On 3 September 2017, the King signed the act regarding disclosure of non-financial and diversity information by certain large companies and groups (Belgian Official Gazette 11 September 2017) . This act implements the eponymous Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 (see also Eubelius Spotlights September 2016) . Under this act, certain large undertakings will have to disclose "non-financial" and diversity information as from their annual report relating to the financial year commencing on or after 1 January 2017.
Companies concerned
Directive 2014/95/EU regulates a practice that was already in place. As of the financial year commencing on or after 1 January 2017, this type of disclosure will be mandatory for two types of entities (new article 96, § 4 Companies Code):
- all undertakings of public interest in the sense of art. 4/1 Companies Code (i.e. listed companies, credit institutions, insurance and reinsurance institutions, clearing institutions and assimilated institutions) which exceed an average number of 500 employees and either a balance sheet total of EUR 17 million or a turnover of EUR 34 million (except for subsidiaries of a company which includes them in its consolidated non-financial report); and
- all undertakings of public interest which are the parent company of a large group and which have more than 500 employees on a consolidated basis.
This scope corresponds to that of the Directive. During review in the parliamentary commission, it was suggested that the scope should be extended to include other companies, but the proposed amendment was not adopted. This new legislation will be applicable to fewer than 200 Belgian companies in total.
Non-financial information to be disclosed
Companies in the categories listed above must disclose – in their annual report or in a separate report to which the annual report makes reference – significant information about their activities, the policies pursued and due diligence in relation to environmental, social and employee matters, respecting of human rights, anti-corruption and bribery matters. The report must also set out the outcome of the policies, as well as the principal risks related to these matters and how these risks are managed. The report should also contain key performance indicators ("KPIs") relevant to the policies (new article 96, §4, section 2 Companies Code).
Disclosure of diversity policies
In addition, and in accordance with Directive 2014/95/EU, the act requires large listed companies to provide a description of the diversity policy applied in relation to the company's directors, members of the management committee and management with regard to aspects such as age, gender, and educational and professional background; the objectives of the diversity policy; the implementation methods, and their outcome (new article 96, §2, section 1, 6° Companies Code).
Comply or explain
Regarding compliance with corporate governance codes, companies required to disclose non-financial and diversity information must apply the "comply or explain" principle. Moreover, and despite criticism, in connection with the disclosure of non-financial information, Belgium has made use of the Directive’s option to allow the companies concerned to omit the disclosure of information that would be "seriously prejudicial" to their commercial position, provided that such omission "does not prevent a fair and balanced understanding of the development of the activities" (the so-called "safe harbour" clause; new article 96, §4, section 8 Companies Code).
Review by the statutory auditor
Both the non-financial information and the information about the diversity policy will have to be verified by the statutory auditor. The auditor is not required to evaluate the quality of this information, but must verify whether the information provided is consistent with the annual accounts for the preceding financial year (new article 144, §1, section 1, 6° and 148, §1, section 1, 5° Companies Code).
In practice
To enhance comparability, the reports will be drawn up in accordance with "accepted European and international frameworks" (article 96, §4, section 4 Companies Code). On 5 July 2017, as required under Article 2 of Directive 2014/95/EU, the European Commission published a communication containing "Guidelines on non-financial reporting (methodology for reporting non-financial information)". This communication contains a list of frameworks and methodological recommendations for drawing up the report.
The report will entail a considerable amount of work in terms of data collection and verification. Once again, the compliance officer will be heavily involved in this work – and will also be exposed in the event of non-compliant disclosure.