The Fourth EC Company Law Directive (CLD) on annual accounts was amended in 2003 to require companies to include, where appropriate, information such as key performance indicators relating to environmental and employee matters in their annual report to the extent necessary for an understanding of the company's development, performance or position.

Some Member States, including Denmark and France, have introduced social and environmental disclosure requirements that are more far-reaching than the amended Fourth Company Law Directive. Better disclosure of non-financial information may be a tool to further increase the number of European enterprises fully integrating sustainability and responsibility into their core strategies and operations in a more transparent way.

In recent years, there have been calls to improve the comparability, reliability, and relevance of information disclosed by enterprises, e.g. on social and environmental issues. Proponents argue that the companies' management would be encouraged to better link sustainability issues to their companies' strategy by looking into sustainability risks and opportunities, and monitoring sustainability indicators. Some also argue that investors would be able to develop better company valuation models, which would provide for more reliable assessment of longer-term performance prospects

Better disclosure of social and environmental information could enhance the accountability of enterprises, and so contribute to higher levels of trust in business on the part of citizens. Others argue that disclosure of more non-financial information may unduly increase the administrative burden of companies, adding to the length of annual reports which are already considered by many to be too long.

Business representatives often argue that enterprises should remain free to choose which social and environmental indicators are most appropriate to them. Some also argue that there are difficulties in providing assurance on sustainability reporting where an organization has not used a standard defined reporting framework.

The International Integrated Reporting Committee (IIRC) has started work to create a globally accepted framework for accounting for sustainability, that is, a framework which brings together financial, environmental, social and governance information in a clear, concise, consistent, comparable and integrated format. In this context, the consultation questions aim to gather stakeholders' views on possible improvements to the current regime for the disclosure of non-financial information.

Click here to access the consultation document which is open for comment until 24 January 2011.