FERMA urges risk management inclusion on social transparency
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Public disclosure of a company’s policies on social issues must be conducted in conjunction with good risk management, said the Federation of European Risk Management Associations on Wednesday in response to a proposal being considered by the European Parliament’s legal affairs committee.
The proposal is intended to increase the transparency of larger companies through more nonfinancial reporting, said FERMA in its statement. It requires companies with more than 500 employees to disclose information on their policies, risks and results on environmental matters, social and employee-related aspects, respect for human rights, anticorruption and bribery issues, and board room diversity, said FERMA.
The proposal was adopted by the European Commission on April 16.
FERMA President Jorge Luzzi said in the statement that while the disclosure of environmental and social information can be viewed positively, “it is disclosure plus risk management that creates the conditions for transparency and sustainability. By itself, disclosure is not enough.”
He continued, “If the regulations do not take sensitive industry-specific issues into account, they could actually damage competitiveness, and so the sustainable performance they are aiming to promote.”
FERMA said other comments it made in response to the proposal were:
• Disclosure requirements should be flexible enough to take into account market strategy on a global level and competition in addition to industry-specific sensitive areas.
• Increased nonfinancial reporting will remain a benefit for business only if it does not turn into a heavy cost and administrative burden.
• Performance sustainability requires a thorough risk management process that involves knowledge and understanding of the risks.
• Risk management should be part of the parliamentary discussion of the draft directive.
• Board diversity and social issues should be treated separately.
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