policies for human rights or climate issues, this must also be disclosed. The purpose is to further strengthen Danish companies’ activities in relation to human rights and climate change which will be beneficial to society overall, but also to the individual company.
Three years after the reporting requirement was introduced, analyses show that companies generally appear to have been encouraged to report on CSR. In the course of the first three years of the legal requirement’s existence, nearly 50% of the companies reported on CSR for the first time. Secondly, there have been significant improvements in reporting practices in a number of areas. There is, nevertheless, still room for improvement as regards reporting consistency and reporting on the results of the CSR work. For information on Danish companies reporting on human rights see section 3.3.”
3. The corporate responsibility to respect human rights
3.3 Actions taken
Evaluation of CSR reporting in large and listed Danish companies [page 18]
“In 2008, Danish Government introduced a legal requirement for large companies in the Danish Financial Statements Act (see section 2.3 page 6 for more on the reporting requirement). Since the statutory CSR reporting was introduced a survey on the effects of the legal requirement has been conducted in three consecutive years. The surveys were based on a rolling group of participants, meaning that the same group of companies has been surveyed the previous years. Since the group has been subject to the reporting requirement for three years it includes – in the last survey – very few companies reporting for the first time. As expected, there have also been few changes in the choice of topics and content in the reports.
In the financial year 2010, a significant increase in the number of companies reporting actions relating to human rights (38% compared to 16% in 2009) and labour rights (35% compared to 16% in 2009) was noted. In the 2011 financial year, these reporting topics were as common as in 2010. Due to recent developments in international CSR principles (in particular the development of the UN Guiding Principles on Business and Human Rights), an increased focus on human rights, in particular, can be expected in the future. Following the latest amendment of Section 99a of the Danish Financial Statements Act, companies thus have to report on the topics of human rights and climate with effect from the 2013 financial year.”
Award for Best Non-financial Report [page 19]
“The Danish trade organization of auditing, accounting, tax and corporate finance, “FSR – Danish Auditors” annually announces the company with the best CSR report both for large companies and SMEs. The reports are judged by a panel of selected representatives from Danish businesses, organization, financial sector, educational institutions, etc. As part of the evaluation the judges look at whether companies also report on difficult subjects such as adverse human rights impacts.”
Further on, in the section Recommendations from the Council for CSR on the State Duty to Protect [page 10], the NAP states:
“Among other initiatives, the Council for CSR recommended that the Danish Government:
- Expands the existing Danish corporate non-financial reporting requirement to include mandatory reporting on human rights.”
Appendix 1, GP 3d
Status in Denmark (initiatives implemented before the UN ratification of the Guiding Principles) [page 27]
“Mandatory CSR reporting
As part of the first national action plan for CSR, the Danish Government introduced a reporting requirement to ensure that major businesses, institutional investors and unit trusts report on their CSR work in the management review of the annual reports. The duty to report for major businesses, institutional investors and unit trusts has entailed an obligation to report on their CSR policies and how they implement the policies in practice. Businesses and investors must also report if they have yet to set up policies for the area. This fact must appear from the management review of the businesses’ annual reports.”
Initiatives taken or planned as a dedicated measure to implement the UNGPs (after the UN ratification of the Guiding Principles) [page 27]
“Reporting on human rights and climate
From 2013 the 1,100 largest Danish companies and all state-owned limited liability companies must report on CSR in their annual reports. The Government will introduce a bill proposing that the largest Danish companies and state-owned limited liability companies in future must expressly state in their reports what measures they are taking to respect human rights and reduce their impact on the climate.”
Appendix 1, GP 10 continued
Initiatives taken or planned as a dedicated measure to implement the UNGPs (after the UN ratification of the Guiding Principles) [page 32]
“The Government has pro-actively supported the European Commission’s proposal for an EU Directive as regards disclosure of non-financial and diversity information. The Danish government finds that the expected European regulation is a timely opportunity for Europe and European companies to further strengthening reporting practices with regard to human rights. In addition it sends an important signal globally that while transparency is important in itself, a leveling playing field is needed.”
1 The state obligation to protect human rights
1.3 Activities in the EU [page 16-17]
“On 18 April 2013, the European Commission made a proposal to amend the accounting directive for the disclosure of so-called non-financial information of certain large companies.
The proposal shall be applied to companies of significant public interest with more than 500 employees on average on the account closing date. According to the proposal, such companies should include in their annual report a declaration stating material data related to the environment, social affairs, employees, human rights, and the prevention of corruption and bribery. The declaration should contain a short description of the business model, a description of the policies related to the areas mentioned above as well as the due diligence related to them, the results obtained in the policies, the main risks and risk management that apply as related to the areas mentioned above, and the non-financial performance indicators significant for company business. Instead of a declaration attached to the annual report, companies may also publish separate reports on certain conditions.
In February 2014, the negotiations between the Commission and the Parliament reached an agreement on the proposal, and the proposal is likely to be submitted to Parliament in April. After this, it will also be approved by the Council of the European Union. The proposal is due for approval before the end of the parliamentary term in May 2014. If the proposal is approved, it must enter into force in Finland in 2016. In this case, it is estimated that the reporting obligation would apply to the financial year 2017 at the earliest. On a national level, Finland will initiate the preparations to implement the directive as soon as possible.”
2 The state and companies
2.1 The state as an economic operator [page 22]
“The Ownership Steering Department in the Prime Minister’s Office has set a CSR reporting requirement for unlisted companies that are either majority-owned by the state or entirely state-owned. This also includes human rights. The obligation requires that companies submit reports in accordance with the best practices in the branch of activity concerned and, at minimum, adopting the standards corresponding to those of their central competitors.
As an owner, the state expects that the administration and management of state-owned companies take human rights into consideration in a responsible and transparent manner, both in their own organisation and in their subcontracting chains. (…)”
3 Expectations towards companies and support services
3.2 Reporting on corporate social responsibility [page 26]
“Reporting on corporate social responsibility may be a significant factor in monitoring the human rights impacts and risks of companies. In the Resolution on Corporate Social Responsibility, the Finnish Government encourages companies to publish the non-financial data on the social and environmental impact of their activities. The Ministry of Employment and the Economy and the Ministry of the Environment are involved in organising the annual competition for reporting on corporate social responsibility. The competitions have been organised since 1996 with a view to encourage companies to report on CSR. When reporting becomes mandatory for some of the companies (cf. Section 1.3 on non-financial reporting), the question of reforming the competition must be addressed.
International information on the content of companies’ responsibility reports is available in a database maintained by the Global Reporting Initiative (GRI). In Finland, Corporate Responsibility Network FIBS acts as a partner for GRI for all Finnish companies and organisations to register their responsibility reports in the database. By means of the database, companies’ responsibility reports can be compared by branch of activity and by geographical area. The database also provides useful information concerning the international corporate social responsibility standard to which each report refers.
As a follow-up measure, the working group proposes that
- human rights be adopted as the annual theme of the reporting competition.
Principal responsible party: Ministry of Employment and the Economy, schedule before the end of 2015.”
I- The State’s Obligation to Protect Human Rights
The International Framework [page 13]
… France also chairs the Group of Friends of Paragraph 47 of the Rio+20 Declaration. This group promotes sustainable development reporting to better ensure that economic actors respect social, environmental, good governance and human rights standards. This group successfully advocated for reporting to be reinforced and extended to all SDGs. …
Actions Underway [page 16]
- Working with the Group of Friends of Paragraph 47 of the Rio+20 Declaration, France supports the reinforcement of reporting requirements in the environmental, social and governance fields, especially with respect to the implementation of the Sustainable Development Goals adopted on 25 September 2015.
The European Framework
7. The European Union (EU) [page 17]
France has played an important role in ensuring that these issues are high on the European agenda, particularly with respect to the adoption of the European directive on binding non-financial reporting, which France actively supported during negotiations. It also promoted the inclusion of social, environmental and governance standards in trade and investment agreements (see section 8 below). It helped to ensure that the conclusions of the Council of the EU under the Dutch Presidency were adopted, supporting the enforcement of the UN Guiding Principles on Business and Human Rights and their integration into development policy. …
Footnote: See Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups, OJ L 330 of 15 November 2014.
- France has made human rights a requirement in non-financial reporting following the transposition of European Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups.
The National Framework
10. The Reinforcement of Legislation [page 23]
Recent public policies have led France to adopt new legislative measures supporting CSR.
… France also played a key role in developing transparency obligations for companies at the European level. It was the main supporter of the draft directive on non-financial reporting obligations, published on 22 October 2014, which requires large European listed companies to publish reports on their social, environmental, human rights and corruption policies. France encouraged the European Commission to take an ambitious approach when adopting the guidelines discussed in the directive. The directive is currently in the final stages of being transposed into French law. This will reinforce existing non-financial reporting requirements for companies. …
13. The Role of Public Agencies
Actions to be Implemented [page 30]
- Make the [Agence Française de Développement] AFD funding for businesses conditional on implementing or undertaking to implement non-financial reporting and a CSR due diligence plan for projects, or on the enforcement of host country or international standards.
15. Economic Sectors and Human Rights
The Financial Sector [page 35]
… One of the instruments France has implemented for businesses is increased transparency by way of non-financial reporting requirements.
There have been a number of voluntary international initiatives by the financial sector to promote human rights (the Equator Principles, UNEP Finance Initiative, the development of Socially Responsible Investment, and the Global Compact). However, France has implemented a regulatory framework that is relatively unique in that some of its provisions specifically target this sector (the Grenelle II Act of 12 July 2010).
Actions Underway [page 36]
- … France is examining whether to extend environmental, social and governance reporting requirements for institutional investors in Europe to cover human rights.
II- Businesses’ Responsibility to Respect Human Rights
In March 2015, the National CSR Platform agreed on the following points with respect to due diligence [page 38]
- … Defining the operational content of reasonable due diligence processes for companies in due diligence plans. These plans would distinguish between subsidiaries and subcontractors given the different due diligence processes applicable to each of these cases. The goal of these plans would be to identify and prevent human rights and environmental risks resulting from business operations. The French NCP’s work on the textile and garment sector could be a useful reference. Parent companies and outsourcing companies would have to disclose the due diligence processes they implement, in compliance with the European directive on non-financial reporting.
1. Charters and Codes of Conduct
Existing Tools [page 39]
6. Reporting [page 44]
Businesses must monitor the human rights measures they adopt and disclose on their initiatives in this field.
Under European Directive 2014/95/EU, human rights will become one of the pillars of CSR. This position will be reflected in French reporting requirements when the directive is transposed into national law. It should be noted that human rights reporting is already a requirement under the regulatory provisions of the Commercial Code. Decree 2012-557 of 24 April 2012 on the social and environmental transparency obligations of businesses places human rights on an equal footing with other issues.
- France is continuing to implement monitoring indicators and communicate with external stakeholders on business commitments and enforcement under the UN Guiding Principles on Business and Human Rights.
Actions to be Implemented
- Implement provisions to help transpose the European Directive on non-financial reporting into French law.
The performance of measures adopted by businesses to respect and communicate on human rights can be monitored in the following ways:
- By using existing global and sector-specific indicators or new company-specific indicators, and by formalizing internal annual reporting systems for the actions implemented;
- By including points to be checked in existing internal supervisory mechanisms;
- By monitoring and addressing human rights incidents;
- By issuing annual reports that can be viewed by the public.
Existing Tools and Responsible Practices [page 45]
- … The Global Reporting Initiative (GRI) has published G4 guidelines for sustainability reporting.
- Shift and Mazars have developed the UN Guiding Principles Reporting Framework for companies to report on human rights. …
There is no mention of non-financial reporting in the Business and Human Rights Chapter of the Georgian Human Rights NAP.
III. Federal Government expectations regarding corporate due diligence in respecting human rights
Reporting [page 9]
“Enterprises should keep information at their disposal and communicate it, where appropriate, to external recipients in order to demonstrate that they are aware of the actual and potential impact of their corporate activity on human rights and are taking appropriate steps to address the situation. The form in which this information is communicated should be tailored to its recipients. Enterprises whose business activity poses a particularly high risk of adverse impacts should issue regular public reports on that subject. Such reporting may be done in the framework of the company’s existing reporting format or take the form of separate reports focused on human rights. At the same time, such reporting obligations should not impose disproportionate administrative burdens on the reporting companies or on the SMEs in their supply chains.”
IV. Key areas for action
1.4 Enterprises in public ownership [page 18-19]
The Current situation
“The annual report on federal holdings lists about 700 enterprises in which the Federal Government has a direct or indirect stake. The Federal Government has direct holdings in 60 companies with business activities (as of 31 December 2014), 41 of these being direct majority holdings. Of the companies in which a direct majority stake is held, 13 have more than 500 employees. Among the matters covered by the report on federal holdings are the implementation of the Public Corporate Governance Code of the Federation, gender equality and the general sustainability of the listed enterprises.”
- “The Federal Government is keen to increase the percentage of enterprises in which it holds a majority share that apply the German Sustainability Code, including its obligation to report on human rights. From the 2018 financial year, the report on federal holdings will list, in its chapter on sustainability, all internationally active enterprises with more than 500 employees in which the Federal Government has a majority shareholding that apply the German Sustainability Code or a comparable framework with compulsory reporting on human rights and those that do not.”
2.1 Ensuring the protection of human rights in supply and value chains
The current situation [page 20]
“The Partnership for Sustainable Textiles, which was initiated by the Federal Ministry for Economic Cooperation and Development, has established an obligation to comply with sustainability standards and to guarantee corporate due diligence in the textile and clothing sector. All members of the Partnership are required to pursue its social and environmental objectives. They submit to a review process, which is conducted by an independent third party and is designed to bring about continuous improvement. Individual schedules of measures (road maps) are compiled annually by all members; the first of these is to be produced by the end of January 2017. A robust sanctions regime and regular reporting on the implementation of the road maps will ensure credibility and transparency. The Textile Partnership creates a reference framework and an independent review system of international scope.”
2.2 Transparency and communication regarding corporate impacts on human rights [page 21]
“Transparency requirements for corporate activity are an elementary component of due diligence with regard to human rights. These requirements are not limited to formal sustainability reporting but also entail willingness to engage in open dialogue with consumers, customers and actual or potential stakeholders and to share information on request.”
The current situation
“The number of enterprises that already present regular sustainability reports on a voluntary basis is steadily increasing. For example, the participants in the Global Compact, more than 300 in number, have committed themselves to presenting annual reports. The reports from German enterprises, and particularly from the large enterprises, are mostly based on the voluntary standards of the Global Reporting Initiative (GRI). The Federal Government has also supported the development of a German reporting standard in the German Sustainability Code (DNK). Sponsored by the Federal Ministry of Labour and Social Affairs, the Institute for Ecological Economy Research (IÖW) assesses the quality of sustainability reports from large enterprises and SMEs and draws up a league table for each of these categories. This ranking is intended to stimulate corporate competition in the realm of sustainability reporting and to highlight and propagate benchmarks for high-quality reporting. Through their purchasing decisions, consumers influence the supply of sustainably produced and delivered goods and services. Instruments such as the information platform www.siegelklarheit.de (sustainability standards comparison tool), initiated by the Federal Government, create transparency and help consumers to adopt sustainable purchasing habits.”
- “On 21 September 2016, the Federal Cabinet adopted the law transposing into German law Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial information by certain large undertakings and groups (the CSR Directive).”
3. Available means of practical implementation support
Measures [page 23]
“I. Helpdesk and initial consultation
- In cooperation with business networks, ‘practice days’ for SMEs are offered nationwide. These sessions provide support, information and exchanges with other enterprises on responsible supply chain management and high-quality sustainability reporting.”
Section 2: Current legislative and Regulatory Framework
Non-financial Reporting [page 15]
“The EU Directive on disclosure of non-financial and diversity information (2014/95/EU) 9 entered into force in December 2014. It requires certain companies known as ‘public interest entities’ to include a declaration in their annual management report containing information stating material data related to the environment, social affairs, human rights, and prevention of corruption. This Directive will shortly be transposed into Irish law.”
Section 3: Actions
II. Initial priorities for the Business and Human Rights Implementation Group [page 18-19]
“viii. Encourage business representative bodies to provide examples, templates and case studies to help support companies in their efforts to develop human rights focused policies and reporting initiatives.
x. Encourage engagement with human rights reporting standards, such as the UN Guiding Principles Reporting Framework, the Global Reporting Initiative or the Business Working Responsibly Mark.
Annex 1 – List of additional and ongoing actions to be carried out across Government
Domestic Framework [page 20]
“1. Transpose the EU directive on Disclosure of Non-financial and Diversity Information (2014/95/EU) into Irish law.”
III. Government Expectations Towards Business
… To this framework, it is important to add the need of disclosure of non-financial information (in this regard, Italy is also intervening with the transposition of the EU 95/2014) and the existence of remarkable standards such as the UNGP Reporting Framework, the OECD Guidelines on Multinational Enterprises and the Tripartite ILO Declaration, as well as other recognized European and International frameworks and standards such as Eco-Management and Audit Scheme (EMAS), the UN Global Compact, ISO26000 and the Global Reporting Initiative.
III. Government Responses: Current Activities and Future Commitments
B. Operational Principles
- Promote effective implementation of EU Directive 2014/95 on disclosure of non-financial and diversity information by large enterprises and groups.
- Promote environmental accounting in sustainability reporting and encouraging the adoption of disclosure processes for the assessment and communication of the environmental and carbon footprint of business;
To achieve the goals set in Principles 4, 5 and 6, and within the overall framework of the implementation of EU directives, the Italian Government will conduct the following activities to be jointly developed and monitored by CIDU and A.N.AC:
- … Strengthen the implementation of socially responsible public procurement rules by adopting a comprehensive framework of reference for bidders coordinated by A.N.AC and covering: anticorruption, non-financial disclosure, supply chain, environment, labor, equal opportunities and non-discrimination.
Italy’s Updated NAP
8. Promote an effective implementation of Legislative Decree n.254/2016 that transposes the EU Directive 2014/95 on disclosure of non-financial and diversity information by large enterprises and groups, also through a comparative analysis realised on a sample of enterprises and aimed at analyse the effective inclusion of the human rights dimension within the non-financial reports published by business and controlled by CONSOB, also in relation to diversity and gender.
34. [text from previous NAP; Within the framework of the monitoring mechanism set in the Plan (see par. V) give special attention to due diligence of business enterprises owned or controlled by the State, including the non-financial disclosure;
Chapter 2. Action Plan
2. Areas of the NAP
(3) Measures of the Government Promoting Corporate Responsibility to Respect Human Rights
A. Measures Related to Domestic and Global Supply Chains and Promotion of Human Rights Due Diligence Based on the UNGPs
(Existing framework/Measures taken）
Japan’s Stewardship Code and Corporate Governance Code refer to grasping the status of investee companies and corporate information disclosure to promote sustainability initiatives, including elements of ESG issues. In addition, the Stewardship Code, which was revised again in March 2020 also includes reference to consideration on sustainability when holding dialogue between institutional investors and investee companies. Furthermore, the Guidance for Collaborative Value Creation was published as a guideline for dialogue and disclosure on voluntary and proactive initiatives of companies on non-financial information, including ESG factors.
(Future measures planned)
(e） Raise awareness on the Guidance for Collaborative Value Creation
- Continue to boost efforts to raise awareness of the Guidance for Collaborative Value Creation, which is useful for holding dialogue and disclosure relating to non-financial information, including ESG factors for investors and corporate managers and directors. The Guidance can be used as a guide for voluntary and proactive initiatives of companies. [Ministry of Economy, Trade and Industry] …
(g）Promote information disclosure by business enterprises in accordance with the Environmental Reporting Guidelines
- Promote understanding of environmental due diligence and information disclosure by publicizing the Introductory Guide on Environmental Due Diligence issued in August 2020. [Ministry of the Environment]
|CHAPTER TWO: SITUATIONAL ANALYSIS AND THEMATIC AREAS OF FOCUS
2.2 Kenya´s Experience with Business and Human Rights [Page 7]
There is need to embed international human rights standards early into the exploration and drilling contracts, impact assessments, due diligence mechanisms and business reporting. This National Action Plan clarifies the Government’s expectation from concerned businesses in this regard.
2.5 Environmental Protection [Pages 10-11]
The Climate Change Act, 2016 establishes the National Climate Change Council, which is mandated to provide guidelines to private entities on their climate change obligations, including their reporting requirements.
Stakeholders’ consultations during the development of this NAP identified the following concerns related to the impacts of businesses on the environment:
CHAPTER THREE: POLICY ACTIONS
3.1. Pillar 1: The State Duty to Protect [Page 16]
The Government will:
iv. Develop guidelines for non-financial reporting under the Companies Act 2015;
3.2. Pillar 2: Corporate Responsibility to Respect Human Rights [Page 18]
The current voluntary initiatives established and adopted by business associations on different human rights issues do not have strict compliance and reporting mechanisms. They therefore fail to offer businesses that have ascribed to them the required guidance and supervision to ensure that their operations respect human rights. There is no mandatory requirement for human rights due diligence. Businesses, including state-owned enterprises, have not embraced the practice of engaging those whose rights are most likely to be impacted by their operations in any human rights due diligence.
d) Reporting : Enforce the requirement for businesses to prepare non-financial reports in line with the Companies Act, 2015, and encourage proactive disclosure of their impacts on human rights and the mitigation measures they are taking in this regard.
CHAPTER FOUR: IMPLEMENTATION AND MONITORING
ANNEX 1: SUMMARY OF POLICY ACTIONS
ANNEX 2: LEGISLATION PROPOSED FOR ENACTMENT OR AMENDMENT
The Lithuanian NAP makes no reference to non-financial reporting.
Part I – Rational Framework for the development, adoption and implementation of the NAP
1. International Context
1.2. European Union (pg. 13)
The Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups was adopted in 22 October 2014. The directive, transposed into national legislation by the law of 23 July 2016,7 imposes an obligation on certain companies identified by national authorities as “public interest entities” exceeding an average number of 500 employees during the financial year, including listed companies, banks, insurance companies and other companies, to include information in their annual management report with respect to human rights. The goal is to help investors, consumers and policymakers to assess the non-financial performance of these companies and encourage them to develop responsible business conduct.
Part III – NAP
1. Declaration of Commitment (pg. 26)
The Government expects companies to fully respect human rights in general, and in particular to:
- prevent human rights violations as a result of their activities;
- adopt the necessary policy instruments for this purpose, in particular by introducing a due diligence process. In this context, due diligence refers to the process that enables companies, as an integral part of their decision-making and risk management mechanisms, to identify, prevent and mitigate potential human rights impacts of their activities, as well as to report on how they address this issue. The nature and scope of reasonable and adequate due diligence in specific situations depends on factors such as the size of the business enterprise, the context of its operations, the specific recommendations of the Guiding Principles and the scope of the negative impact. When business enterprises have a large number of suppliers, they are asked to identify the general areas where the risk of adverse human rights impact is most significant and to prioritize risk assessment for human rights due diligence with regard to such suppliers;
3. Government’s Response (pg. 28)
… Regarding the level of corporate commitment, it is interesting to take note of a study on corporate social responsibility that the international consulting firm KPMG published in 2017.15 For the first time, this study analysed the extent to which human rights were perceived as a business issue in the 4,900 largest companies in 49 different countries (including Luxembourg) and in the 250 largest companies in the world. According to the findings, Luxembourg is among the countries in which companies produce reports on their social responsibility at a lower rate than the world average. While this average is 72 per cent, in Luxembourg only 59 per cent of companies submit CSR reports. Accordingly, it can be concluded that, in Luxembourg, human rights are still perceived as insufficiently important as a business issue. Therefore, an effort of information, promotion and awareness raising through the NAP by the government, appears useful and necessary for the implementation of the UN Guiding Principles, and to ensure that businesses develop their internal rules and regulations to respect human rights, and means for implementation and follow-up to address potential adverse human rights impacts.
Content from the BHR specific chapter in the Human Rights NAP:
Strategic priority 3.6. Promote public policies aimed at the prevention and mitigation of adverse impact caused by private, public or mixed business activities
3.6.5. Promote human rights due diligence in order to identify, prevent, mitigate and repair the negative effects caused by business activities (private, public or mixed) and, to foster transparency and accountability in supply chain flows.
3.4 Transparency and reporting [page 28-31]
“During the consultations, various parties pointed out that companies should be encouraged and/or required to report on their human rights policy and the results achieved. At the same time, they stressed that level of reporting should be proportionate to what it yields, and that account needs to be taken of the administrative burden on the business community.
The UN Guiding Principles devote attention to the importance of transparency and reporting. The responsibility to respect human rights calls not only for internal processes to identify and mitigate risks of adverse impacts (‘knowing’), but also for communication on these risks with the parties directly involved and other stakeholders, such as investors (‘showing’). In this way, companies can account for their policies and facilitate dialogue with all stakeholders.”
“As it points out in its policy letter ‘CSR Pays Off’, the government supports the European Commission’s proposal to amend accounting legislation in relation to non-financial reporting. Large companies will be required to disclose information on human rights, environmental matters, social and employee-related matters and corruption. The proposal affects some 600 companies in the Netherlands, which together account for considerable social impact. The new Directive will ensure a level playing field at European level. What is more, it will place a limited administrative burden on the business community, since it is non-prescriptive as regards information provision, and works on the basis of the ‘apply or explain’ principle.
The Netherlands pursues an active policy of encouraging social reporting through the transparency benchmark. This benchmark is carried out every year on the instructions of the Ministry of Economic Affairs to give the 500 largest Dutch companies a rating for transparency on sustainability and CSR. The benchmark’s criteria have been updated and brought in line with international developments such as the UN Guiding Principles and the European Commission’s proposal for a new Accounting Directive. The Transparency Benchmark will now apply to the 600 companies referred to in this proposal.
The government supports the growing number of international initiatives to promote transparency by means of tax disclosure. It takes an active part in discussions in the EU on a possible expansion of obligatory tax disclosure by companies operating internationally to include payments to countries where they are active. It urges attention for possible adverse economic consequences of making this information public, and for close harmonisation with existing transparency requirements.
The government continues to call companies’ attention to the need to comply with the Corporate Governance Code and the principle that members of the management and supervisory boards should take account of CSR in fulfilling their duties. The government has pointed out that CSR should be part of the entrepreneurial spirit. It is therefore essential to devote serious attention to CSR within the existing structures and responsibilities of the management and supervisory boards. Their reports should also include more information on their CSR policies.
During the consultations, attention was again requested for the Production and Supply Chain Information (Public Access) Act (WOK). With this legislation, consumers, members of the public, civil society organisations and other parties who ask companies about the origins of their products and services would be assured of an answer. On the basis of the results of a study by Panteia/EIM15 in 2009, the government then in office concluded that implementation of the WOK was technically feasible, but that it would entail high costs for the business community, and its enactment would probably run into international legal obstacles.
In this light, the government does not feel that this is the right time to enact such legislation, and points to the increasing availability of information on supply chains through instruments such as the Sustainable Trade Initiative and the Sector Risk Analysis project. The SER also devotes considerable attention to promoting supply chain transparency and responsibility in its ICSR committee. Moreover, it is possible to report to the NCP on companies that are insufficiently transparent for a constructive dialogue on CSR.
2. The State duty to protect human rights
2.1 The state as legislator
Amendments to EEA legislation [page 19]
Small amendments to Norwegian legislation may be necessary in order to implement the expected new EEA rules corresponding to the new EU Directive (2014/95/EU) on disclosure of non-financial and diversity information by certain large companies and groups, which includes CSR.
2.9 International cooperation on CSR [page 27]
- … seek to ensure that the reporting framework set out in the UN Guiding Principles is incorporated into the United Nations Global Compact and the Global Reporting Initiative.
3.3 External communication and reporting [page 34]
… The Guiding Principles also provide further details on how companies should address the human rights impacts of their operations. It is the company itself that decides how to communicate and report on this in the light of its situation and target groups. We recommend companies to use international reporting frameworks, and to have their reports verified by an independent auditor or other expert. It is also important to publish the reports in the language of the country where the company operates. The company itself chooses the most appropriate reporting framework, and the Norwegian authorities can advise on this.
International reporting Standards
The UN Guiding Principles (UNGP) Reporting
Framework was launched in February 2015. It evolved from the Human Rights Reporting and Assurance Frameworks (RAFI) and is co-facilitated by Shift and Mazars. Business was actively involved in the development of the reporting framework, and many companies began using it during the development process. The High Commissioner for Human Rights (OHCHR), and the Working Group on the issue of human rights and transnational corporations and other business enterprises, have expressed their support for the project but are not involved in it. Norway has supported the project. www.ungpreporting.org
United Nations Global Compact requires its members to report on their eforts to implement its 10 principles in four areas: human rights, labour, environment and anti-corruption. Enterprises’ reports are graded as GC Advanced, GC Active or GC Learner (minimum requirement). Norway supports Global Compact. www.gcnordic.net/ www.unglobalcompact.org
Global Reporting Initiative (GRI) is the most widely used standard for reporting on CSR, and includes human rights indicators. There are three levels of reporting, from A, the most advanced, to C, the least advanced. Independent auditing/verification of the report earns a plus, making A+ the highest level. Norway supports GRI. CSR Norge maintains an overview of Norwegian companies that follow GRI, and regularly holds GRI Certified Training courses. www.globalreporting.org www.csrnorge.no
Pillar II: The corporate responsibility to respect human rights
Non-financial Reporting: Implementation of Directive 2014/95/EU to the Issue of Non-financial Reporting [page 30]:
Since January 2017, it has been mandatory for a certain group of companies to disclose information regarding the application of human rights policies in business practice in connection with the transposition of Directive 2014/95/EU into Polish law.
Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large enterprises and groups came into force on 6 December 2014. EU Member States had two years to transpose the directive into national law.
It is estimated that the provisions will affect about 6,000 entities in the European Union, while in Poland some 300 enterprises may be required to disclose non-financial data. In Poland, the Ministry of Finance was responsible for the transposition. The Act of 15 December 2016 amending the Accounting Act was published on 11 January 2017 in the Journal of Laws (Journal of Laws 2017, Item 61) as a transposition of the above-mentioned Directive with respect to disclosure of extended non-financial information. The Act came into force on 26 January 2017 and will apply for the first time to reports prepared for the financial year beginning on or after 1 January 2017.
The implemented provisions of the Directive aim to increase the transparency of information with respect to corporate social responsibility (CSR) presented in management reports (in the form of a statement) or in separate reports as regards environmental, social, and occupational issues, respect for human rights, and anticorruption measures. New reporting obligations are addressed to large entities and generally include those that primarily operate in the financial sector, including banks, insurance companies, issuers of securities, and large capital groups.
Under the Directive and its transposed law, the companies subject to this obligation may apply any national, EU, or international reporting standards or guidelines, including their own rules.
The state’s expectations of business enterprises
Several new legal provisions proactively ensure the strengthening of respect for human rights in business, which involves non-financial reporting on the environmental and social impacts of major business enterprises, measures to promote equality, and considering environmental, social and labour law aspects in public procurement. (pg. 7)
Principle 2 – States sets expectation for respecting human rights
Slovenia has recently included several proactive provisions in national legislation to foster respect for human rights in business. An example is the Act Amending the Companies Act of April 2017, which introduces non-financial reporting on the environmental and social impacts of major enterprises and measures to promote equality. (pg. 10)
Principle 3d – Non-financial reporting
Slovenia has adopted a new legal regulation aimed at increasing the transparency of certain companies and at improving the adequacy, convergence and comparability of non-financial information, increasing the transparency and consequently the diversity in their administrative, management and supervisory bodies, increasing corporate responsibility and efficiency and thereby the effectiveness of the single market, and at improving corporate management.
In accordance with Directive 2014/95/EU, which requires that certain large companies disclose relevant non-financial information to provide investors and other interested parties with a more complete picture of the development, efficiency, status and environmental and social impacts of their activities, Slovenia incorporated the obligation of non-financial reporting for large companies into its legal system in April 2017. In addition, to create a transparent, effective and clear management system which fosters the trust of investors, employees and the general public in the corporate management system, Slovenia has extended the list of companies which are required to include non-financial statements in their annual reports. (pg. 21)
Non-financial reporting: In accordance with the Act Amending the Companies Act, which transposed Directive 2014/95/EU into the Slovenian legal order, large companies which are public-interest entities exceeding the average number of 500 employees must include a non-financial statement in the management report, containing information on their environmental and social impacts. Published as part of the annual report (or as a separate report), the statement must contain information at least on environmental, social and human resources issues, respect for human rights, and matters relating to the fight against corruption and bribery. The obligation to report also applies to large companies with the number of employees at the consolidated basis exceeding 500, which have to prepare consolidated annual plans.
In addition, all companies subject to audit have to outline the policy of representation diversity in their management or supervisory bodies (diversity based on gender, age, education). The diversity of skills and positions of members of management or supervisory bodies improves the understanding of business operations and openness to innovative ideas, prevents similarity of views, etc. The above provision is aimed at indirectly contributing, through such diversity, to the more successful management of companies. The monitoring and supervision of implementation of the abovementioned legal provisions will be entrusted to the Ministry of Economic Development and Technology.
As part of drafting policies and measures for restructuring and the transition to a circular economy, the Ministry of the Environment and Spatial Planning, in cooperation with other relevant ministries, will actively promote the use of voluntary environmental labelling instruments at the EU level, such as Ecolabel and EMAS. To this end, targeted expert support and assistance will be offered to companies and organisations through financial incentives and more widely by promoting sustainable production and consumption. (pg. 23)
Annex I – Guidelines on Corporate Human Rights Due Diligence
- Monitoring of, and reporting on, due diligence and respect for human rights
One of the basic principles of corporate social responsibility is transparency; therefore, it must be ensured that the enterprise report regularly comprehensively and clearly to stakeholders on its observance of human rights.
The simplest way for an enterprise to report observance of human rights is in its annual report, or a special sustainability report, or a corporate social responsibility report, in which it also reports on other non-financial aspects of business operations.
In planning the scope and structure of the report, the enterprise can draw from some international standards and initiatives that include human rights and have developed basic indicators for monitoring them, inter alia:
- EU directive on non-financial reporting for public-interest companies with morethan 500 employees (transposed to Slovenian legal order with the ActAmending the Companies Act),
- GRI guidelines on reporting on sustainability in business operations,
- ISO 26000 – social responsibility guidelines for enterprises,
- SA 8000 Certificate,
- Principles of the United Nations Global Compact.
By joining some of the Slovenian initiatives and by acquiring certificates, enterprises can fully or partially comply with requirements concerning human rights. Some of the relevant certificates are: Family-friendly company, Socially responsible company, EFQM excellence model, Golden Thread, Most respectable employer, HORUS – Slovenian award for social responsibility, Leader in social responsibility and sustainable development; alongside other means in support of this field. (pg. 47)
South Korea’s NAP makes no reference to non-financial reporting.
Guiding Principle 3
“In order to increase transparency, and the confidence of consumers and investors on Spanish companies, the Government will compile the reports that companies write voluntarily, in accordance with the Spanish Strategy for Corporate Social Responsibility, and the Article 39 of the Sustainable Economy Law. It will be encouraged that these take into account the impact of their activities on human rights, including the value chain, introducing a specific chapter for that purpose. Likewise, and in relation to the reports and reports mentioned in the article 35 2 a) of the Sustainable Economy Law, which binds state business corporations, and public business entities attached to the General State Administration, it will be promoted the inclusion of a section on human rights. In addition, the transposition of Directive 2014/95 / EU on disclosure of non-financial information and information about diversity by certain large companies and certain groups will be carried out.”
2 The corporate responsibility to respect human rights [page 14]
“In keeping with the UN Guiding Principles, businesses’ human rights efforts are expected to include the following main points: …
- Be transparent, i.e. report on and communicate the risks and opportunities facing the company, as well as its impact on society, both favourable and adverse …
[Footnote: February 2015 saw the launch of the first comprehensive guidance for companies on human rights reporting in line with the UNGP: UN Guiding Principles Reporting Framework. Five international companies are ‘early adopters’ of the reporting framework: Ericsson, H&M, Nestlé, Newmont and Unilever.]
Annex: Measures taken [page 23-24]
The State as owner
- “According to the government state ownership policy, state-owned companies are expected to set a good example, which means that they must seek to comply with international guidelines such as the UN Global Compact, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises. They must also be transparent and report in accordance with the Global Reporting Initiative (GRI). State-owned companies must also identify areas of CSR that are relevant to their business strategy and the board of directors must set strategic sustainability targets. The ownership policy applies in companies where the State is the majority owner; in other companies, where the State is part-owner, the State seeks to ensure that the ownership policy is followed, in dialogue with other owners.
Annex: Measures planned [page 27-29]
Regulations and legislation
- “The EU has adopted a Directive amending the Accounting Directive on disclosure of non-financial and diversity information. Corporate disclosure of sustainability and diversity policy (Ministry Publications Series 2014:45) proposes that certain companies prepare a sustainability report providing information on, for example, respect for human rights and anti-corruption activities. It is also proposed that the corporate governance reports of certain listed companies disclose the diversity policy that applies to their board.”
How can the State support the business sector?
- “The Government Offices is prepared to consider continued support to the Shift Project for its development of the Reporting and Assurance Frameworks Initiative (RAFI). Companies are encouraged to use the UNGP’s Reporting Framework developed by Shift and Mazars.”
Annex: Links [page 30]
“GRI 4: www.globalreporting.org
Guidance for companies to report on how they respect human rights in line with the UN Guiding Principles: UN Guiding Principles Reporting Framework: www.ungpreporting.org”
2 National Action Plan on Business and Human Rights 2020-23
2.1 Pillar 1: state duty to protect
2.1.2 Operational principles: legislative and information policy measures
Swiss legislation does not require companies to carry out human rights due diligence. In response to the popular initiative ‘Responsible Business – Protecting Human Rights and the Environment’, the Federal Council proposed submitting it to the people (referendum), without a counter-proposal. It advised voters to reject the initiative, explaining that it prefers a coordinated approach at the international level and the use of existing instruments, specifically the national action plans on the subjects covered by the popular initiative (NAP on Business and Human Rights, Corporate Social Responsibility (CSR) Action Plan and the ‘Green Economy’ report). On 14 June 2018, the National Council tabled an indirect counter-proposal, which is still being debated in parliament. The Federal Council is monitoring the debates, as well as international developments, emerging legislative trends on corporate human rights due diligence and the implementation of the UN Guiding Principles by businesses. Of particular interest are legislative changes in the EU regarding the mandatory reporting of non-financial information.
2.1.5 Policy coherence
Guiding Principle 10
Measure 19: Promotion of respect for human rights and labour standards within financial institutions
Investments by the Swiss Investment Fund for Emerging Markets (SIFEM) are subject to full due diligence with regard to its environmental, social (including working conditions) and governance (ESG) responsibilities. The relevant human rights standards are applied in all ESG risk assessments. This means that the risks of human rights abuses are always taken into account in the investment decision-making process. SIFEM partners (fund managers) are required to submit an annual or half-yearly report detailing their ESG activities and any major ESG accidents and incidents. This information makes it possible to improve the monitoring of human rights issues from the initial situation assessment and right through the investment cycle.
3. The core content of the National Action Plan on Business and Human Rights
3.2 Action plan for community, land, natural resources and the environment
3.2.3 Action Plan (2019–2022)
Pillar 1: State duties in protecting (Protect)
|Responsible agencies||Time-frame (2019–2022)||Indicators (wide frame)||Compliance with National Strategy/ SDGs/UNGPs|
|8.||Development of government operations||Establish a report on environmental assessment, critical business situations and cases of human rights violations that occurred, as well as specify protection measures of human rights of villagers in the area||– Ministry of Natural Resources and Environment
– Ministry of Interior
|2019–2022||– Established report on environmental assessment, critical business situations and cases of human rights violations that occurred
– Measures to protect the human rights of local peoples
|– National Strategy for Public Sector Rebalancing and Development
– SDG 11, 13, 14 and 15
– UNGPs Articles 1, 3, 4, 5 and 7
|Consider the establishment of monitoring and evaluation mechanisms for human rights situations with every section involved||– Ministry of Natural Resources and Environment
– Ministry of Interior
– Ministry of Justice
|2019–2022||– – Established monitoring and evaluation mechanisms for human rights situations, with representatives from all sectors involved participating||– National Strategy for Public Sector Rebalancing and Development
– SDG 11
– UNGPs Articles 1, 3, 4, 5 and 7
The UK 2013 NAP in the section dedicated to Government expectations of business states that [page 13]:
The UNGPs guide the approach UK companies should take to respect human rights wherever they operate. The key principles of this approach are to:
– … be transparent about policies, activities and impacts, and report on human rights issues and risks as appropriate as part of their annual reports.
The UK 2013 NAP in the section dedicated to Actions taken to support business implementation of the UNGPs states that [page 14]:
To help businesses to fulfil their responsibility to respect human rights we have so far:
(ii) taken steps to ensure that from 1 October a clarification of the Companies Act 2006 means that company directors will include human rights issues, in their annual reports;
The UK 2016 Updated NAP states in the Introduction that [page 3-4]:
“Companies understand the business case for respecting human rights and the benefits this brings. They understand that positive action, supported by due diligence, transparency and reporting can:
– help to protect and enhance a company’s reputation and brand value;
– safeguard and expand their customer base;
– help them attract and retain good staff;
– build and maintain sustainable and effective relationships with employees and external stakeholders;
– reduce risks to operational continuity resulting from conflict inside the company itself or with the local community or other parties;
– reduce the risk of litigation for human rights abuses;
– attract institutional investors, including pension funds, who are increasingly taking ethical , including human rights, factors into account in their investment decisions;
– help companies become partners/investors of choice for other businesses or governments concerned about human rights risks;
– support company ethics and values.
Since the UK’s National Action Plan was published there has been an increased emphasis within the business community on the importance of reporting, benchmarking companies’ social and ethical performance, and corporate transparency. These can be an effective complement to regulation and a tool for protecting and promoting corporate reputation, and providing reassurance to both customers and investors.”
The UK 2016 Updated NAP notes in relation to Government Expectations of Business that [page 14]:
“The Government has supported important industry led initiatives that have gained ground over the last two years, including on reporting, benchmarking performance and practical sector guidance.”
The UK 2016 Updated NAP states in Actions taken to support business implementation of the UNGPs that [page 14-15]:
“To help businesses to fulfil their responsibility to respect human rights the Government has:
(ii) provided guidance to companies on transparency in supply chains and implementing the reporting requirement in the Modern Slavery Act 2015. https://www.gov.uk/government/publications/transparency-insupply-chains-a-practical-guide
(v) supported the UNGPs Reporting Framework, the world’s first comprehensive guidance for companies to report on how they respect human rights. http://www.ungpreporting.org/ “
The UK 2016 Updated NAP refers to non-financial reporting in the section devoted to the Government Commitments [page 16]:
“The Government will continue to encourage UK companies in their work to respect human rights. We will: (…) ii) ensure the provisions of an EU Directive on non-financial disclosure are transposed in the UK to enable greater consistency and comparability of public information on the human rights policies and performance of listed companies in Europe.”
The UK 2016 Updated NAP, while highlighting the UNGPs Reporting Framework + Unilever human rights report, refers to non-financial reporting [page 17]:
“There is increasing demand for greater formal reporting by companies on their human rights performance, including from regulations such as the EU non-financial reporting directive and the UK’s Companies Act and Modern Slavery Act reporting requirements.”
Facilitating RBC By Companies [page 17]
“The U.S. government encourages businesses to treat tools like the OECD Guidelines and the UN Guiding Principles as a floor rather than a ceiling for implementing responsible business practices, and to recognize that implementing RBC should be a continuing process. The U.S. government is supportive of company efforts to voluntarily report on human rights impacts, anti-trafficking measures, transparency and anti-corruption efforts, and other related aspects of their global operations, including the opportunities and challenges they face. Given the heightened risk of serious human rights impacts in conflict-affected areas, the U.S. government particularly encourages corporate due diligence and reporting under such circumstances.
The U.S. government generates and vets relevant information that can be used to conduct appropriate due diligence and risk assessment. While the concept of due diligence is increasingly well understood and accepted among businesses, the tools and resources available to effectively conduct detailed and appropriate risk and impact assessments can be sparse, particularly in many of the complex environments where this type of data is most needed.
To help address those gaps, the U.S. government deploys significant resources to produce and disseminate a variety of reports that help describe the state of human rights, labor rights, commercial, and investment conditions across the world, and produces international company profiles to provide U.S. companies with information to help them vet potential business partners. In certain instances, the government also funds third-party reports that contain information useful to those seeking to promote and implement RBC. As part of the ongoing effort to facilitate RBC, the U.S. government will continue to enhance these resources, making them increasingly user-friendly and easier to find for the purposes of corporate human rights due diligence and social impact assessment.”
Outcome 3.1: U.S. Government Reports
New Actions [page 18]
“Supporting Voluntary Reporting on RBC: Voluntary reporting on RBC by U.S. companies will help them achieve their RBC goals while promoting RBC more widely and helping to build the U.S. “brand.” State and other agencies will welcome and recognize new methods of reporting in support of RBC and create an online resource to that end.” – Implementing Department or Agency: State