Are You Now Required to Report Non-Financial Information?
“Non-Financial Information” is often used as an accounting term to refer to metrics that gauge an organization’s environmental, social and governance (ESG) performance.
“Pre-Financial Information” is an alternative term used to emphasize the direct correlation between a business’s ESG performance and its subsequent financial health.
Occupational health and safety statistics, the diversity of employees, and water consumption are a few popular metrics an organization might report in its disclosure of ESG performance.
Non-Financial Information may be buried in a periodic financial report like a 10-K, but often, key metrics are disclosed in a standalone Sustainability Report.
You may be one of the thousands of companies that voluntarily publishes your Non-Financial Information in a consolidated Sustainability Report, motivated by the many internal and external benefits of making your ESG performance transparent.
Or, maybe, you don’t publish a Sustainability Report and, instead, your reporting is limited to certain regulatory drivers that compel you to report very specific, Non-Financial Information such as:
- air emissions to the EPA to comply with the Clean Air Act
- quality and quantity of your waste water effluent to comply with the Clean Water Act
- your Climate Change Risks to comply with the SEC’s “Regulation S-K”
By not adopting broader sustainability management and reporting practices, you will miss out on the opportunity to continually improve efficiencies, increase profits, reduce risk and increase marketability... but at least you are in compliance, right? Well, maybe not.
You might be surprised to learn that in October of 2014, the European Parliament and the Council of the European Union enacted Directive 2014/95/EU to require the disclosure of non-financial and diversity information by approximately 6000 companies operating in any of the EU’s 28 member states. Is your company one of them?
The reporting required by the European Union’s Directive on Non-Financial Reporting includes:
- environmental, social, employee, human rights, anti-corruption, and bribery matters
- description of business model
- outcomes and risks of the policies on the above matters
- the diversity policy applied for management and supervisory bodies
It is expected that the first reports will be published in 2018 covering financial year 2017-2018. Failure to comply will result in fines.
“My company is required to comply with Directive 2014/94/EU. How should we make these disclosures?”
The Directive recommends that companies use internationally recognized frameworks and standards to prepare and publish their disclosures. Each member state was allowed to adopt legislation implementing Directive 2014/95/EU so applicability and reporting requirements vary.
KERAMIDA’s Sustainability Services group can help you evaluate the implications of Directive 2014/95/EU on your company. We can help you determine applicability and identify the reporting requirements. Our GRI certified sustainability reporting courses can also train you to use the internationally recognized GRI Standards as a framework for your reporting. And, even if Directive 2014/95/EU does not apply to you, KERAMIDA can help you strategically consider and address the risks and opportunities that may emerge if it applies to your competitors or customers.