GUBERNA response to European reporting requirements

On December 1^st, GUBERNA replied to a call for evidence from the European Commission on the reporting requirements resulting from EU legislation. We provided our response based on a survey held among our community members.

GUBERNA reported to the commission that Directors see transparency as a prerequisite to create trust between economic actors, and to hold companies accountable for their possible societal or ecological externalities. The promise by the current Commission to reduce reporting obligations by 25% is welcomed, but we signaled a concern among our members that the introduction of new regulations may counteract this reduction.

Our members state that in theory well-governed companies could integrate the various reporting requirements seamlessly into their strategy without additional efforts, but in practice the capacity in staff and resources forms a bottleneck. Two criteria are suggested to assess the relevance and practicality of regulatory reporting requirements. Firstly, a qualitative assessment of the degree to which the regulatory framework ensures effective outcomes. Secondly, a quantitative evaluation which assesses the costs and benefits of reporting.

For larger or public companies, where the reporting burdens are heavier, our members plead the European level to create harmonized guidelines for the reporting requirements, to counter the risk of a proliferation of member state guidelines and definitions. Having harmonized guidelines for each reporting standard would help to avoid “guideline shopping” between member states, where companies go where the guidelines offer more leeway or are more leniently implemented. In order to achieve this harmonization, we proposed to introduce pan-European “implementation acts” for further legal clarity and consistency. These frameworks could be evaluated and adapted every two to four years, in order to keep them up to date with the latest (technological) developments.

For smaller companies, simplified reporting requirements or exemptions from various requirements are needed. The expenses to ensure reporting are not justified for companies with an EBITDA below €1M. Even companies above that threshold struggle to conform to the reporting requirements. For example, the Regular Supervisory Report (RSR) or the Solvency and Financial Condition Report (SFCR) disproportionately burden smaller insurance companies, particularly in the realm of risk management. In their reports, companies will often repeat standard answers that provide minimal insights for external readers, and become ineffective as key issues cannot be discerned from the reports.

Finally, the reporting processes could be further digitalized in terms of data collection and in terms of submission of the reporting itself, in particular in non-financial reporting in general and GDPR compliance in particular.