One year from the launch of the proposal by European Commissioner for Internal Market and Services, Michel Barnier, and after extensive negotiations between the three European bodies, with a 599-55 voting result, the European Parliament decided to amend Directive 2013/34/EU (Fourth and Seventh Accounting Directives on Annual and Consolidated Accounts), which now requires mandatory disclosure of non-financial and diversity information, by an estimated 6,000 European-based "Public Interest Entities" (PIEs) or by parent companies of European-based PIEs.

Public-Interest Entities include companies of over 500 employees which are listed, as well as some unlisted companies, such as banks, insurance companies and other companies that are so designated by Member States, because of their activities, size or number of employees.

These entities will be: 

• Required to report on environmental, social, employee-related, human rights, anti-corruption and bribery issues.
• Required to describe their business model, policies, outcomes, risks and key performance indicators on the above issues.
• Required to describe their diversity policy applied for management and supervisory bodies, for example age, gender, educational and professional background.
• Encouraged to rely on recognized frameworks such as the GRI Guidelines, UNGC, UNGP on Business and Human Rights, OECD Guidelines, ISO 26000 and ILO Tripartite Declaration.

Entities will be required to report on the above issues on a "report or explain" basis, retaining flexibility to disclose relevant information in the way that they consider appropriate, whether part of their annual report, in a separate report etc.

On the other hand, certain aspects of the decision have attracted criticism:

• The Directive does not require comprehensive reporting on environmental and social aspects (although the Commission encourages it).
• The requirements will become into force in the not so near 2017.
• The Commission will prepare guidelines on methodology for reporting non-financial information (including general and sectoral non-financial key performance indicators), however these are expected within the next 24 months and will be non-binding, letting little hope for comparable performance data being published.

The Directive is expected to strengthen transparency, accountability and double the number of entities currently reporting on ESG matters in the EU from an estimated 2,500. It will come into force when ratified by the EU Member States in the European Council, which is expected to formally adopt the proposal.