Environmental and social transparency under the ... - ClientEarth

106 | Environmental and social transparency under the Companies Act 2006Annex 3: EU law on company environmental and social accounting and reporting | 107and about the company’s attitude towards the environment and the enterprise’senvironmental performance to the extent that they may have consequences onthe financial health of the company.”Current legal requirements, and the regulatory framework established inUK law to ensure compliance with them, are inadequate to address theproblems that the Commission identified here.A.3.4The Transparency Directive (Directive 2004/109/EC)The Transparency Directive was introduced with the aim of creating acommon framework across Europe for information disclosure by companiestraded on stock exchanges in the EU. It was part of the FinancialServices Action Plan (FSAP), an even broader European project, whichwas designed to create a single European capital market. The TransparencyDirective works alongside other pieces of FSAP legislation, in particularthe Market Abuse Directive. 288N.B.In the Transparency Directive’s recitals, 289 the Council comments on thenature of the appropriate body to supervise compliance with accountingand reporting obligations, stating that [emphasis added]:‘whereas:… (28) A single competent authority should be designated in eachMember State to assume final responsibility for supervising compliance withthe provisions adopted pursuant to this Directive, as well as for internationalcooperation. Such an authority should be of an administrative nature, and itsindependence from economic players should be ensured in order to avoidconflicts of interest. Member States may however designate another competentauthority for examining that information referred to in this Directive is drawnup in accordance with the relevant reporting framework and taking appropriatemeasures in case of discovered infringements; such an authority need not be ofan administrative nature.’This is of obvious relevance to the appropriate constitution of the UKauthority, the FRRP (see Proposal 2 above).DIRECTIVE 2004/109/EC OF THE EUROPEAN PARLIAMENT AND OF THECOUNCIL of 15 December 2004 on the harmonisation of transparency requirementsin relation to information about issuers whose securities are admitted totrading on a regulated market and amending Directive 2001/34/ECChapter II: PERIODIC INFORMATIONArticle 4Annual financial reports2. The annual financial report shall comprise:(a) the audited financial statements;(b) the management report5. The management report shall be drawn up in accordance with Article 46 of Directive78/660/EEC and, if the issuer is required to prepare consolidated accounts,in accordance with Article 36 of Directive 83/349/EEC.The Directive includes an obligation on companies to produce (as part ofits annual financial reports) a ‘management report’, in accordance withArticle 46 of Directive 78/660/EEC, which now includes certain (limited)environmental and social requirements as a result of the amendments ofDirective 2003/51/EC (the Accounts Modernisation Directive).The Transparency Directive’s requirements for environmental and socialreporting at EU level are incorporated at UK level in both the CompaniesAct 2006 and the FSA Disclosure Rules and Transparency Rules.