City of 13 million legislates on mandatory reporting

One of the world’s most populous cities has passed legislation requiring companies based there to publish annual sustainability reports.

The Argentine capital Buenos Aires will apply the legislation, known as Law 2.594, to both local and international businesses with more than 300 employees that have a legal address in the city.

Smaller companies will receive financial incentives, such as low interest loans and tax breaks.

The law proposes that reports make reference to the Global Reporting Initiative guidelines, the AccountAbility 1000 standard, and guidance produced by Brazil’s Instituto Ethos, a business-led corporate responsibility body.

The city’s production ministry is monitoring the quality of reports and stakeholders should be able to raise any objections. The ministry could then audit a company’s data and claims, though the city has yet to reveal the penalties for non-compliance.

The Global Reporting Initiative said the law was further evidence that ‘governments are now taking notice of the global movement towards transparency and sustainability’. In recent months the Chinese and Swedish governments have required state-owned enterprises to produce annual sustainability reports and more examples of mandatory reporting look set to follow.

The law, which has been passed but not yet implemented, will only apply to companies with a high turnover – the exact level has not been decided. Early estimates are that around 100 companies will be affected including Telecom Argentina, BBVA Banco Frances, Cresud and MetroGas.

Buenos Aires has a high degree of political autonomy and is Latin America’s third largest conurbation. Maria Irigoyen of ReporteSocial, an Argentinian consultancy specializing in non-financial reporting, told EP the measure had come from a pro-business administration rather than one with any radical intentions. ‘The new government of the City of Buenos Aires has a corporate background and hence understands the importance of accountability in the private sector,’ she said. ‘It wants companies to increase the transparency of their social and environmental performance through measurable indicators comparable over time.’

However, Irigoyen said most large companies in Argentina – even those that already publish annual sustainability reports – are opposed to mandatory reporting.

Some business associations have already suggested amendments to the law that would do away with penalties for companies that fail to comply.