The Directive 2014/95/EU on the disclosure of non-financial and diversity information by certain large undertakings and groups[1] is part of a set of measures of the so called European Union 2020 Strategy[2]. This strategy seeks a model of sustainable economy based on transparency that allows progress on fairer societies that respect Human Rights (HHRR) and the commitment on the Sustainable Development Goals (SDGs). Although up to now the European Directives focused on the economic dimension of the companies, demanding greater transparency on their accountability in order to avoid tax evasion, the Non -Financial Report Directive advance in the attainment of Sustainable Development Goals (SDGs) of the United Nations and the Paris Agreement on Climate Change (COP21) with specific objectives such as sustainable development, prevention of corruption or actions in the field of human rights.
The novelty of this Directive is the ethical dimension that is given to companies to contribute to a sustainable economy. Therefore, companies are conceived not only as corporations that generate economic profits, but also as organizations that take on an important role in the transformation of society. While the economic element[3] is essential for the revitalization of the economy, the intention of this Directive 2014/95 / EU is to emphasize the relevance of the business fabric as a transformer of society. Thus, the Directive distinguishes three elements that have to be developed by companies in their annual reports: human rights, society and the third place respect for the environment.
Human rights
The economic activity of companies is directly related to the respect of Human Rights. The Directive 2014/95 / EU raises the respect of human rights as a matter of prevention, requiring companies to report on what they do to prevent the violation of human rights as well as what kind of mechanism do they have to respond to an eventual violation of these rights. These issues certainly try to prevent violations of human rights but implicitly, the fact of posing it, questions the companies behavior.
The elements that must be taken into account when we speak of fundamental rights in the field of companies and business are the social and labor rights of the workers themselves: salaries, social security, working hours, health care system and other standards established by the International Labor Organization. The European companies affected by this Directive operate not only in Europe but, in many cases in developing countries with fragile democratic institutions. For this reason, the report must inform about how companies protect people who report specific situations of HHRR abuses that affect workers. Likewise, the report must inform how the economic activity of a company affect to the surrounding communities such as forced displacement of populations, fair compensations for the use of their lands and natural resources etc.
The Society
The social impact evaluation of companies in the environment in which they carry out their activity is decisive for compliance with the Directive. The Directive encourages companies to provide information on the non-economic impact provoked in the place where they carry out their activity. This influence can be very different depending on the activity they develop, as their location depends normally on practical criteria or on production costs. Normally, the companies are implanted near the populations to which they offer their services, in rural areas if they are agri-business, near water resources or in places rich in natural resources such as the mining basins, forests, coasts, fuel reserves, etc.
The Directive stipulates not only compliance with national and international regulations but also requires to TNCs to report on how this respect is carried out. Therefore, the reports should answer basic questions such as: Are the populations informed about the arrival of investments in their local communities? Do the companies carry out the mandatory social, economic and environmental impact reports required by the main guidelines of UN principles? Do the companies hire mainly workers from nearby towns? Do companies invest part of their profits in the populations affected by their activity? Do they make compensation for the exploitation of natural resources when they belong to local communities? Do they show transparency of payments made to local authorities? What transparency measures they do to avoid corruption? What kind of audits is carried out to guarantee respect for local and environmental legislation?
The protection of the environment
The activities of companies provoke changes in the geographical environment in which they carry out their activities, regardless of the activity: extractive, energy, technological, mining, agri-business or processing of raw materials. All industrial activity generates an impact on the environment that must be specially monitored and respected. For this reason, the Directive requires companies to report on this impact and what activities they carry out to protect, maintain and restore the environment once their activity ends. Sometimes companies refuse to show their environmental protection plans or they simply do not exist. On other occasions restoration plans are presented in such a way that are impossible to comply with them or they are so basic that they are done just to obtain the licenses to operate. Unfortunately, in many cases this restorative plans are forgotten once the companies operate and especially when the activities cease. In these cases, companies excuse themselves saying that there is no budget to implement them.
Conclusion
The fragility of this Non-Financial Report Directive is in the voluntary nature for most European companies operating in Africa. The mandatory nature of this directive is limited only to listed companies, TNCs that have their parent in one of the EU member states, those with more than 500 employees and those with a balance exceeding 20 million euros or a turnover of more than 40 million euros. The transposition of this Directive into national legislation in EU member states could increase the level of demand in aspects such as the audit of non-financial report information of issues not included in the Directive itself. However, the lack of interest of the member states in these issues is once again perceived, instead of being demanding, raise exemptions and restrictions to the obligatory nature.
The sustainability of industrial production and the change in the habits of extraction of raw materials are essential for the achievement of the SDGs in Africa. They will be achieved if governments show their commitment to binding regulation. The Directive 2014/95/EU should promote policies encouraging companies to achieve sustainable economy through a commitment with renewable energies, ethical behavior of CEO, respect for the environment and local communities, the fight against inequalities and the prevention of any type of violation of human rights. Only putting the integral development of people before profits of economic activity will help for the success of this regulation both in Europe and in developing countries.
José Luis Gutiérrez Aranda
AEFJN Policy Officer
[1] Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0095
[2] Europe 202 A European strategy for smart, sustainable and inclusive growth http://ec.europa.eu/eu2020/pdf/COMPLET%20EN%20BARROSO%20%20%20007%20-%20Europe%202020%20-%20EN%20version.pdf
[3] The economic dimension of the companies is reported by the Transparency directive where companies are obliged to present annually their economic results.
