FRC publishes a factsheet on non-financial reporting

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By Carol Hislop, Head of Corporate & Financial Reporting, Policy Leadership

3 August 2017

Carol Hislop, Head of Corporate & Financial Reporting, outlines the implications of the new regulations.

The FRC has published a factsheet on non-financial reporting which provides an overview of the new regulations implementing the EU Directive on non-financial and diversity information. The regulations apply to companies and qualifying partnerships with financial years beginning on or after 1 January 2017. The factsheet is located on the FRC website.


Companies will need to consider whether they fall within the scope of the regulations which apply to certain large companies and qualifying partnerships. Entities with more than 500 employees on average during the year will fall into scope if they are:

  • Traded companies
  • Banking companies
  • Authorised insurance companies
  • Companies carrying on an insurance market activity

The information should be provided on a consolidated basis for groups.

Companies which are not within the scope of the new regulations will continue to apply the pre-existing non-financial reporting requirements of the Companies Act 2006 for the Strategic Report.

The FRC recognises that a potential source of confusion in the EU Directive is that the regulations apply to “traded” companies, whereas the pre-existing Strategic Report regulations apply to “quoted” companies. The Companies Act defines traded and quoted companies as follows:

  1. A traded company is a company whose transferable securities are admitted to trading on a regulated market (section 474(1)).
  2. A quoted company is a company whose equity share capital:

(a) has been included in the official list in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000, or

(b) is officially listed in a European Economic Area (EEA) state, or

(c) is admitted to dealing on either the New York Stock Exchange or NASDAQ (section 385(2)).

A key distinction is that “traded” companies include those with debt securities on a regulated market. Alternative Investment Market (AIM) companies are excluded from both as they do not meet the definition of either a traded or quoted company.

Disclosure requirements

The new regulations require companies within scope to include a non-financial statement in the Strategic Report disclosing, as a minimum, information about:

  • environmental matters
  • the company’s employees
  • social matters
  • respect for human rights
  • anti-corruption and anti-bribery matters.

This information is required only to the extent necessary for an understanding of the company’s development, performance and position and the impact of its activity. If the company does not pursue policies in relation to any of the above matters, the statement must provide an explanation.

The Strategic Report should also include a description of:

  • the company’s business model
  • the policies pursued in relation to the matters above, including due diligence processes implemented
  • the outcome of those policies
  • the principal risks relating to the matters noted arising in connection with the company’s operations
  • how the company manages the principal risks
  • non-financial key performance indicators
  • where relevant and proportionate, the business relationships, products and services which are likely to cause adverse impacts

The EU Directive also requires listed companies to make the following diversity disclosures in their corporate governance statements:

  • their diversity policy including aspects such as age, gender, educational and professional backgrounds
  • the objectives of the diversity policy
  • how the policy has been implemented; and
  • the results of the policy in the reporting period.

If there is no diversity policy in place, the company must disclose the reason for this in the corporate governance statement.


  • Corporate and financial reporting
  • Guidance

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