Assess record for 'Disclosure of Non-Financial Information by Companies'

Transcription

1 Page 1 of 5 Assess record for 'Disclosure of Non-Financial Information by Companies' Meta Informations Creation date Last update date User name null Case Number Invitation Ref. Status Background Information For the purpose of analysis of this consultation you want to be identified as -single choice reply- Please specify the user type -single choice reply- N User NGO /Other organisation of stakeholders Name(s) (of respondent and of your organisation / company) -open reply- - Finnwatch / Janne Sivonen - Kepa (Service Centre for Development Cooperation) / Tytti Nahi Country where your organisation / FI - Suomi company is located -single choice reply- Please provide the name and location of parent company Your address Finnwatch: Kotkankatu 9, Helsinki Finland Kepa: Töölöntorinkatu 2A, Helsinki, Finland Your address: -open reply- janne.sivonen@finnwatch.org tytti.nahi@kepa.fi Short description of the general activity of your organisation / company: Finnwatch is an NGO which monitors Finnish companies in developing countries and economies in transition. Kepa is one of Finnwatch s member organizations and it represents more than 280 civil society organisations in Finland. Is your organisation registered in the Interest Representative Register? If your organisation is not registered, you have the opportunity to register here before you submit your contribution. Responses from organisations not registered will be published separately from the registered organisations. -single choice reply- Please specify the Register ID number in the Interest Representative Register - open reply- Can the Commission contact you if further details on the information you submitted is required? -single choice reply- Publication: Do you object to publication of the personal data on the grounds that such publication would

2 Page 2 of 5 harm your legitimate interests? -multiple Questionnaire 1. How would you consider the current regime of disclosure of nonfinancial information applicable in your country? -single choice reply- Poor In replying to this question, please provide information on what way current reporting provides useful information, and to what extent it is sufficiently tailored to the circumstances of the company. Please also comment on whether you find non-financial information useful for the decision-making of a company. In Finland, general public is very interested in CSR issues: for instance, the sales of Fairtrade products has been growing even during the recession. As a result, many Finnish companies are keen on showing their performance on CSR. However, there is no legislative framework for non-financial reporting in Finland. Therefore nonfinancial reporting is not very useful, and it is difficult to compare the performance of different companies. The reporting seems to be used by most companies as a PR tool instead of being an instrument for self evaluation and better decision-making on issues related to sustainability. The reports are often drafted by the comms staff of the company in question and/or an external PR agency. While there are also some positive examples in disclosing non-financial information among the Finnish companies, comprehensive and good quality non-financial reporting is rare. Of listed companies in Finland, only about one of every seven companies published in 2008 a report with a comprehensive coverage of all three dimensions of CSR (economic, social and environmental). The amount of companies participating the national competition about best CSR reporting is rather small (the competition is organized annually by the Ministry of Economy and Employment, the Confederation of Finnish Industries (EK) and several other organizations). In 2009, 29 Finnish companies signed in to the competition, and in 2010 only 15 companies signed in. In addition, in 2010 the organizers screened the reporting of all 128 public companies in Finland. As a result of the screening, only 27 additional companies qualified for the competition. The rest did not have a report which was comprehensive enough either from the economic, social and/or the environmental point of view. As a result of the PR focus, the information in non-financial reporting is often provided selectively. Many companies focus on issues which are not controversial, and leave out important environmental, social or even human rights impacts associated with their activities. Because of this and the fact that many companies do not disclose any non-financial information at all, the general public, shareholders, investors and other stakeholders don't have access to the adequate information to assess the company's accountability. This is one of the major obstacles in promoting CSR in Finland. 2. Have you evaluated the effects, and costs and benefits, of any current corporate disclosure of environmental and social information? -single choice reply- Finnwatch monitors environmental and social problems associated with operations of Finnish companies in developing countries, tracking both individual companies and whole business sectors. In this work, lack of transparency within Finnish enterprises has been an everyday problem. For example, several companies just recently refused to answer any questions about the sustainability and origin of working clothes they are using or selling to other actors (e.g. cities, hospitals, army etc). One large, state-owned enterprise refused to answer whether they had a policy on sustainable procurement in place at all. In addition, a city-owned bus company stated that it is a "trade secret" whether they have a code of conduct on this issue, even though they are using taxpayers money in their public procurement. As these examples show, even large companies do not always give crucial information about the origin of the products they are buying/selling. Lack of information is therefore hampering public discussion about CSR issues, not to mention improving the actual performance of the enterprises in developing countries. Finnwatch has also published a comparative study on public CSR policies in different European countries. The report was commissioned by the Ministry of Economy and Employment. It indicates that relevant regulation can improve both non-financial reporting and the actual performance on social and environmental issues. 3. If you think that the current regime of disclosure of non-financial information should be improved, how do you suggest that this should be done? There should be legal requirements for multi-national enterprises to report on the impacts and risk of their operations both in the EU and internationally, with the introduction of mandatory, clear, auditable, comparable and enforceable standards for large and medium-sized companies. The standards should be based on

3 Page 3 of 5 international conventions listed in Annex III of the EU Generalized System of Preferences. The corporate disclosure of non-financial information should: - be mandatory (regardless of the materiality of such information to the financial position of the reporting company) - be based on clear indicators - form a part of the annual financial report sent to the regulatory authorities - be requested from medium and large-sized companies - cover and identify the whole supply chain and extend to all organizations that the reporting company can control (including subcontractors, subsidiaries, fractional ownerships, production countries etc.) - include a description of violations and risk of violations of international standards for human rights and environmental protection as a result of company's operations or the operations of its subsidiaries, suppliers or subcontractors. This description should provide objective data on facts and figures constituting relevant risks and violations. - include information about views expressed by local communities in the areas of operation - include information about using hired labour - include information about presence of trade unions in the production facilities - report activities in Export Processing Zones and uncover related incentives such as tax breaks - include information about local legislation, e.g. minimum wages - explicate the code of conduct and the verification methods - report public support and finance - include information about taxpaying in all countries - be subject to independent third party review - include effective sanctions for companies which fail to report the required information - be enforceable by members of the public; in particular those who depend on access to this information to be able to exercise their rights should be able to challenge any failure to provide that information in the courts. The courts should also have power to require the disclosure of information and to impose sanctions on any company that has failed to report. 4. In your opinion, should companies be required to disclose the following (check all relevant boxes): -multiple Whether or not they have a CSR policy, and if they do, how they implement that policy and what the results have been The principal business risks and opportunities arising from social and environmental issues, and how they are taken into account in company strategy. Key information regarding issues such as employee engagement (e.g.: employee training policy, equality and diversity, etc.); customer satisfaction (e.g.: customer loyalty); public perception of the company (e.g.: stakeholder dialogue); environmental policies (e.g.: energy efficiency, waste reduction); and innovation (e.g.: R&D expenditure). Other Other, please specify: -open reply- All risks of violating international human rights and environmental standards should be included, including the risks related to subsidiaries and suppliers. 5. In your opinion, for a EU measure on reporting of non-financial information to achieve materiality and comparability it should be based upon (check all relevant boxes): - multiple 5a) In case you consider that Key Performance Indicators (KPIs) would be useful, would you think that they should be (check all relevant boxes): - multiple choices reply- Principles Key Performance Indicators (KPIs) Other General for all economic sectors Sector specific 5b) Please indicate which indicators you would consider to be the most relevant for all economic sectors: Performance in areas regulated by existing international legal frameworks, especially human rights (labour rights in particular). Other, please specify: -open reply- Companies should identify risks and violations of international standards for human rights, environmental protection and corruption. This may or may not be framed as a KPI, but must be understood as requiring a full analysis of the impacts of the company s operations. The new EU measure should include non-financial reporting based on mandatory requirements, and these should be complemented by non-legal key performance indicators for different sectors so that companies can effectively report on non-financial issues. The mandatory requirements should be based on the conventions contained in Annex III of the EU Generalized System of Preferences. 6. In your opinion, what should be the process to identify relevant principles and/or indicators (whether general or sector-specific)?

4 Page 4 of 5 In replying to this question, please comment on whether the Commission should endorse or make reference to any existing international frameworks (or a part of them), such as Global Reporting Initiative (GRI), UN Global Compact, the OECD Guidelines, ISO 26000, or other frameworks; or whether companies should be required to select relevant indicators together with their investors and other stakeholders and to disclose information according to such indicators, depending on the use that different stakeholders would make of such information. The main reporting obligations should be based on the international conventions on human rights, environmental protection and anti-corruption issues contained in Annex III of the EU Generalized System of Preferences. They should also reflect governance gaps which the UN Special Representative on Business and Human Rights has identified. OECD Guidelines, GRI, ISO or UN Global Compact can be also useful references. 7. In your opinion, should companies be required to disclose the steps they take to fulfill the corporate responsibility to respect human rights? -single choice reply- Foreign Ministry of Finland has published a study about human rights in the context of Finnish enterprises (Merja Pentikäinen: Yritystoiminta ja ihmisoikeudet 2009). The study concluded that in Finnish companies, very little consideration has been given to human rights and their concrete significance to companies and their activities. The study called for increased knowledge and understanding on human rights in this particular context: according to the author, every company should have a human rights strategy, which covers relevant issues in the business sector and the countries where the company operates (including the supply chain). Requiring companies to disclose what steps have been taken to address these issues could certainly improve their performance in this area. In addition, the companies would learn from each other when they face similar human rights risks. 8. In your opinion, should companies be required to disclose the risks they face and the policies they have in the field of corruption and bribery? -single choice reply- The reasons for tackling corruption have been well analyzed e.g. in OECD and UN documents. 9. In your opinion, what companies Medium-sized & Large companies (listed and non-listed) should be required to disclose nonfinancial information (check only one box)? -single choice reply- 10. In your opinion, should institutional investors be subject to specific or additional disclosure requirements, for example to disclose whether and how they take into account environmental and social issues in their investment decisions? -single choice reply- In replying to this question, please provide information on which issues seem to be the most relevant and why; and which institutional investors should be subject to such an obligation. A recent Finnwatch study ( demonstrated that Finnish pension funds have invested hundreds of millions of Euro e.g. in tax heavens, tobacco and gambling. The first step in improving the performance is having enough relevant information about the issue. 11. In your opinion, should European policy promote the concept of "integrated reporting"? Integrated reporting refers to a report that integrates the company's key financial and non-financial information to show the relationship

5 Page 5 of 5 between financial and non-financial performance (environmental, social, and governance). -single choice reply- In replying to this question, please indicate the advantages and disadvantages of an integrated report, as well as possible specific costs of integrated reporting. Annual reports should include information which have an impact on the financial performance - including an analysis of the financial risks for a company of human rights and environmental abuses resulting from the company's operations. However, non-financial reporting should not be limited to only those issues that might affect the financial performance. Sometimes bad performance on human rights and environment could be even profitable for a company in the short term. 12. In your opinion, should disclosed non-financial information be audited by external auditors? -single choice reply- In replying to this question please provide any evidence you may have regarding costs of auditing non-financial information, as well as your views on other possible forms of independent reviews besides external auditing. See problems pointed out in the answer to question 1. If the information is not audited externally, there is a risk that companies provide misleading information. 13. If you have relevant documents you want to share with us, please attach them here. (optional) -multiple PRINT EXPORT RECORD