​​Disclosure of non-financial and diversity information by certain large undertakings and groups

1. What national legislation enacted the NFRD in Cyprus and did any aspects of it exceed the requirements set by the NFRD? 

The Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups (the “NFRD”) has been implemented into national law by the Companies (Amendment) (No. 3) Law of 2017 (the “L.51(I)/2017”). It should be noted that the L.51(I)/2017 is an amendment to Cyprus Companies Law (the “Cap.113”). 

The L.51(I)/2017 closely resembles the NFRD and inserted, inter alia, two new sections into Cap.113, namely sections 151A and 151B the content of which replicate exactly those of articles 19(a) and 29(a) of the NRFD, respectively. 

Therefore, and based on the above, we are of the view that, no aspect of the enactment of the NRDF into the Cypriot national legal landscape exceeds the requirements set by the NRFD.  

Finally, for the purposes of completeness, since NFRD is an amendment to Directive 2013/34/EU, we should note that the latter has been implemented into national law by the Auditors Law of 2017 (the “L.53(I)/2017”).  

2. Which national authority or authorities oversee ESG reporting? 

Section 151A(11) of Cap.113 provides that the statutory auditor or audit firms must check whether the non-financial statement or the separate report has been provided and whether it has been prepared in accordance with the applicable legal requirements. Provided that the statutory auditors or audit firms, pursuant to L.53(I)/2017, are subject to public supervision and disciplinary control by the Cyprus Public Audit Oversight Board (“CyPAOB”), it is clear that the CyPAOB oversees the ESG reporting. 

3. Does any existing legislation require firms to disclose the environmental / sustainability impact of their activities, or of companies in which they invest? 

The laws imposing disclosure obligations on the environmental or sustainability impact of firms’ activities in Cyprus are the L.51(I)/2017 enacting the NFRD, as well as the Law on Environmental Impact Assessment for Certain Projects of 2018 (the “L.127(I)/2018”).  

Sections 151A and 151B of the Cap.113, require that “Large undertakings which are public-interest entities” and “Public-interest entities which are parent undertakings” shall prepare Non-Financial Statements or Consolidated Non-Financial Statements, respectively. The said statements shall include information about environmental matters.  

In relation to such matters the following information will need to be included: 

• A brief description of the business model of the company/group. 
• A description of the policies pursued by the company/group in relation to those matters, including due diligence processes implemented.  
• The outcome of those policies.  
• A description of the principal risks related to those matters linked to the operations of the company/group, including, where relevant and proportionate, its business relationships, products or services which are likely to have adverse impact on those areas, and how the company/group manages those risks.  
• A description of the non-financial key performance indicators relevant to the particular business. 

Further, the Law on Environmental Impact Assessment for Certain Projects of 2018 L.127(I)/2018 was enacted for the purposes of harmonizing Cyprus legislation with Environmental Impact Assessment Directive 2014/52/EU. This law obliges firms to submit an environmental  impact assessment report to the competent Environmental Authority before being granted permission or authorisation to conduct certain works which may have substantial environmental impact due to, amongst other factors, their nature, size, or position.  

4. Does any national legislation regulate whether an activity or investment can be classified as sustainable / environmentally friendly? 

Despite that no national legislation regulate whether an activity or investment can be classified as sustainable, the financial regulatory body of Cyprus, the Cyprus Securities and Exchange Commission (the “CySEC”), is responsible for overseeing sustainable finance in Cyprus. As defined by CySEC, the term sustainable finance encapsulates the following:  

1. Re-channelling of private capital to more sustainable investments,
2. Fostering sustainable economic growth and long term economic development,
3. Ensuring the stability of the financial system,
4. Strengthening transparency, and
5. Managing the risks stemming from environmental and social issues.

The CySEC’s approach to sustainable finance has three main pillars; authorisation and supervision, education and encouragement of relevant innovation, and policy making at EU level. 

Through its authorisation and supervision process, the CySEC works to ensure that investors are not being misled through the mislabelling, misrepresenting, and mis-selling of investments or activities as ‘sustainable finance’. Furthermore, the CySEC organises seminars and provides guides and recommendations to enhance the understanding of market participants on sustainable finance. It is also noteworthy that the CySEC provides support to entities innovating in the area of Green Fintech through the CySEC Innovation Hub. This Hub is aimed at enhancing green labelling and improving the analytical capabilities of firms when dealing with ESG information.  

5. Does any national law or regulatory guidance cover workplace diversity, for example, the representation of women on a firm’s management or supervisory body? 

The Cypriot legal landscape contains numerous national laws that safeguard equality and prohibit discrimination at the workplace. Cyprus has implemented EU directives and has ratified international conventions aimed at anti-discrimination, equal treatment, and equal opportunities.  

Through their provisions on anti-discrimination, these laws also indirectly safeguard workplace diversity. Therefore, even though not directly addressing the representation of women or minority groups on firms’ management or supervisory bodies, these laws have an impact on the enhancement of workplace diversity in Cyprus: 

Firstly, the Cypriot Constitution contains a general anti-discrimination provision that corresponds to Article 14 of the European Convention on Human Rights (ECHR). More specifically, Article 28 of the Constitution states that every person is equal before the law and it prohibits any kind of discrimination against any person on the ground of their race, religion, sex, political or other views, national or social descent, colour, social class, or any other ground whatsoever.  

Secondly, Cyprus has enacted the Equal Treatment (Racial or Ethnic Origin) Law (L. 59(I)/2004),  as well as the Equal Treatment in Employment and Occupation Law (L. 58(I) of 2004), for the purpose of harmonization with two EU Directives; the Racial Equality Directive 2004/43/EC and the Employment Equality Directive 2000/78/EC. These laws specifically address equal treatment and provide protection against discrimination in employment, conditions at work and access to professional training.  

In particular, the Equal Treatment (Racial or Ethnic Origin) Law implements the principle of equal treatment between people, regardless of their racial or ethnic background and provides protection against discrimination in employment and training, social security, health and access to goods and services. Furthermore, the Εqual Treatment in Employment and Occupation Law (L. 58(I) of 2004) is comprised of identical benefits to the Equal Treatment (Racial or Ethnic Origin) Law in that it enacts the principle of equal treatment in employment and education irrespective of religion, beliefs, sexual orientation and age. The Directive also requires that employers make reasonable arrangements and provide appropriate facilities for people with disabilities who are capable of employment. In addition, it allows for limited deviations from the principle of equal treatment (e.g. to promote the ethos of religion or to accommodate for specialized programs that promote the entry of seniors or younger people in the labour market).  

Thirdly, for the better harmonization with European Directives 76/207/EEC, 2002/73/EC and 2006/54/EC, Cyprus has enacted and amended several times the Equal Treatment of Women and Men in Occupation and Vocational training Law  (L. 205(I)/2002).  With one of the latest amendments, the Equal Treatment of Men and Women in Employment and Vocational Training (Amendment) Law of 2009 (L. 39(I)/2009) provides for the following, among others:  

• It revises the definition of “sex discrimination”, “direct discrimination” and “indirect discrimination” in such a way as to strengthen the protection afforded to victims of discrimination.  
• It ensures equal treatment for both sexes as regards their membership of, and involvement in, an organisation of workers or employers or any organisation whose members carry on a particular profession, including the benefits provided for by such organisations.  
• It ensures that complainants can submit their complaints even if the employment relationship has ended.  
• It strengthens the Gender Equality Committee in Employment and Vocational Training’s independence and improves its structural characteristics and functionality, by allowing the Committee to buy the services of experts to assist it with its duties and goals, including the provision of independent assistance to victims of discrimination. It should be noted that, the said Committee, among others, advises, within its competencies, on national policy and legislation and supervises the implementation of the Law through the competent Department of the Ministry of Labour and Social Insurance, as well as, it submits, by its own initiative, complaints or accepts complaints and forwards them for action to the Chief Inspector. 

Moreover, according to Article 24, the Minister of Labour and Social Insurance can appoint Equality Inspectors to ensure the better implementation of the legislation relating to sex discrimination and the promotion of equality between the sexes.  

The Equality Inspectors’ main duties, as specified in Articles 25-28, are:  

• To make sure that the Equal Treatment of Men and Women in Employment and Occupation Law is implemented correctly,
• To provide information and advise employers regarding their responsibilities in relation to the equality principle and, 
• To report to the Minister any problems they may encounter while implementing the legislation and suggest ways in which these can be overcome.  

Finally, the Commissioner for Administration (Ombudsman) was appointed as Cyprus’ Equality Authority in 2004 on the basis of the Combating of Racial and Other Discriminations (Ombudsman) Law (L.42(I)/2004), as the competent body to combat both direct or indirect discrimination on the grounds of race, religion, beliefs, special needs and sexual orientation in employment, vocational training and vocational education. The Equality Authority has also been granted on the basis of the Equal Treatment of Women and Men in Occupation and Vocational training Law (L. 205(I)/2002), with the power to investigate complaints regarding discrimination on the grounds of sex in both the public and private sector.  

6. Does any national legislation require firms to report on gender or other diversity pay gaps? 

A duty upon firms to report or disclose information on gender or other diversity pay gaps may arise in the context of the investigation as to pay discrimination under the national legislation that aims to combat pay discrimination.  

Specifically, the Equal Pay between Men and Women for the Same Work or for Work of Equal Value Law (L. 177(I)/2002), the Combating of Racial and Other Forms of Discrimination (Commissioner) Law (L. 42(I) of 2004),  as well as the Equal Treatment in Employment and Occupation Law (L. 58(I) of 2004), specify procedures by which complaints of pay discrimination (as well as other types of discrimination) can be investigated and resolved. 

According to Section 14 of the Equal Pay between Men and Women for the Same Work or for Work of Equal Value Law (L. 177(I)/2002), entitled “Duty to provide information”, Equality Inspectors have the power to request from any employer or his representative, to provide any information, book, or record in relation to the matters governed by this Law. This could potentially include information on pay discrimination. 

Equally, in the context of an investigation of a complaint as to pay discrimination made, based on any of the above laws, the Commissioner of Administration (or Ombudsman), pursuant to the Combating of Racial and Other Forms of Discrimination (Commissioner) Law (L. 42(I) of 2004), has the power to request from a firm any information that may assist him in the investigation. This could also potentially include information on pay discrimination. It should be noted that the Ombudsman may also investigate issues on his or her own right where the Ombudsman deems that any particular case that came to his or her attention may constitute a violation of the law.

7. Are firms under any national legal duty to identify/prevent risks such as modern slavery or human rights abuses? 

Even though there is no legal duty imposed on firms to identify risks such as modern slavery or human rights abuses, the Cyprus legal framework clearly and strongly prohibits such abuses.  

Cyprus’ Constitution contains several provisions for the protection against the violation of human rights, including the prohibition of forced labour and modern slavery. Article 10(2) of the Constitution prohibits forced labour: “No person shall be held in slavery or servitude. No person shall be required to perform forced or compulsory labour”.  

Cyprus has also ratified the European Convention of Human Rights (ECHR) in 1962 with The European Convention for the Protection of Human rights (Ratifying) Law (L. 39/62) which incorporates the ECHR into Cypriot national law. 

Although it is well established that the ECHR cannot deal with complaints by employees against private companies, Cyprus’ Constitution provides for the possibility of bringing an action for damages against a company or firm for the violation of any of the human rights protected under Part II of the Constitution. 

Moreover, Cyprus’ Criminal Code criminalizes forced labour in section 254, which reads: “Any person who unlawfully compels any person to labour against the will of that person is guilty of a misdemeanour, and liable to imprisonment for one year”. Liability under this section may be imposed on companies or firms based on the well-known common law principles for establishing corporate criminal liability. 

Cyprus has also ratified several Fundamental Human Rights Conventions of the International Labour organization, and amongst them are those which cover the areas of the Elimination of Forced and Compulsory Labour. Finally, Article 8 of the Law on the Prevention, Fighting against Trafficking in and Exploitation of Human Beings and Protection of Victims (Law L. 60(I)/2014) also makes forced work or services a prohibited form of labour exploitation.