trends and future of sustainable development - TransEco

2.2. The EU CSR disclosure regimeSimilarly to the US, the EU does not have a dedicated comprehensive CSR disclosure regime either, andthe CSR related information is mandated to be disclosed within the already existing framework offinancial and non-financial disclosure. According to the Transparency Directive (Directive 2004/109/ECof the European Parliament and of the Council of 15 December 2004, Article 4(5)), which regulates theongoing disclosure of listed companies, the annual report of listed companies has to be drawn up inaccordance with the provisions of the accounting directives. And by the virtue of Directive 2003/51/EC(Modernisation Directive) modifying the company law directives on annual accounts (Fourth CouncilDirective 78/660/EEC of 25 July 1978, Seventh Council Directive 83/349/EEC of 13 June 1983), theaforementioned provisions of the EU regime now require the disclosure of certain non-financial keyperformance indicators, including environmental and employee matters in the annual report of listedcompanies (Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003:Article 1(14)(a) and Article 2(10)(a)). Thus, seemingly the EU regime requires the disclosure of moreCSR related information than the US regime; however, the EU regime suffers from shortcomings of itsown.Unlike the Regulation S-K, the Modernisation Directive does not contain further specification ofwhat is to be understood under the term ‘non-financial key performance indicators’ and ‘environmentaland employee matters’, and which specific pieces of information are to be disclosed according to theDirective. Thus this requirement resembles the above described general disclosure requirement of theUS disclosure system. Unfortunately, to date, there are no specific guide lines on what is to beunderstood under the term non-financial key performance indicators.Regarding the scope of the disclosure of environmental matters the Commission might provide someguidance (Commission Recommendation 2001/453/EC of 30 May 2001). Although not binding, theRecommendation suggests the disclosure of the policies and programmes that have been adopted bycompanies in respect of environmental protection, the improvements that have been made in key areasof environmental protection, and the extent to which environmental protection measures have beenimplemented or are being implemented (Commission Recommendation 2001/453/EC of 30 May 2001,Annex 4(2)(a)-(c)). Thus, the Recommendation seems to suggest the disclosure of a wide variety of CSRrelated information, similarly to the line items of Regulation S-K. However, due to the fact that theRecommendation is non-binding, companies may deviate from the guidelines laid down therein.As for employee matters, not even such recommendation or other guideline exists. However, it issuggested that the term should be interpreted broadly and may refer to such issues as “health and safety,human rights, schooling, education and career perspectives” (Lambooy and van Vliet, 2008).Nevertheless, the scope of the term employee matters is even less clear than that of the environmentalmatters.Given the foregoing, it might be stated that the Modernisation Directive mandates the disclosure ofcertain CSR related information. But it does not require an unlimited disclosure. The Directive providesan additional condition: the non-financial key performance indicators have to be disclosed only “to theextent necessary for an understanding of the company's development, performance or position”(Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003: Article 1(14)(a)and Article 2(10)(a)) in line with the requirement of giving a fair review of the company’s development388