The European Union's 2014 Non-Financial Reporting Directive : Mandatory Ex Post Disclosure - But Does It Need Improvement?

This chapter introduces European Union's 2014 Non-Financial Reporting Directive (NFR Directive), considered a first step in the field of mandatory sustainability reporting, prior to analyzing the need for it to be improved. The author begins by setting out the historical context, both on the international and EU levels, including a new EU definition of corporate social responsibility (CSR) that envisages non-voluntary action. While the emphasis is placed on the extractive industries, the chapter's treatment of the issue is of more general interest. The NFR Directive, which has been described as an example of the reflection in law and regulation of the United Nations Guiding Principles, is detailed through the legislative proposal and negotiations that led to its adoption, and through its content, including environment, social and employment reporting, which extends to a diversity policy description for publicly-traded companies governed by member State law. The NFR Directive is seen as part of an international process, complementing measures at the international level to improve financial reporting transparency, such as those of the OECD, the G20 and the G8. However, a certain amount of discretion is accorded to the EU member States in the implementation of the Directive into national law (allowing for the possibility of lack of harmonization), and elements such as the legislation's ex-post focus and limited scope, and the lack of an auditing mechanism have been subject to criticism. The chapter concludes with a discussion of opportunities for improvement