trends and future of sustainable development - TransEco

espect of the materiality of CSR related information, since it has been suggested that CSR relatedinformation is frequently represented as marketing or greenwashing material, consisting of vague,speculative statements and puffery (Sjåfjell, 2010). Accordingly, due to such legal practice, much of theCSR information, may be rendered immaterial.Similar rule applies to the disclosure of forward-looking information. The Private SecuritiesLitigation Reform Act of 1995 creates a safe harbour for companies for disclosing forward-lookinginformation and predictions to investors (Private Securities Litigation Reform Act of 1995, Pub. L. 104-67, 109 Stat. 737). This safe harbour is also relevant for CSR information, since much of the CSR relatedinformation concerns future intentions of companies and future predictions about their legalenvironment and operations. Thus, such CSR information might also be found immaterial.The last circumstance rendering information immaterial is the ‘bespeak caution doctrine’ (Hazen,2006). This doctrine is connected to the above discussed circumstances and holds that sufficient use ofcautionary language can render information immaterial (Hazen, 2006). It is also a characteristic of CSRdisclosure that the language used is rather cautionary. Thus, it might be stated that certain pieces of CSRinformation may be rendered immaterial by this doctrine as well.3.2. Disclosure of CSR information in the EUAs set forth above, the Modernisation Directive’s CSR related disclosure requirement resembles thegeneral disclosure requirement of the US disclosure system. The provision requires the disclosure ofnon-financial performance indicators of companies, especially information on environmental andemployee matters (Directive 2003/51/EC of the European Parliament and of the Council of 18 June2003: Article 1(14)(a) and Article 2(10)(a)). But the disclosure obligation is not unconditional. In orderfor a disclosure obligation to arise, the non-financial information needs to be necessary for anunderstanding of a company's development, performance or position (Directive 2003/51/EC of theEuropean Parliament and of the Council of 18 June 2003: Article 1(14)(a) and Article 2(10)(a)). Thiscondition is discussed bellow in comparison to the US notion of materiality and it is explored what theEU disclosure system can learn from the US system.3.2.1. The intended audience of the disclosureBeing a vague rule, the provision of the Modernisation Directive does not reflect on who should be ableto understand a company’s development, performance or position from the disclosure. It is evident thatfor an ordinary person and an ordinary investor or shareholder different quality and quantity ofinformation is necessary for such an understanding. The quality and quantity of information necessarymight even be different within the aforementioned groups.It might reasonably be argued that, similarly to the US rules, the EU provision also refers to theunderstanding of shareholders and investors, since in order to satisfy the criterion in relation to aregular person, the companies would have to make extensive disclosures on market fundamentals, whichcould mean an unreasonable burden on the companies. It has to be noted that in respect of the EUprovision, the division of voting and trading decision does not seem to play a role, since, unlike the USdefinition of materiality, the EU provision does not refer to the importance of a piece of information in394