Magdalena Ludwiczak

Statutory auditor (Poland)
Branch manager
Phone: +48 61 624 49 43

Directive 2014/95/EU of 15 November 2014 amended Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups. EU Member States have time until 6 December 2016 to transpose the new regulations into national legislation, so they will apply from 1 January 2017. The Directive results from the global trend that has been developing for three decades to extend the scope of reporting on enterprise activities and their impact on the environment as well as internal anticorruption policy and anti-discrimination measures (the Corporate Social Responsibility, or CSR).

What is Directive 2014/95/EU about?

The purpose of the new Directive is to promote integrated reporting which means reporting on more than just financial figures. The Directive broadens as well the scope of non-financial information that must be disclosed and promotes its publication together with financial data as an appendix to the financial statements.

The Directive:

1. Extends the scope of non-financial information as follows:

  • by the requirement to disclose in the management report information relating to at least environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters; Member States may allow this information to be published in a separate statement;
  • the disclosures should include a description of the policies, outcomes and risks and risk management in non-financial matters;
  • companies may report using the guidelines which they consider appropriate (from own to international).

The new rules will only apply to those public-interest entities having: 

  • an annual average number of employees in excess of 500; and
  • balance sheet total in excess of EUR 20 million or net turnover in excess of EUR 40 million.

2. adds disclosures to the diversity policy through the obligation to include in the corporate governance report the information about the company's diversity policy in relation to the administrative, management and supervisory bodies with regard to aspects such as, for instance, age, gender, origin or educational and professional backgrounds, the goals of the policy and the outcomes in the reporting period.

This new rule will apply only to large listed companies which meet two of the following three criteria:

- number of employees in excess of 250;

- balance sheet total in excess of EUR 20 million;

- net turnover in excess of EUR 40 million.

The overriding principle will be "comply or explain", which means that you have to publicly explain why you do not comply with a certain policy or do not take certain measures.

As mentioned at the beginning, the new regulations follow the global trend that encourages companies to report not only on their financial performance but also on other aspects of their operations. This adds different perspectives to looking at an enterprise – not only from the investor's point of view, but also the employee's or the local community's point of view. The purpose is also to reveal the chain of supply and sub-contractors. At present, very few Polish companies publish non-financial reports. It is estimated than more than 80% of 118 large listed companies do not publish such information. Experiences of companies worldwide show that the first such report takes about half a year to compile, involves about 50 people and requires around 100 ratios to be defined. Therefore, it makes sense to start preparing for this process right now.

Of course, the new rules apply to large companies only but the trend is global and encompasses also smaller enterprises not covered by the Directive. Reports on sustainable development are published also by local government units – a good example in Poland is Warsaw.

Just by attempting to compile such a report a company may learn about the impact it exerts on its surrounding. Such an analysis should lead to conclusions and the strengthening of internal management systems. By publishing a non-financial report a company also increases its transparency. Asking itself about the ultimate objectives may help a company make better business decisions. 

According to the Directive, auditors will only have to check if a statement on non-financial information or a separate report has been made (in accordance with the "comply or explain" principle). EU Member States may choose if the information in the statement or a separate report needs to be verified by an independent provider of attestation services.

We would be glad to offer more information if you are interested in this subject. In addition, our auditors and audit consultants remain at your service in our offices in Cracow, Gdansk, Gliwice, Poznan, Warsaw, Wroclaw to answer all questions about financial audit in Poland.