Sustainability and non-financial reporting

Sustainability and non-financial reporting
The evolving macroeconomic risk landscape brings us to the need for a new cohesive reporting system, that together with relevant regulation and effective assurance, would ensure reaching the development goals and standards.
According to the Global Reporting Initiative, a Sustainability Report is a document produced by companies that describes all the economic, environmental and social impacts the company creates with its activity to the geographic area where the company operates.
The purpose of the report is to demonstrate the link between the business strategy, values, and sustainability commitment.
It is important to note that sustainability reporting can be an advanced step from non-financial reporting and an initial step to integrated reporting. Creation of one of these reporting systems aims at reorganizing the information collection process and communication strategies.

Along the last decade, regulators have introduced a series of new reporting obligations to increase the transparency of companies' behaviours. Sustainability is becoming a new reality, and reporting non-financial impact gets more attention and importance. The global trend is that governments, and that of EU in specific, regard digitalization and sustainability course as the pillars for the further socio-economic development of countries.

“The (Next Generation EU) recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe's moment.”
Ursula von der Leyen, President EU Commission
Which companies should provide Sustainability Report?
Obligatory for:
Large companies affected by the EU Non-Financial Reporting Directive
(over 500 employees), covering listed companies, banks, insurance companies and other companies designated by national authorities as public-interest entities;
Small and medium-size enterprises (SMEs) belonging to the supply chain of a large company affected by the EU NFR Directive;
SMEs planning to tap capital markets;
SMEs that aspire to access valuable supply chain.

Optional for the companies that want to:
• Challenge the culture of short-termism and introduce long-term vision and value creation;
• Respond to new risks: climatic, economic, societal.
Why to consider sustainability and non-financial reporting:
Sustainable development and long-term thinking
for major stability and resilience
Creating a balanced system based on values
considering social, economic and environmental factors
Strengthening of brand image

becoming responsible corporate citizens
Innovate and evolve, managing key risks
Keeping up to the new requirements of the market
Why to consider sustainability and non-financial reporting:
Sustainable development and long-term thinking
for major stability and resilience
Creating a balanced system based on values
considering social, economic and environmental factors
Strengthening of brand image

becoming responsible corporate citizens
Innovate and evolve, managing key risks
Keeping up to the new requirements of the market
The process for sustainability reporting is similar to all performance-based business management processes. It involves the same steps, including goal setting, measurement, analysis, and action, but differs in the type of information collected. Information technology is a major consideration in sustainability reporting. Businesses should be prepared to effectively manage the large amount of information related to sustainability and need to have information systems that can help to integrate sustainability information into their existing corporate reporting systems.

We follow five steps in the Sustainability Reporting:

1

Definition of performance goals and assessment

Activities to be performed by SSC:
Definition of the Sustainability Goals of the company, based on the Materiality Principle (focus on the areas of higher economic, environmental and social impact)
Development of the Sustainable Performance Indicators (SPIs) that will be used to measure progress towards the goals.
Goal and SPI selection can become overwhelming to an organization given the wide reach of sustainability reporting. Our aim is to help your company with prioritization, goal establishment and monitoring.
Company’s involvement:
Sharing of the existing information and data
Setting of the sustainability goals
Deliverable:
Impact analysis report, identification of achievable goals and prioritization
2

Identification of available information flows

Activities to be performed by SSC:
In all companies a number of information are already collected although sometimes partially or in an unappropriated format. Analyzing what the company already produce and design it to serve the reporting scope is the first task to perform followed by a gap analysis to complete the system in order to achieve the goals set.
Company’s involvement:
The company should provide for the data to be collected systematically, validated for accuracy, and stored. In this phase it is important to ensure that data is being collected correctly, including establishing quality control over its accuracy.
Deliverable:
Identification of information flows and process already existing within the company, gap analysis vis a vis targeted goals
3

Integration of the missing information flows

Activities to be performed by SSC:
Conversion of raw data into useful performance information, including:
odata compilation (organizing, synthesizing, and aggregating data)
odata analysis (in order to provide useful insights by converting data facts into useful knowledge)
Company’s involvement:
Change in process and information flow, ICT support to create the information system needed to create a permanent reporting tool
Deliverable:
New management information system
4

Identification and elaboration of the strategic implications

Activities to be performed by SSC:
Develop the elaboration of all information in order to create a strategic plan to be adopted by the company to management and board.
Company’s involvement:
Involvement of management of the company that should be prepared to react to sustainability performance with all the basic management functions: planning, organizing, controlling, and leading. Management plays a decisive role in defining goals and establishing SPIs which allows a company to continually improve its sustainability performance.
Deliverable:
An action plan for the management of the company.
5

Reporting and communication with external stakeholders

Activities to be performed by SSC:
Preparation of the Sustainability Report which will include an assessment of environmental and social risks as well as an analysis of past sustainability performance and an outlook for the future. The report will be prepared using one of the standardized reporting frameworks, such as the Global Reporting Initiative (GRI), or other.
Company’s involvement:
Define the target and channels in which to route the new sustainability report and information related to the company environmental and social impacts.
Deliverable:
Sustainability Report and dissemination of information to stakeholders in a form they can understand and learn how a company is performing in relation to its sustainability efforts.

As an outcome, sustainability and non-financial reporting helps to ensure that:



• Capital allocation and corporate behaviour are aligned to the wider goals of financial stability and sustainable development;

• New metrics are based on a new way of accounting and a new representation of corporate value through the cycle of integrated reporting and thinking;

• Corporate accounting is directly linked to Environmental Social Governance (ESG) and UN Sustainable Development Goals (SDG).

Benefits of sustainability and non-financial reporting
-1-
Introducing a competitive advantage
Sustainability reporting can contribute to a stronger bargaining position for entering new markets, attracting investment and negotiating contracts.
-2-
Building
trust

Transparency about non-financial activities can become an opportunity to demonstrate leadership, accountability and commitment by conducting an open dialogue with customers, communities, investors.

-3-
Improving processes & strategy
Measurement and reevaluation of decision-making and management processes can open up new ways of cost reduction. Such issues as materials use, waste and energy consumption can be optimized and innovated.

-4-
Reducing compliance costs

Measuring non-financial performance can help companies to meet regulatory requirements, avoid costly breaches, gather necessary data in a more cost-effective way and to reduce reputational risks.
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Discover other services that we offer