Disclosure of Non-Financial Information by Companies

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For the purpose of analysis of this consultation you want to be identified asPreparer
If you are preparer, are youOrganisation of companies
Name(s) (of respondent and of your organisation / company)
Takuya Fukumoto, Secretary General of JBCE 
Country where your organisation / company is locatedBE - Belgique / België
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Rue Montoyer 40, 1000 Brussels, Belgium 

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Japan Business Council in Europe (JBCE) was established in 1999. It is the European organisation representing companies of Japanese parentage operating in Europe. The mission of JBCE is to contribute to European Public Policy. JBCE membership currently consists of around 60 multinational companies and covers a wide range of industry sectors, including air-conditioning, automotive, chemicals, consumer electronics, engineering, industrial machinery, information and communication technology, medical equipment, photo and imaging equipment. JBCE takes an active role in enhancing understanding of Japanese companies and their business in Europe and to put forward the views of its members on legislative issues currently under debate and on the public policies issues which will shape the years to come.  

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Can the Commission contact you if further details on the information you submitted is required?Yes
Publication: Do you object to publication of the personal data on the grounds that such publication would harm your legitimate interests?
1. How would you consider the current regime of disclosure of non-financial information applicable in your country?Sufficient

Please explain


In replying to this question, please provide information on what way current reporting provides useful information, and to what extent it is sufficiently tailored to the circumstances of the company. Please also comment on whether you find non-financial information useful for the decision-making of a company.

JBCE represents European companies of large Japanese corporate groups. JBCE members operate in markets of multiple European countries, and therefore respect the rules and procedures set up by each jurisdiction. From the perspective of global companies whose activities stretch across different European countries, we strongly favor an EU-wide approach in the light of the global context to non-financial information disclosure. 
2. Have you evaluated the effects, and costs and benefits, of any current corporate disclosure of environmental and social information?Yes
Please explain
All JBCE members evaluate their own corporate disclosures of environmental and social information to varying degrees. The level of the evaluation however depends on the individual companies. Some companies do so on a European basis while others on a global basis. 

3. If you think that the current regime of disclosure of non-financial information should be improved, how do you suggest that this should be done?


Please explain

• The current regime of non-financial information disclosure, which is mostly promoted by rating and reporting scheme providers, has led to disconnects between the corporate strategies and the non-financial information. Therefore, from a point of view of providing the strategy-consistent information, we believe that the current regime could be improved. • Having said that, we do not agree to an increasingly sector-oriented approach to non-financial information presentation. Companies in the same sector may face different sustainability risks and opportunities because of company-specific strategies and internal processes. In line with the interpretation of materiality put forward by the IFRS’ Practice Statement for Management Commentary, we strongly believe that what is material to companies is company-specific and therefore can hardly be determined by a sector-approach. • JBCE believes that companies should be encouraged to report. This promotes pro-active communication between companies and their stakeholders about the causes and the impact of specific stakes. We support the idea of adding narrative, context related information relevant to sustainability risks and opportunities because it makes the non-financial disclosure relevant. Such narrative information helps readers of the non-financial information to understand in a more holistic manner, including the reasons behind a company’s strengths and weaknesses. 
4. In your opinion, should companies be required to disclose the following (check all relevant boxes):Whether or not they have a CSR policy, and if they do, how they implement that policy and what the results have been
Please explain
JBCE supports the view that the content of a CSR policy is company-specific. In line with the previous statement, we agree with the general principle that companies should be encouraged to report and make their strategies more transparent. However, we disagree with a one-size-fits-all approach that applies the same disclosure items to all the companies. 
5. In your opinion, for a EU measure on reporting of non-financial information to achieve materiality and comparability it should be based upon (check all relevant boxes):Other
Other, please specify:
• As pointed out in two previous statements submitted to the European Commission (in attachment), JBCE considers that a one-size-fits-all indicator approach fails to capture the sustainability context of individual companies. • JBCE subscribes to the Practice Statement on Management Commentary by IFRS that the non-financial information must be qualitative in nature in order to ensure the competing goals of achieving materiality and comparability. The IFRS Practice Statement clearly states that materiality is an entity-specific aspect of relevance. In the JBCE view, by-passing the IFRS and creating an EU-only non-financial disclosure regime is likely to counter the overall European Union’s goal of achieving the Europe2020 through smart regulations. Companies, particularly those of small and medium-size and or belonging to of non-EU groups, will be impaired by the additional administrative burdens to comply with the EU-disclosure regime. 

6. In your opinion, what should be the process to identify relevant principles and/or indicators (whether general or sector-specific)?


Please explain


In replying to this question, please comment on whether the Commission should endorse or make reference to any existing international frameworks (or a part of them), such as Global Reporting Initiative (GRI), UN Global Compact, the OECD Guidelines, ISO 26000, or other frameworks; or whether companies should be required to select relevant indicators together with their investors and other stakeholders and to disclose information according to such indicators, depending on the use that different stakeholders would make of such information.

• JBCE is of the view that the process of identifying relevant principles and indicators should be ‘company-specific’. Each company should have the flexibility to determine what is relevant or not to its strategic development by encompassing sustainability challenges and opportunities. Therefore, JBCE has reservations about a possible EU endorsement of any of the existing reporting schemes. It is the company itself, which should have the freedom to select the most appropriate scheme, to explain, if necessary, its sustainability context.  
7. In your opinion, should companies be required to disclose the steps they take to fulfill the corporate responsibility to respect human rights?No
Please explain
JBCE, recalling its previous statements, wants an international level agreement on principles that encourage local-level collaboration of companies and communities. From the perspective of international comparability, corporate responsibility to respect human rights should be principle-based to fit the operating context. JBCE, while fully endorsing the essence of the Ruggie Framework, is of the view that companies should not be required to disclose specific due diligence steps to respect human rights. Requiring such a type of disclosure is prescriptive and would risk ushering in a compliance- and box-ticking mentality. Although we support the framework, we believe that ticking boxes does not serve the Framework’s purpose. 
8. In your opinion, should companies be required to disclose the risks they face and the policies they have in the field of corruption and bribery?No
Please explain
• JBCE believes that disclosing a general policy statement in the field of corruption and bribery does not add value to information users. JBCE takes the view that companies should be disclosing corruption and bribery risks if the management views them as material to their strategic goals. This means that mandating disclosure in this area obliges companies to report what might not be material to the strategic goals. • JBCE apprehends that disclosing all ‘possible risks’ may confuse the users of the information, rather than improve judgments. Disclosure without material information only leads to the boilerplate presentation.  
9. In your opinion, what companies should be required to disclose non-financial information (check only one box)?Other
Other, please specify
JBCE is of the opinion that companies should not be required to disclose specific contents of the non-financial information in a prescriptive format. Should the EU proceed with the mandatory reporting, we would like to stress that companies should be allowed the flexibility to choose the content and the format. 
10. In your opinion, should institutional investors be subject to specific or additional disclosure requirements, for example to disclose whether and how they take into account environmental and social issues in their investment decisions?Yes

Please explain


In replying to this question, please provide information on which issues seem to be the most relevant and why; and which institutional investors should be subject to such an obligation.

JBCE takes the view that institutional investors such as pension funds are a corporate entity as much as a financial institution. This means that they have the similar organizational responsibility towards their stakeholders. As an important stakeholder to European Union’s sustainable development agenda, institutional investors should be treated as a large corporate entity. 

11. In your opinion, should European policy promote the concept of "integrated reporting"?

Integrated reporting refers to a report that integrates the company's key financial and non-financial information to show the relationship between financial and non-financial performance (environmental, social, and governance).


Please explain


In replying to this question, please indicate the advantages and disadvantages of an integrated report, as well as possible specific costs of integrated reporting.

• JBCE’s position is unchanged from its previous statement (Nov. 2010) on the development of an integrated reporting scheme. Namely, we call for a more substantial and transparent dialogue with wider stakeholder groups. Discussions on integrated reporting furthermore should focus more on how to integrate financial and non-financial factors rather than on the format that this reporting should take. • JBCE already noted in its response to question 5, above, that a one-size-fits-all reporting scheme not only fails to capture the sustainability context of companies, but also increases the administrative burden of companies without any tangible impact on the society’s sustainable development. A prescriptive approach is likely to result in a sheer list of environmental, social and governance disclosure items, which may have no bearing on corporate strategies.  
12. In your opinion, should disclosed non-financial information be audited by external auditors?No

Please explain


In replying to this question please provide any evidence you may have regarding costs of auditing non-financial information, as well as your views on other possible forms of independent reviews besides external auditing.

As stated throughout this consultation response, JBCE is of the opinion that the only approach with the non-financial information disclosure is give companies flexibility to choose ‘what to’ and ‘how to’ report. Non-financial information is company-specific by nature, and the third-party assessment on the non-financial information hardly captures the sustainability context of corporate strategies. 
13. If you have relevant documents you want to share with us, please attach them here. (optional)I attach additional documents