As one of our services we offer sustainability reporting for companies based on the latest standards of the Global Reporting Initiative (GRI). Sustainability reporting is becoming mandatory for all large companies within the EU starting with the 2017 annual report.
This article summarizes the most important facts you need to know about non-financial reporting, as well as showing where national law requires action and why you should start reporting now if you haven’t done so yet.
We also invite you to contact us if you need support with the set-up of your sustainability reporting or if you wish to further advance your existing reporting scheme.
One outcome of the 2012 United Nations Conference on Sustainable Development (Rio + 20) was the document “The Future We Want” which recognizes the importance of corporate sustainability reporting and encourages attempts to consider integrating sustainability information into the reporting cycle. The goal is to develop models for best practice together with industries, interested governments and the relevant stakeholders, and to facilitate action for the integration of financial and non-financial information.
Based on the outcome of the UNCSD, the European Parliament and EU member states adopted the CSR directive 2014/95/EU about the extended reporting of large companies and groups in 2014. This affects all undertakings which are public-interest entities with an average of over 500 employees during a financial year. Hence, non-financial information should be provided in order to increase transparency regarding the social and environmental aspects of companies within the EU, starting with the 2017 fiscal year. Non-financial information is generally considered to be environmental, social and governance related. This information can be disclosed in the form of a statement in annual reports, a separate corporate governance statement, a separate report, a website etc.
Which information should be provided?
A non-financial statement should contain information that is necessary in order to understand an undertaking’s development, performance and position, as well as the impact of its activities that are related to environmental, social and personnel matters, respect for human rights, and anti-corruption and bribery issues.
Therefore, it is necessary to include the following information:
- a brief description of the undertaking’s business model;
- a description of the policies pursued by the undertaking in relation to these matters, including the due diligence processes implemented;
- the outcomes of these policies;
- the principal risks related to any issues that are linked to the undertaking’s operations including, where relevant and proportionate, its business relationships, products or services which are likely to have an adverse impact on these areas, and how the undertaking manages these risks;
- non-financial key performance indicators that are relevant to the business in question.
Where an undertaking does not pursue policies in relation to one or more of these matters, the non-financial statement should provide a clear and logical explanation for not doing so.
Depending on your industry, you might cover different topics in your non-financial statement. For example, you might report on environment-related issues such as product innovation, climate action, wastewater treatment, energy efficiency, recycling, responsible consumption and production. Social issues might include safety, good health, personal development, gender equality, diversity, respect and acceptance of human rights. With regard to anti-corruption issues, you might establish a transparent and efficient corporate governance that contributes to society and focusses on business ethics.
No matter if you are completely new to sustainability reporting and need a holistic approach or if you wish to build out and develop your current reporting and require support for a specific topic – Leadership & Sustainability will assist and advise you either way!
Why should you start reporting even if it is not obligatory in your country yet?
Against the background of European and global developments, Corporate Social Responsibility (CSR) has gained increasing prominence in the public’s perception of companies. Socially responsible companies send a signal to their stakeholders, especially to their workers, shareholders and investors, but also to consumers, public authorities and non-governmental organizations such as environmental and conservation organizations, consumer organizations and Third World Initiatives.
Companies which communicate clearly that they do more than the bare minimum required by law will find that their voluntary commitment is a future investment which ultimately helps them to increase their profitability.
Moreover, taking care of social and environmental issues helps to identify risks at an early stage and supports you in preventing those risks. Not only will this enhance the goodwill of your stakeholders, it will also increase your future profits.
So, even if your company is not legally obligated to do sustainability reporting, you might gain new customers, and therefore more profits, by setting up your non-financial reporting anyway. Leadership & Sustainability offers one-to-one consulting, identifying any benefits and supporting the creation of your sustainability report. Please get in touch with us for further information!
Global Reporting Initiative (GRI) Framework
The most common and internationally approved reporting method is the Global Reporting Initiative (GRI), which has published standards for sustainability reporting. The standards are designed to be used by organizations in order to report on their impact on the economy, the environment and society, regardless of their size, sector or location.
As shown in the Figure below, the GRI Standards are divided into Universal Standards and Topic-specific Standards.
Figure 1 – Overview of the set of GRI Standards
The universal standards apply to every organization preparing a sustainability report. Afterwards, a company will select from the set of topic-specific GRI Standards to report on its material topics, which might be economic, environmental and/or social.
The table below shows the main aspects of the topic-specific standards. All the standards include disclosures on that topic and are also designed to report on its management.
Table 1 – Categories and Aspects in the Guidelines
There are two options you can follow to prepare your sustainability report in accordance with the GRI Guidelines. The core option contains the essential elements of the sustainability report. This means it provides the background against which you communicate the impact of your economic, environmental, social and governance performance.
The comprehensive option requires additional standards disclosures of your strategy and analysis, governance, ethics and integrity. In addition, you would need to communicate your performance more extensively by reporting all indicators related to your identified material aspects.
Leadership & Sustainability assists you with identifying your material aspects and build or adapt your sustainability report to either the core or the comprehensive option!
Let us help you to set up and execute your sustainability reporting for the future in order to either meet your national requirements and/or prepare your company for the future. Get in touch with us today for a free 30-minute appointment and receive more information about what we can do for you! We can also support you with materiality assessments, strategy projects and much more.
Read more about how we have supported other clients!