Smart Regulation 3: Mandatory Social and Environmental Reporting

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Presentation given by Filip Gregor (ECCJ lawyer) at the ECCJ/PSE conference on 29 May 2008 in Brussels

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Smart Regulation 3: Mandatory Social and Environmental Reporting

  1. 1. Smart Regulation <ul><ul><li>Proposal 3: </li></ul></ul><ul><ul><li>Mandatory Social and Environmental Reporting </li></ul></ul><ul><ul><li>Filip Gregor </li></ul></ul>
  2. 2. The Legal Proposal <ul><li>The parent companies will be mandated to disclose: </li></ul><ul><ul><li>The enterprise structure and its sphere of responsibility </li></ul></ul><ul><ul><li>The risks of human rights abuse and environmental damage within the enterprise's operation or operations within its sphere of responsibility </li></ul></ul><ul><ul><li>Data on environmental and social impacts of the operations of the enterprise in the reporting period </li></ul></ul>
  3. 3. Why is the Proposal needed? <ul><li>Increased transparency of business operations would spur voluntary improvements. </li></ul><ul><li>Voluntary initiatives lack assesment and enforcement mechanisms – as result the reports are impossible to compare and often ignoring material and controversial issues. </li></ul><ul><li>The markets cannot discrimate well between good and bad performers – business case for CSR is not working. </li></ul>
  4. 4. Missing Standards <ul><li>Company fear and refusal to disclose voluntarily – risk of legal liability, competitive disadvantage, divulgence of trade secrets </li></ul><ul><li>Greenwashing </li></ul><ul><li>Lack of reporting templates as a source of confusion </li></ul><ul><li>Lack of clarity what social and environmental issues are companies responsible for </li></ul>
  5. 5. Aim of the Proposal <ul><li>The proposal seeks to achieve that public and those in control of companies have information about what is important with respect to the company's impacts on human rights and environment </li></ul><ul><li>Through better transparency to improvements </li></ul>
  6. 6. Scope of the Proposal <ul><li>The law will extend to all large companies incorporated in the EU or listed on European stock exchanges. </li></ul><ul><li>To protect EU companies from unfair competition, the law will also require European subsidiaries of non-EU companies to disclose information about the whole group they belong to. </li></ul>
  7. 7. Mandating GRI? <ul><li>Voluntary initiatives provide a useful basis and experience (and so do existing mandatory schemes) </li></ul><ul><li>They are self-evaluated and self-assessed, they offer several levels of complicity </li></ul><ul><li>Mandatory scheme has to be clear, unambiguous, audited and enforceable. </li></ul>
  8. 8. Are directors liable? <ul><li>The directors will be liable for public sanctions if the reporting standards are not observed properly </li></ul><ul><li>Strict liability, however, limited by fault based liability of the company in the area of risks reporting </li></ul>
  9. 9. Verification & Enforcement <ul><li>The reports would require independent verification </li></ul><ul><li>Public liability enforced by state or interested agencies </li></ul><ul><li>Standing to those having a sufficient interest or mantaining an impairment of right </li></ul>

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