2.6.1.2 The European Union

In Lisbon in March 2000 the Council set as a strategic goal for 2010 for the EU to become the most competitive knowledge-based economy in the world, capable of sustainable economic growth and greater social cohesion. The Council appealed to European companies' corporate sense of social responsibility to realise this goal.1

In 2001, the Commission published a Green Paper on CSR, which emphasised the importance of companies' voluntarily taking on commit-ments.2 Its aim was to encourage a broad debate on how the EU could promote CSR at a European and global level and how this would contribute to the EU's strategic goal as adopted by the Lisbon Summit for 2010. In July 2002, the Commission issued a written communication as a ' follow-up' to the Green Paper, which set out the details of the EU strategy to promote CSR. In its communication, the Commission proposed to set up a Multi-Stakeholder Forum (EU CSR Forum) on CSR for making recommendations on reporting, accounting, auditing, codes of conduct, management standards and socially responsible investment.3

In October 2002, the Commission set up the EU CSR Forum. Within its setup, representative organisations of employers, employees, professional associations as well as NGOs consult with each other on future CSR practices at a European level. The EU CSR Forum presented its final results and recommendations in June 2004.4 Its recommendations were, however, rather general and non-committal. The European professional associations would have preferred more concrete recommendations providing guiding principles for CSR practices and reporting.5 The EU CSR Forum in its Final Report does, however, not mention non-financial reporting, which is somewhat surprising given that in 2003 the Council and the EP drafted a new directive on annual reporting which did include certain CSR issues, such as the environment and human resources (see below). The Commission is expected to develop further CSR principles on the basis of the EU CSR Forum's report.

The EP has always been a clear advocate of mandatory CSR regulation rather than voluntary rules. Following the Commission's Green Paper, the EP in 2002 adopted a resolution in which it called for inclusion of a clause on mandatory social and environmental reporting6 in the Fourth Accounting Directive.7 The EP, in reaction to the Commission's communication of 2002, voted unanimously in favour of a resolution in which it calls upon the Council and the Commission to oblige businesses to include information on the environmental standards they observe outside the EU in their annual reports.8 Moreover, in 2003 committees of the EP urged the Commission to draw up a directive on mandatory CSR reporting within three years and to include additional obligations for companies regarding the disclosure of information on CSR in its Prospective Directive.9

Environmental and human resources reporting now have become mandatory at the European level, owing to factors other than the European CSR debate.

In trying to establish a common integrated European capital market, the Council has insisted that the comparability of companies' financial statements should be improved.10 In addition to the International Accounting Standards (IAS) regulations that apply to financial statements of listed companies,11 the Council and the EP came up with a new directive on the annual reporting of other financial undertakings (Modernisation Directive) in 20 03.12 The Modernisation Directive amends four earlier accounting directives with respect to the content of annual reports.13 It stipulates that annual reports and consolidated annual reports should also include non-financial key performance indicators relevant to the particular business, including information relating to environmental and employee matters'.14 This information needs to be included to the extent it is ' necessary for an understanding of the company's development, performance or position.'15 Since environmental and employee matters play an important part and represent considerable interests in most businesses, it is argued that companies readily fall within the scope of the new reporting requirements. In the Netherlands, the Modernisation Directive requirements have been implemented quite literally in the Dutch Modernisation Directive Implementation Bill implementing the IAS Regulation and IAS 39 Directive and the Modernisation Directive.16

Small and medium-sized enterprises are exempted from these reporting requirements.17 Consolidated annual reports must include information pertaining to the entire commercial enterprise, including foreign subsidiaries. The Modernisation Directive should have been implemented into the national laws of the member states by 1 January 2005 at the latest.18 Although the Netherlands failed to meet this implementation date, the Dutch Modernisation Directive Implementation Bill does determine that the new reporting requirements apply to annual reports from 2005 onwards.19