Eurosif (European Sustainable Investment Forum) recently submitted a statement to the European Commission (EC) with suggestions on how to arrive at a framework for mandatory annual environmental, social and governance (ESG) corporate disclosure in the European Union.(1) The submission follows a series of workshops facilitated by the EC with European stakeholders held from September 2009 to February 2010 to discuss ESG disclosure.
As a means to generate agreement on many of the substantive issues and advance the discussions more quickly with the EC, Eurosif collaborated with the following institutions who represent a range of economic and capital market stakeholders within the workshops: EFFAS (European Federation of Financial Analysts Societies), European Laboratory: Valuing non-financial performance, The Prince’s Accounting for Sustainability Project, Railpen Investments, and World Intellectual Capital/Assets Initiative. The production of the joint position paper has been coordinated by Robin Edme, Vice President of Eurosif.
More information regarding the Workshops can be found on the European Commission Enterprise and Industry website along with information regarding the ESG Disclosures.
The submission from Eurosif and partner organisations can be found directly here.
General Position of the Submission
As representatives of economic and capital market stakeholders, we:
- favour a combined approach to corporate reporting as one of the levers to embed sustainability in corporate strategy & management practices;
- support a mandatory regulatory approach to ESG disclosure and reporting at the European level, as long as it provides companies with some latitude of choice in terms of content;
- consider that there is no appropriate ESG disclosure and reporting framework presently fully meeting the needs of capital markets actors (namely companies and investors), while non-financial disclosure and reporting frameworks currently in progress are promoting the idea of combined reporting;
- acknowledge the fact that the time has come to unite the efforts of the scattered and international European initiatives on ESG disclosure & reporting, and to support the efforts of international connected reporting initiatives such as the International Connected Reporting Committee.
Matt Christensen, Eurosif Executive Director, states, “It is important for investors to be able to assess not only a company’s value now, but what it will be worth in the future. Eurosif supports mandatory ESG reporting and refocusing disclosure requirements to provide greater clarity on the significance of ESG issues. We are pleased that this submission has been endorsed and signed by other leading actors in the field of ESG disclosure.”
The facilitator of the Workshops, Pedro Ortun, a European Commission Director, commented, 'The workshops have helped all participants to understand the views of different stakeholders, including the investment community. Investors clarified their need for comparable, relevant and timely ESG information.'
Specific Recommendations from the Submission
Eurosif also recognises that ESG disclosure and reporting is still in infancy, and suggests that any further European regulatory approach should combine a principles-based as well as a rules-based approach.
Given the fact that different stakeholders have different interests and therefore different requirements in terms of disclosure content and format, the signatories of the submission encourage the Commission to:
- Create a high level working Group composed of representatives of the major stakeholders within the categories implicitly defined by the EU ESG Disclosure Workshops (companies, investors, civil society & media, trade unions and public administrations);
- Organise the workflow in sub-groups of stakeholders sharing the same interests and objectives (the primary split between economic & capital markets stakeholders, and civil society stakeholders, the trade unions having an in-between situation);
- Fix a deadline by which the disclosure and reporting framework should be agreed upon between the stakeholders as a first step to be flexibly improved;
- Align their work with international developments ensuring that common international requirements are adopted.
EC Response
The EC is expected to respond to the Workshop submissions with its own recommendations on the next steps to be taken on ESG disclosure at the European level.