The UK’s National Association of Pension Funds (NAPF) has given its support to European Commission proposals to increase social and environmental reporting by large companies.

The proposals announced today will see companies with more than 500 employees obliged to disclose information in their annual reports on policies, risks and results for environmental, social and staffing issues, respect for human rights, anti-corruption, bribery and board diversity.

The Commission’s internal market and services commissioner Michel Barnier said: “Today we are proposing important legislation on business transparency across all sectors. This is about providing useful information for companies, investors and society at large – much demanded by the investor community. Companies that already publish information on their financial and non-financial performances take a longer term perspective in their decision-making. They have lower financing costs, attract and retain talented employees, and ultimately are more successful…Best practices should become the norm.”

Despite existing EU legislation on disclosure of non-financial information in company accounts, fewer than 10% of the largest EU companies disclose such information regularly. However, the new proposals are “non-prescriptive”, according to the Commission, with companies free to decide what form disclosure should take.

The NAPF welcomed the move. Its head of corporate governance David Paterson, said: “These changes will help investors like pension funds get a much clearer picture about the long-term sustainability of a business. Too often at present, investors can study a company’s financials but they cannot understand and compare vital non-financial parameters that gauge social and environmental issues.”

“Long-term and non-financial risks - including environmental concerns, social factors and governance – can be connected with a company’s ‘licence to operate’ and will have a financial impact down the line, so they should be reported meaningfully to shareholders.”

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