Non-financial reporting, also known as sustainability reporting, is the way a company or organization publishes information about environmental, social and economic impact and performance related to its current activities. Also, a non-financial and sustainability report presents the company’s/organization’s values as well as the business model while demonstrating the link between its strategy and its commitment to a sustainable local but also global economy.
In Romania, the implementation of this non-financial and sustainability report is regulated by MPF Order no. 1938/2016 which transposes the EU Directive 95/2014 and MPF no. 3456/2018. Thus, starting with 2018, public interest entities that exceed an average of 500 employees are required by default to prepare such a report for the previous financial year.
The legal requirement to prepare a non-financial report does not limit the non-financial and sustainability reporting only to a certain type of organizations. The non-financial report brings benefits both in the short and long term for any company/organization, regardless of whether it has 100 employees or 2000. In the same time, for relevant entities non-financial and sustainability reporting should not be perceived as a new burden of legal compliance but as a tool that facilitates the development of a responsible business model.
Indeed the non-financial and sustainability reporting implies also a series of challenges but these can be transformed into opportunities that will contribute to integrating sustainability concepts within business practices and strategies of the companies/organizations that will choose to prepare such a document.
An efficient non-financial and sustainability reporting process will bring benefits for the reporting company/organization as well as in its external sphere. Without being an exhaustive list, we mention below the benefits of non-financial reporting, based on the classification done by Global Reporting Initiative, the international organization that developed GRI Standards, the most used sustainability reporting framework:
- Monitoring and assessing sustainability performance as well as identifying areas that need improvement.
- A better understanding of the impact, risks and opportunities that will contribute to optimizing processes, cost reduction, improving efficiency as well as to structuring the management strategy and policy.
- Emphasizing the link between financial and non-financial performance so that business plans can be prioritized on a long term.
- Comparing performance internally but also between organizations and activity sectors.
- Employee motivation due to the company’s good performance and reputation.
- Avoiding being involved in public scandals due to environmental, social damages or governance failures.
- Improving reputation and brand trustworthiness, noticeable especially after the first reports, however this benefit is very dependent on the balance and honesty of reporting.
- Enhancing competiveness and attracting new sources of capital because potential investors have access to more relevant information than the legally required one.
- Easy access to information on environmental, employees, human rights aspects or the anti-corruption measures for internal stakeholders as well as for external stakeholders (customers, suppliers, investors, local community, civil society, etc.).
- Increasing company’s visibility in the community and on its social responsibility initiatives.
Therefore, for companies operating in sectors of activity known to be polluting it is important to show transparency related to their ongoing efforts and investments to mitigate their environmental impact. In a similar way, a company that had the reputation affected will use the non-financial or sustainability report to communicate those relevant economic, social and environmental aspects so that society gains back the trust in brand. At the same time, a company at the beginning of the business will decide to report its sustainability performance to improve their visibility on the market, to grow their clients portfolio and to consolidate their relationship with communities.