- Companies with more than 500 employees that are public-interest entities or exceed certain thresholds must publish a non-financial information statement.
- The statement must cover environment, staff, human rights, anti-corruption and tax information, and be verified by an independent third party.
- It applies to financial years starting from 1 January 2018, and in three years it will reach more companies.
On 29 December 2018 the Official State Gazette published Act 11/2018 of 28 December, amending the Commercial Code, the Companies Act and the Audit Act in respect of non-financial information and diversity. The act came into force on 30 December and applies to financial years beginning on or after 1 January 2018.
The rule obliges certain companies to include in their management report, or in a separate report, a non-financial information statement, with data on their business model, policies and results and the risks they face.
Who it applies to
The statement must be presented by companies with more than 500 employees on average that are public-interest entities, or that for two consecutive years exceed two of these three thresholds: total assets of more than 20 million euros, annual turnover of more than 40 million or more than 250 employees on average. SMEs are exempt, and the act provides that, three years after its entry into force, the obligation extends to public-interest companies with more than 250 employees.
In practice, the obligation will affect large groups, including listed companies and financial institutions, although its effects will pass on to suppliers and business partners, from whom large companies will request information.
What it must contain
The statement must include a summary of the business model, the policies applied and their due diligence procedures, their results with key indicators, and the main risks and how they are managed. The information must cover environmental, social and staff matters, including equality, non-discrimination and accessibility, as well as human rights, anti-corruption and bribery, information on society and tax information.
If the company does not apply a policy in any of those matters, it must explain this clearly and with reasons, and must indicate the national, European or international framework it has used. The information must be verified by an independent provider, approved by the general meeting as a separate item and published on the company’s website within six months of the year end.
Diversity on boards
The act also amends the Companies Act so that director selection procedures favour diversity of age, gender, disability and training, and facilitate a balanced presence of women and men. Listed companies must describe in their corporate governance report the diversity policy applied, with its objectives, measures and results, or explain why they do not have one.
The auditor will only check that the statement appears in the management report or that reference is made to the separate report. The legal, financial and human resources departments of affected companies will have to coordinate to gather reliable indicators, because the content is verified and published.
What to review
Companies that may fall within the scope should check their headcount, asset and turnover figures for the last two years, and analyse what data they already collect and what is missing. It is worth defining those responsible, choosing a reference framework and contacting an independent verifier in good time, because the first year of application is the one that began on 1 January 2018.
Companies outside the scope, including SMEs, can prepare anyway, because their large customers will ask them for information on their own practices. Putting environmental, labour and compliance policies in order in good time becomes a competitive advantage, and can be done in a way proportionate to size.
It is impossible to report on what is not measured: the law pushes companies to measure and to explain what they do.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
