19 August 2014

EU Directive requires large companies to report on human rights

The new EU Directive on the disclosure of non-financial information has been ratified by the European Parliament and is due to go before the Council before being officially adopted in September or October 2014. The new Directive marks a significant step forward in the recognition of corporations’ responsibilities to protect human rights and the environment.

According to Jerome Chaplier, from the European Coalition for Corporate Justice: “This legislation is the first step in embedding into EU law the corporate responsibility to respect human rights and the environment as it is expressed in the UN Guiding Principles and OECD Guidelines for Multinational Enterprises.” The Directive requires listed companies with over 500 employees to report annually on principal risks to human rights, the environmental and social impacts linked to their operations, relationships, products and services. Bribery and diversity are also included in the risk reporting requirements.

Companies are expected to explain and describe their due diligence procedures for identifying, preventing and mitigating these risks. Reporting is mandatory, but there is some wiggle room in the form of a “comply or explain” approach, which requires them to give a clear and reasoned explanation for not following any policies.

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