Europe’s largest companies will have to be more transparent about how they operate according to new measures adopted by the European Parliament today.

The European Commission has welcomed today's adoption by the European Parliament of the Directive on disclosure of non-financial and diversity information by large companies and groups.

Companies concerned will need to disclose information on policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on boards of directors.

Internal Market and Services Commissioner Michel Barnier said:

 "I am pleased that the European Parliament has adopted this Directive modernising the disclosure of relevant and useful non-financial information by large companies and groups. Companies, investors and society at large will benefit from this increased transparency. Companies that already publish information on their financial and non-financial performances take a longer term perspective in their decision-making. They often have lower financing costs, attract and retain talented employees, and ultimately are more successful. This is important for Europe’s competitiveness and the creation of more jobs. Best practices should become the norm.”

The new rules will only apply to large companies with more than 500 employees, In particular, large public-interest entities with more than 500 employees will be required to disclose certain non-financial information in their management reports. The scope includes approximately  6 000 large companies and groups across the EU.

However, the approach taken is intended to ensure that administrative burden is kept to a minimum. Companies will be required to disclose concise, useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than a fully-fledged and detailed report. Furthermore, disclosures may be provided at group level, rather than by each individual affiliate within a group.

The Directive gives companies significant flexibility to disclose relevant information in the way that they consider most useful, or in a separate report. Companies may use international, European or national guidelines which they consider appropriate (for instance, the UN Global Compact, ISO 26000, or the German Sustainability Code).

The Directive also provides for further work by the Commission to develop guidelines in order to facilitate the disclosure of non-financial information by companies, taking into account current best practice, international developments and related EU initiatives.

In order to become law, the Commission's proposal needs to be adopted jointly by the European Parliament and by the EU Member States in the Council (which votes by qualified majority). Following today's adoption by the European Parliament, the Council is expected to formally adopt the proposal in the coming weeks.

Last year the European Parliament adopted two resolutions  - Corporate Social Responsibility: accountable, transparent and responsible business behaviour and sustainable growth and Corporate Social Responsibility: promoting society’s interests and a route to sustainable and inclusive recovery - acknowledging the importance of company transparency on environmental and social matters. The Commission then adopted a proposal to enhance business transparency on social and environmental matters (IP/13/330). The European Parliament and the Council reached final agreement on 26 February 2014.

Currently, fewer than 10% of the largest EU companies disclose such information regularly although over time, some Member States have introduced disclosure requirements that go beyond the Directive. For instance: the UK introduced legislation in 2006 and updated it in 2013; Sweden adopted legislation in 2007; Spain in 2011; Denmark amended its legislation the same year and France in 2012.