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Essential Corporate News – Week ending February 9, 2018

Publication February 9, 2018


Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.

BEIS: Government response to the Taylor Review of Modern Working Practices

On February 7, 2018 the Department for Business, Energy and Industrial Strategy (BEIS) published the Government’s response to the Taylor Review of Modern Working Practices (the Taylor Review) which was published in July 2017.

The Taylor Review made 53 recommendations designed to deliver an overarching ambition - that all work in the UK economy should be fair and decent with a realistic scope for development and fulfilment. A number of the recommendations related to agency workers and zero-hour contracts, holiday and statutory sick pay, and the relationship between tax law and employment law.

Recommendation 16 was that the Government should introduce new duties on employers to report (and to bring to the attention of the workforce) certain information on the structure of the workforce. This would involve companies above a certain size making public their model of employment and use of agency services beyond a certain threshold, reporting on requests received and accepted from zero hours contract workers for fixed hours and reporting on requests received and accepted from agency workers for permanent positions.

The response notes that the Companies Act 2006 already requires companies to report on a range of employee-related issues, with these requirements being extended for quoted companies by the implementation of the Non-Financial Reporting Directive. The Government is also proposing that companies will have to report on how their directors, in pursuing their duties, have taken account of wider matters, including the interests of employees and fostering relationships with suppliers. It believes this will result in larger companies being more transparent about their workforce structures, particularly where these are an important aspect of their business model.

The Government is to work with the Financial Reporting Council (FRC) to determine how the FRC’s Guidance on the Strategic Report can be revised to encourage companies to provide a fuller explanation of their workforce model and practices. It will review the impact of these changes on reporting practices and if there is no change, further action could include a requirement  for companies to publish a “People Report”. This could bring together existing employee-related reporting requirements (including gender pay gap and diversity data), with additional specific metrics relating to workforce structure.  However, the Government notes that this would place an additional burden on business and believes that more comprehensive reporting under the existing and forthcoming legal framework is preferable, but is interested in views on the potential value of such a report.

(BEIS, Government response to the Taylor Review, 07.02.18)

ISS: Launch of Environmental & Social QualityScore

On February 5, 2018 Institutional Shareholder Services Inc (ISS), a US proxy adviser, announced the launch of its Environmental & Social QualityScore which will measure the quality of corporate disclosures on environmental and social issues, including sustainability governance, and identify key disclosure omissions.

ISS notes that expectations regarding disclosure practices are defined by industry groups and reflected in standards such as the Global Reporting Initiative, the Sustainability Accounting Standards Board standards and the Taskforce on Climate-related Financial Disclosures recommendations. The ISS scores will measure the depth and extent of companies’ disclosures and the information in the ISS reports will be sourced from company publications including mainstream filings, sustainability and CSR reports, integrated reports, publicly available company policies and information on company websites.

Initially six industry groups are being covered. These comprise energy, materials, capital goods, transportation, automobiles and components, and consumer durables and apparel, as these are considered to be sectors based on industries most exposed to environmental and social risks.  Later in 2018 ISS plans to add 18 additional industry groups to its coverage and these will include consumer services, media, retailing, food, pharmaceuticals, banks, real estate and utilities.

In measuring a company’s level of environmental and social governance disclosure risk, this will be considered both overall and within eight broad categories. So far as environmental disclosures are concerned, the areas that will be considered include management of environmental risks and opportunities, carbon and climate, natural resources and waste and toxicity.  Human rights, labour, health and safety, stakeholder and society and product safety, quality and brand will be the topical areas for social-related disclosures.

(ISS, Launch of Environmental & Social QualityScore, 05.02.18)

European Commission: Fitness check roadmap on public reporting by companies

On February 8, 2018 the European Commission published an evaluation roadmap which sets out details of a fitness check exercise to be undertaken to assess whether the public reporting obligations (including financial and non-financial reporting requirements) of EU companies are meeting their objectives, whether they are consistent, and whether the cost and burden stemming from the various legal reporting obligations are reasonable and proportionate.

A consultation is to be launched in the first quarter of 2018 and views will be sought in particular on the following:

  • Whether the current financial reporting framework meets its objectives and will continue to do so in the digital economy, whether the level of harmonisation and simplification meets the needs of both large cross border groups and SMEs, the role of International Financial Reporting Standards for non-listed and listed companies and their interaction with the broader EU accounting framework, and the coherence of the specific accounting framework for financial institutions and insurance companies with other EU reporting and prudential legislation;
  • Whether the financial and non-financial disclosures in relation to environmental, social and governance reporting by companies are fit for purpose, including sustainability disclosures;
  • Whether experimentation with integrated reporting should be encouraged as a way to make the EU reporting framework more effective and efficient; and
  • Whether public corporate reporting could benefit more from technological developments such as digitalisation.

Following the consultation, the European Commission plans to publish a Staff Working Document in the second quarter of 2019.

(European Commission, Fitness check roadmap on public reporting by companies, 08.02.18)

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