By Tatjana Schroeder*
Companies are not only responsible towards their stakeholders, but more and more bear general social responsibility. The scope and legal structure of this responsibility is often summarized under the term Corporate Social Responsibility ("CSR"). The European Commission regards CSR as the "responsibility of enterprises for their impact on society." In the Commission's view, CSR comprises the impact on environmental, social, ethical, and human rights matters that companies should not only identify, but in case of possible adverse impact prevent or at least mitigate.
All German capital market-oriented companies will have to consider already now whether the new provisions on reporting as part of CSR, with which the German legislator intends to implement into German law the CSR Directive, adopted by the EU at the end of 2014, will impact them with respect to mandatory "non-financial reporting".
Contents of the new provisions
In the first step, on March 18, 2016, the CSR Directive Implementation Act was issued as a Minister´s bill. On September 21, 2016 it has moved forward into a bill issued by German Government without any changes. It is intended to implement the CSR Directive by German Parliament into German law by December 6, 2016. In this bill on the CSR Directive, changes to the German Commercial Code have been drafted, in which the Directive is fully accepted in substance:
Section 289b (new version) of the German Commercial Code
Section 289b (new version) of the German Commercial Code stipulates that major capital market-oriented companies having an average number of employees in excess of 500 workers (in the case of a group on a consolidated basis, thus likely also taking into account the number of workers in consolidated foreign subsidiaries) are now required to implement non-financial reporting in its status report (according to the German Commercial Code – HGB).
Section 289c (new version) of the German Commercial Code
Section 289c (new version) of the German Commercial Code specifies the content of this non-financial reporting as follows:
Section 289f (2)(6) (new version) of the German Commercial Code
According to Section 289f (2)(6) (new version) of the German Commercial Code major capital market-oriented companies which are publicly traded, similar to the " quota of women on boards" introduced in 2015, must describe their diversity policy, including age, gender, and educational background of the members of its management and supervisory board.
Section 289e (new version) of the German Commercial Code
Adverse information may be omitted only under the conditions of Section 289e (new version) of the German Commercial Code.
Section 289b (2) (new version) of the German Commercial Code
According to Section 289b (2) (new version) of the German Commercial Code, companies are exempted from the obligation on non-financial reporting in their status report (according to the German Commercial Code – HGB), if they are included in the consolidated status report (according to the Commercial Code – HGB) of a parent company if such contains a non-financial report.
Effects for “waiting too long” with handling the CSR issue
Certain German capital market-oriented companies/groups would therefore have to publish non-financial reports for fiscal years commencing on or after January 1, 2017, thus for the first time in 2018.
However, the content of this non-financial report provides for the minimum requirements outlined below. Thus, affected companies should not wait until 2018, but review the new obligations for CSR prior to entry into force of the disclosure requirements since the required reports relate to company "policies" pursued on these matters. The requirements are as follows:
Therefore, such policies should be established and prepared for use in due time (for example, through appropriate decisions of corporate bodies). Otherwise, the following effect would occur: Where the company does not pursue a policy, the “reason why” must be provided. Once the disclosure obligations enter into force, companies that are unprepared would have to announce that no policy has been pursued. The negative PR effect of such a notification would speak for itself.
*Tatjana Schroeder is a partner in the Corporate/M&A as well as in the Banking and Finance Practice Group in the Frankfurt office of SKW Schwarz Rechtsanwälte Wirtschaftsprüfer Partnerschaft mbB. She has worked for over 15 years as in-house counsel for large international groups (Siemens AG) as well as family offices (DELTON AG, shareholded by Stefan Quandt) and joined SKW Schwarz in 2003. Tatjana Schroeder can be contacted at email@example.com.
SKW Schwarz Rechtsanwälte Wirtschaftsprüfer Partnerschaft mbB is an independent German law firm. With more than 120 lawyers and offices at Berlin, Düsseldorf, Frankfurt am Main, Hamburg and Munich the firm is present in the major German business hubs.