A proposed new law would require Spanish companies to increase the non-financial information in their management reports and expand content on corporate governance in their annual reports. The bill aims to measure, supervise and manage companies’ performance and their impact on society and the environment.
The Council of Ministers received a report from the Ministry of Economy, Industry and Competitiveness on the bill, which comes in response to the European directive on the disclosure of non-financial information by large corporations. The text will be sent to the Council of State for their opinion prior to its approval as a bill and subsequently, to the parliament.
The bill would oblige companies to include in their management report information on social and environmental issues, as well as content related to staff, respect for human rights and the fight against corruption. This information will help to identify possible risks to sustainability and therefore boost confidence among investors, consumers and society in general. Furthermore, the annual corporate governance report that public limited companies publish will have to include their policies on diversity of expertise and points of view on their board of directors regarding issues such as age, gender, disabilities, education and professional experience.
The legislation would modify Article 49 of the Code of Commerce, Articles 252 and 540 of Spain´s Law of Capital Companies and the Account Auditing Law. It seeks to measure, supervise and manage corporate performance for social and environmental issues and the impact they have on society. These rule changes affect companies with more than 500 employees during the year, or those that meet the follow characteristics for two consecutive years: total asset entries over €20 million; net annual turnover exceeding €40 million; or more than 250 people employed during the year on average.
Concern for society and the environment
Companies will have to provide detailed information on the current and foreseeable future impact of their business on environmental issues such as health and safety, energy use, water use, pollution and greenhouse gas emissions.
According to the directive, social issues and those related to personnel must be focused on the measures the company has taken to ensure gender equality, workplace conditions, social dialogue, respect for union rights, work safety and measures for dialogue with and protection of local communities. Companies will also have to inform about their measures to protect human rights measures and fight against corruption.
All this information will have to be presented – together with a description of the policies and results obtained on these matters - in the company’s management report, or in a separate report.
BBVA is currently working to apply the new directive and expand both its financial and non-financial information from 2017. The purpose is to help the market make better decisions in an environment with an ever- greater demand for non-financial information.
BBVA already included information of this kind in its annual reports, which explain the bank’s strategy and offer management information for the year. The 2016 report is a good example, as BBVA includes non-financial information in this document. The bank reports on the impact its business has on people and things like the generation of wealth, as well as its contribution to social well being, society and sustainable development.