More accountable and transparent business practices are needed if Europe is to make a strong and sustainable economic recovery, European Commissioner Michel Barnier said today. Barnier, the European Commissioner for Internal Market and Services, was speaking at the Global Reporting Initiative’s 2013 Global Conference on Sustainability Reporting in Amsterdam, before an audience of 1,600 sustainability thought leaders and practitioners from around the globe.

In April, the European Commission adopted a proposal for a directive of the European Parliament and the Council of the European Union which would require large companies to disclose information on the major economic, environmental, and social impacts of their business as part of their annual reporting cycle. The proposal could be the vital catalyst that is needed to usher in a new era of transparency in the largest economic region in the world.

Addressing the conference, Commissioner Barnier said he hoped the EU proposal would be swiftly adopted by EU legislators, the European Parliament and the Council – and that it would serve to inspire legislators in other parts of the world to follow suit.

Said Commissioner Barnier: “Europe is still recovering from the worst crisis in 50 years. I think that this crisis marks a turning point. We need safer financial institutions. More generally, we need to eliminate the short-termism that has dominated the corporate sector for too long.

“The EU proposal on non-financial corporate reporting can be part of Europe’s economic recovery, as well as a source of inspiration for other jurisdictions. Experience shows that transparent companies have lower financing costs, attract and retain talented employees, and are more successful in the long term.”

The EU proposal contains a ‘report or explain’ approach, requiring companies to provide information on their strategy, results and risks in six key areas – environmental, social and employee-related matters, human rights, anti-corruption and bribery. Should a company decide not to disclose information on any of these topics, they would be required to explain why this is the case. Companies that are already producing a standalone sustainability report using recognized frameworks will be considered to have met the requirements.

The proposal will build on the voluntary efforts of thousands of businesses already practicing sustainability reporting – the majority of which use the GRI Guidelines.

Also speaking at the conference were high level government representatives from Denmark and Sweden, countries which have already introduced legislation based on a ‘report or Explain’ approach. Since a ‘report or explain’ policy was implemented in Denmark in 2009, disclosure among large Danish companies has risen to 97 per cent.

In April, the Norwegian government, also represented at the conference, announced legislation which requires large businesses to either disclose their CSR information annually or explicitly state that the business has no CSR policy. Norway’s other Nordic neighbors, Finland and Sweden, also mandate annual sustainability reporting, although their legislation targets state-owned or state-majority owned companies.

The ‘report or explain’ approach is designed to allow companies the flexibility to focus on those impacts that are most relevant to their business, as determined in dialogue with their stakeholders, from civil society to investors. The ‘Report or Explain’ approach is consistent with the principle of materiality as contained within the GRI Guidelines, which encourages companies to include only information that is material to their business.

Teresa Fogelberg, Deputy Chief Executive of GRI, said: “Political leadership is crucial in advancing business transparency and reporting. The EU proposal demonstrates that regulation on non-financial reporting can be both bold and balanced. If this proposal is implemented, the number of large EU companies reporting will jump from 1,800 to 18,000. Europe is showing leadership on this issue, and in many countries policy and regulation has already happened or will happen soon. With their policies, these countries point the way for the rest of the world to build on global frameworks like those of the UN Global Compact, the OECD, and GRI.

“When it comes to the urgent need to switch to a more sustainably economy, the world is in this together – and we need to work together to make it happen: in Asia, the Americas, the Middle East, Africa and Europe. Together, the combined efforts of policy makers across the globe can drive more and better reporting for a sustainable global economy and a better world.”

The GRI Global Conference also welcomed over 100 policymakers and regulators from across the world, as well as hundreds of businesses engaged in sustainability reporting. Also present were delegations from India, China, Brazil, South Africa and the US, all of which have pioneered a number of innovative policies on sustainability disclosure in recent years. The conference sees the launch of a pivotal new linkage document aligning the GRI Guidelines with India’s National Voluntary Guidelines, which help Indian companies to make their operations sustainable and use their entrepreneurship to contribute to the welfare of communities.

The EU proposal explicitly refers to the Global Reporting Initiative’s Sustainability Reporting Guidelines as one of the internationally accepted frameworks companies should use when preparing their sustainability reports, alongside the UN Global Compact and the UN Guiding Principles on Business and Human Rights, among others.

Since their inception in 2000, the GRI Guidelines have become the most widely used non-financial reporting framework in the world.

The 2013 conference sees the unveiling of the next generation of the Guidelines – G4 – which are designed to drive more robust, credible and consistent reporting and to enhance the relevance of the Guidelines for both business and society.

The Global Reporting Initiative (GRI) promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to a sustainable global economy.

GRI’s mission is to make sustainability reporting standard practice. To enable all companies and organizations to report their economic, environmental, social and governance performance, GRI produces free Sustainability Reporting Guidelines.

GRI is an international not-for-profit organization, with a network-based structure. Its activity involves thousands of professionals and organizations from many sectors, constituencies and regions.

www.globalreporting.org