The Danish Government's Position on Companies’ Disclosure of non-

financial Information

The Danish Government supports a new common EU-regulation on com-panies’ disclosure of non-financial information. Employed in the smartway, regulation on disclosure of non-financial information will contributeto both European competitiveness and sustainable growth.The Danish Government shares the Commission understanding of thecrisis and the need to rebuild trust in business on the part of Europeancitizens. We are also faced with major challenges in terms of violation ofhuman rights, demolition of nature and environment, energy and climateand so fort.The Danish Government is convinced that companies’ disclosure of non-financial information is essential to both rebuild trust and to meet soci-ety’s challenges, and therefore finds an EU-regulation important.Moreover, the Danish Government supports a regulation which promotesCSR employed in a strategic way. Strategic CSR is where responsibilityand profit is not understood as opposites, but rather are integrated in abusiness’ core strategy and creates shared value by meeting both socialand business needs. Employed in this way, CSR and regulation on report-ing may both strengthen competitiveness and contribute to trust and sus-tainable growth.It is the Danish experience that a flexible comply-or-explain law grantsthe companies the necessary freedom to work with social and environ-mental issues as they find fruitful to both business and society. ManyDanish companies’ state that they are positive to the Danish law on non-financial disclosure and that they have gained a better understanding ofthe values they create and their CSR business case.It is thus the Danish Government’s conviction, that a common EU-regulation in this area must fulfil the following requirements in order tobe an effective tool to promote sustainable growth, increase competitive-ness and avoid unnecessary burdens:1) It is voluntary to engage in corporate social responsibility. The in-dividual company decides for itself whether, how and to what ex-tent it wishes to work with social responsibility. This entails aprinciple-based comply-or-explain model. Moreover, the individ-

ual company decides for itself, what material to disclose. The dis-closed non-financial information should be audited by externalauditors.2) Potential EU-regulation must be coordinated with, and encouragethe participation of European enterprises in the internationallyrecognised initiatives on social responsibility, here within in par-ticularUN Global CompactandPrinciples for Responsible In-vestments(PRI), as well as theGlobal Reporting Initiative(GRI).3) Disclosure on CSR is an administrative burden, and it is vital thatany requirements on disclosure are composed in a way whichkeeps administrative burdens on a minimum level.4) As point of departure, requirements to disclosure on non-financialinformation ought to be integrated with requirements to financialreporting. However, concerning potential publication of detailedinformation, some flexibility must be ensured in relation to howthis information is made public.5) A new EU-regulation on disclosure of non-financial informationshould encompass the large companies (both listed and non-listed), including investors. Large companies, whether listed ornot, are of equal importance when it comes to rebuilding trust inbusiness. Moreover, the large companies have in principle thesame opportunity to create shared value to both business and soci-ety. Investors are important drivers to CSR in business, and the fi-nancial crisis has made it evident that there is a need to focus onresponsible investments. Increasingly, private customers are alsodemanding responsibility from their investments managers.

Disclosure increases trust

Disclosure of non-financial information is by the Danish Governmentfound important to rebuild trust in business on the part of European citi-zens and to improve the competitiveness of European Industry.Corporate Social Responsibility increases trust in business among inves-tors, customers and stakeholders, if companies disclose relevant non-financial information. CSR reinforces a company’s reputation and givesthe company a higher market value, and makes it easier to attract andretain competent employees and secure market shares.

Global challenges must be met by global standards on CSR

Human Rights and Labour Rights are violated, our natural resources arelimited and our environment is under pressure. These issues will not dis-appear, unless we continue to encourage the companies to take action anddiscover business opportunities in responsible business conduct.

CSR employed in the strategic way, creates shared value – value to bothbusiness and society – and this is an opportunity we as societies cannotafford to miss out on. It is however, important to have the same expecta-tions in the internal market, as on the global market, to avoid an ineffi-cient functioning of the market. Therefore, it is imperative, that an EU-regulation on disclosure does not create any new European standards, butevokes internationally recognised standards asUN Global CompactandPrinciples for Responsible Investments(PRI), as well as theGlobal Re-porting Initiative(GRI).Moreover, the existing 4thCompany Law Directive, which allows fordifferent national regulations, ought to be harmonised in order to avoid arisk of development of different national regulations. Such a developmentwould be detrimental to the internal market, as it would impose an unnec-essary burden on the companies, without benefits to justify these.

A driver to sustainable growth and strengthened competitiveness

Business driven CSR is about managing social and environmental risksand opportunities in a way which creates value to both business and soci-ety. It entails integrating CSR in the business strategy and in concert withthe business’ core competences.

Flexibility necessary to promote making CSR a business case

It is of utmost importance that the companies have the necessary freedomto work strategically with CSR, i.e. that they may make their efforts incompliance with their strategic challenges and not be obstructed by rigor-ous and burdensome reporting requirements on issues which might noteven be within their sphere of action and have any relevance at all to thecompany. Flexible reporting requirements are a necessity for CSR to be adriver to sustainable growth and strengthened competitiveness.

Flexibility ensured by a principle-based model

The necessary flexibility is ensured by a regulation where the reportingrequirements are confined to whether or not the company has a CSR-policy or not, and if so, what their efforts are and what they haveachieved. This is a principle-based model which does not create unneces-sary administrative burdens or becomes an obstacle to business drivenCSR.It is the Danish understanding, that these principles entail reporting onimportant risks and opportunities of environmental and social character,and how these are integrated in the business strategy.

Investors’ interests in a company’s value

Non-financial assets and intangibles are significant drivers of corporateperformance. Disclosure of non-financial information will deepen theunderstanding of a company’s value, which is also demanded by moreand more investors. Investors are increasingly finding that CSR is impor-tant to protect and increase their long-term investments.