Home Knowledge Large Companies Preparing to Disclose Non-Financial and Diversity Information

Large Companies Preparing to Disclose Non-Financial and Diversity Information



Many large PLCs are for the first time preparing to disclose non-financial and diversity information under Regulations introduced in 2017. The European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 (the “Regulations”) incorporated provisions into Irish law from an EU Directive requiring certain large companies to make information on non-financial matters publicly available on an annual basis. Matters to be reported on include environmental issues, social and employee matters, respect for human rights and corruption and bribery risks and policies.  

In addition, the Regulations require large listed companies to include in their corporate governance statement a report on their diversity policy with regard to their board of directors.

The Regulations have recently been amended by the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) (Amendment) Regulations 2018 (the “Amending Regulations”). The Regulations are to be read as one with the Companies Act 2014.


The Regulations apply for financial years commencing on or after 1 August 2017. For companies in scope with a 31 December financial year end, the first financial year for which they will be required to prepare non-financial and/or diversity reports will be 1 January 2018 to 31 December 2018. Therefore, it is expected that most companies in scope will turn their attention to preparing the non-financial and diversity information reports in early 2019.

What companies are in scope?


Diversity report

The requirement to provide a diversity report applies only to “large traded companies”. These are large companies with transferable securities admitted to trading on an EEA regulated market. Certain debt issuers are exempted from this requirement.


Non-financial statement

In the context of the requirement to provide a non-financial statement, the Regulations apply to any company that meets all three of the following criteria:

  • it is a large company or a holding company of a large group (other than companies which qualify as large by virtue only of their being an “ineligible entity” or of being the holding company of an ineligible entity);
  • it, or the group of which it is the holding company, has an average of more than 500 employees;
  • it is an “ineligible entity”.

Ineligible entities include: 

  • PLCs (whether listed or unlisted);
  • companies with transferable securities admitted to trading on a regulated market of any EEA Member State;
  • credit institutions;
  • insurance undertakings;
  • other undertakings specified under Schedule 5 of the Companies Act 2014, including investment firms, investment companies, and insurance intermediaries;
  • undertakings designated as “public-interest entities”, for instance undertakings that are of significant public relevance because of their size, nature of business or number of employees.

In order to qualify as large, a company must have a balance sheet total exceeding €20m or turnover exceeding €40m. With regard to a holding company, a large group is one which has an aggregate balance sheet total exceeding €20m net (or €24m gross) or an aggregate amount of turnover exceeding €40m net (or €48m gross).

Non-financial information


What must be included in the non-financial statement?

The directors of a company in scope are obliged, for each financial year, to produce a statement (the “non-financial statement”) containing information, in the context of the activity of the company, on environmental matters, social and employee matters, respect for human rights, and bribery and corruption. The company must describe the policies pursued in relation to, and main risks associated with, these matters. A brief description of the company’s business model must be given and an analysis of the non-financial key performance indicators relevant to the particular business should be set out.


What if I cannot report on any of the matters mentioned above?

Where the directors of the company do not pursue policies in relation to one or more of the matters mentioned above, the non-financial statement must set out a clear and reasoned explanation as to why such policies are not pursued. 

Information relating to impending developments or matters in the course of negotiation may be omitted from the non-financial statement where to disclose such matters could, in the opinion of the directors, seriously prejudice the competitive position of the company. Such omission must not prevent a fair and balanced understanding of the company’s development, performance, position and impact of its activity. The fact and reason for any omission of information must be set out in the non-financial statement. 


How should the non-financial information be published?

The non-financial statement can be included as a specific section of the directors’ report, which forms part of the company’s annual audited financial statements. Alternatively, the non-financial information can be set out in a separate statement, a copy of which must either be published on the website of the company within 6 months of its financial year end or be annexed to the annual return of the company. 

Where the non-financial statement is published on the website of the company, the directors’ report must refer to this fact and must give the website address of the company.  

In addition, where a separate statement is produced (whether published on the website or annexed to the annual return), it must be attached to every balance sheet laid before the AGM of the company. 

The main benefit of the option to produce a separate statement is to allow the company some flexibility with respect to how and when it publishes its non-financial information. This flexibility may be of benefit to companies particularly where they already publish some of the required information on their website, for example, in a sustainability report.


What about holding companies and subsidiaries?

Where a holding company is in scope, it must prepare a non-financial statement or a separate statement in respect of the group.

Where a subsidiary company is in scope, it will be exempt from the obligation to prepare a non-financial statement if it is included in the group non-financial statement prepared under the Regulations or under the equivalent implementing legislation in another Member State.


Do the auditors have a role in relation to the non-financial statement?

When preparing their annual statutory auditors’ report, the auditors of a company in scope are obliged to establish that the company has, in respect of the financial year immediately preceding the financial year that is the subject of the auditors’ report, prepared the non-financial statement as required under the Regulations. Where a company has not so prepared the statement, the auditors must state that fact in their own report. Prior to the Amending Regulations being published, the statutory auditors were required to look to the non-financial statement produced for the financial year to which their auditors’ report related. It seems an amendment was required here to take account of situations where a company opted to publish a separate statement, rather than publishing the statement in the directors’ report. In such cases, the statement would not have been available for the auditors to opine on at the time that they were preparing their statutory auditors’ report.  


Diversity report

The requirement to provide a diversity report relating to the board of directors of the company only applies to large traded companies, and not the broader category of companies that must produce a non-financial statement as set out above. The diversity report must be included in the corporate governance statement of the company and must describe the diversity policy applied in relation to the company’s board of directors with regard to aspects such as age, gender or educational and professional backgrounds. The company must also state the objective of the policy, how the policy has been implemented by the company, and the results of that policy in the financial year.

Where a company does not apply any diversity policy, it must give an explanation as to why it does not. 

The statutory auditors of the company are obliged to give an opinion as to whether the information required under the Regulations with regard to the diversity report has been included in the corporate governance statement. 

What are the penalties if I do not comply?

A director who fails to comply with the requirements under the Regulations with regard to the non-financial statement and diversity report will be liable on summary conviction to a class A fine (currently €5,000) or to a term of imprisonment not exceeding 12 months, or both.  

Further guidance

The European Commission has published non-binding guidelines on methodology for reporting non-financial information, including non-financial key performance indicators, with a view to facilitating the disclosure of non-financial information by companies. These guidelines suggest that, when preparing the non-financial information report, companies may cross-reference to information publicly available elsewhere, for example in the company’s sustainability report. 

Contributed by: Aoife Kavanagh

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