Environmental and social reporting – new EU Directive

Image from viralheat.com

I recently read an article from the Guardian which highlights the problems of measuring and reporting all things environmental, sustainable and social. The article noted a recent study n the Journal of Cleaner Production. It analysed metrics used in academic literature to measure performance in sustainable supply chains. The study reveals a total of 2,555 different metrics were published in 445 different articles.

I think we would all agree that publishing some performance measures on sustainability and similar issues is very important. But if we do not have a set of standards to follow, comparing things is quite difficult. This should sound quite familiar to accountants, as before we had financial reporting standards in the 1970’s and IFRS at EU level today it was not easy to compare financial statements.

Although there are some standards on environmental and social reporting (such as the Global Reporting Initiative), these are typically voluntary. The EU has recently provided some help and impetus. According to a CGMA article, “About 6,000 large companies and groups across the EU will be required to disclose certain non-financial information on environmental and social impacts as well as diversity policies for boards of directors”.  The Directive must be implemented by member states within two years, so by 2017, we should see the first reports. I am sure some will say the Directive does not go far enough, but at least it’s a start and it sets a standard. This is better than no reporting or such diverse reporting that it becomes pointless.