Most of us are facing problems such as climate change, air pollution, biodiversity loss, and to some extent the current pandemic, and are beginning to see the importance of our activities and the impacts they can cause. Given the importance of the economy and industrial development, in December 2014 the European Parliament adopted the Directive (No. 2014/95 / EU) on non-financial reporting. This directive obliges all companies, ie public interest entities that have more than 500 employees to publish this non-financial report, which, above all, contains information on environmental issues, care for employees, respect for human rights, and the fight against corruption.
Serbia has implemented this directive in domestic legislation under the new Accounting Law. This law obliges all companies that have over 500 employees and operate in Serbia to publish non-financial reports for the previous year, ie 2020, in 2021. In addition to comprehensively considering all possible impacts on the natural and social environment, non-financial reporting (or as it is also called sustainability reporting or corporate responsibility reporting) brings with it many other benefits.
Thus, for example, a company’s transparency regarding the environmental, economic, and social impact of its business activities is key to creating the belief among others that the company is seriously considering sustainability. Of course, this can, or more often, affects the reputation and increases the company’s credibility in the business community or the general public. The fact that such reports can indicate to the company itself where it can achieve savings in case it applies the principles of sustainability shows that this is not an additional administrative charge that also has a financial cost. Also, in light of the increased awareness and concern for our environment that exists among employees, these reports can be used to internally inform employees about the measures their company is taking to achieve sustainability.
This helps to create loyalty and greater engagement of employees because they know that their company takes care of the general well-being, so they are aware that their individual efforts as employees help in the overall goal. This is supported by research (consultants EY and the University of Boston, 2013) that more than 30% of companies that reported on sustainability detected increased employee loyalty precisely as a result of publishing the report.
Reporting is a repetitive process that helps us learn through work. Thus, not all sustainability measures are equally effective. Reporting can help identify which measures are effective and which are not. Last but not least, credible public reporting increases the confidence of stakeholders and investors. According to KPMG’s 2017 report, The Road Ahead, which deals with corporate responsibility reporting, 60% of the world’s nearly 5,000 largest companies include corporate responsibility data in their annual financial statements. This suggests that investors expect this information to be available. This is not surprising considering that investments that take into account environmental issues, social policy, and management are now one in every four dollars invested in the United States, and are worth almost 23 billion dollars globally.
The introduction of a non-financial reporting obligation is also important because it is in line with the SDG Sustainable Development Goals (directly related to sub-objective 12.6.) This says that countries should encourage large and transnational companies to integrate sustainable business practices and include sustainability information in their reporting. On the other hand, as monitoring progress towards sustainability goals around the world becomes more important, it becomes increasingly necessary to refer to SDG goals in non-financial reporting, as these goals reflect the global consensus on the most important issues facing humanity and serve as a compass towards a sustainable future. the current representation of SDG targets in non-financial reporting is shown in the chart below). In Serbia, this type of reporting is just beginning, so we all have the opportunity to influence together what it will look like. A good direction would be to integrate SGD objectives into sustainability reporting.
The original publication in Nedeljnik.
