EINF Sustainability Report: Obligation or Opportunity?

It has rained a lot since the publication of Law 11/2018 of Non-Financial Information Statements (EINFF). In less than four years, we have gone from haste, uncertainty and ignorance to planning and analyzing what companies want to tell in these non-financial reports.

All of us who have faced for the first time the development of a EINF we have experienced that feeling of having to perform a complex and practically incomprehensible exercise.

There are many areas of the company that are involved and the information to be submitted is not always available in our systems in the form in which it is required.

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What is an EINF and how can we plan it?

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When preparing an EINF (Non-Financial Information Statement) or what is also known as a sustainability report, there are certain considerations to keep in mind that can help us make this exercise much easier for us:

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1. Plan a calendar in advance

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It is important to know the time spent internally by the different departments of an EINF that have to provide the information that should appear in the report, distinguishing between quantitative and qualitative information.

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2. Identify sustainability indicators

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Los indicators which allow us to monitor and support legal requirements, must be adapted to the company's reality and their reporting must be accessible to the teams in charge in accordance with the means at their disposal. That is why it is very important to carry out this identification well in advance and thus ensure that the information can be in time and form for the signing of the report.

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3. Assign managers

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In addition to the person who coordinates the collection of information and drafting of the report, each indicator must be assigned a responsible person, who will know its content in advance and the deadlines for responding. It is also necessary to assign chapter or topic managers, experts in the field who can validate the contents to be presented in the report, as well as its drafting.

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4. Define the structure

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The structure of the document can be made in several ways, either in accordance with the sections of the Law, or based on the most relevant issues resulting from the materiality analysis of the company. Los material matters They tell us the aspects that may influence business development or that are considered to be of high priority by our stakeholders. Therefore, we must focus on these aspects when structuring our report.

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5. “Nice” wording

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We must try not to fall into repetitions and overly technical terms. A report that is too extensive does not mean that it is of better quality or that the company has a higher degree of development in sustainability. It is important for the reader to find the information relevant to them in a clear and simple way, answering their concerns and valuing the company's work throughout the year.

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6. Intermediate reviews

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It is highly advisable to plan the execution of the report with sufficient time to allow for at least two rounds of content and form review, once it has been verified by the person responsible that the report complies with legal requirements. In this way, we will ensure that the opinion of those most responsible is taken into account and that the version that reaches the board for signature is validated by all of them.

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7. Sustainability is not a specific topic

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La sustainability In a company it is not a topic to deal with when the reporting period begins. It is something that is part of the management model of a business. Let's not forget that we are preparing an annual report, so it should reflect a company's activity on environmental, social and governance issues throughout the year.

It is important for a person within the organization to collect those actions, plans and initiatives put in place so that, when starting to prepare the report, we know in advance what novel content we have and how to obtain the relevant information.

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Legislative news for 2022

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Since Law 11/2018 was published, the European Commission has continued to make progress in the implementation of European Green Deal And the Sustainable Finance Action Plan, which has involved modifications or extensions with respect to the information that companies must include in their reports and to those who apply these new regulations.

If in 2021, Law 11/2018 was also extended to companies with more than 250 employees (originally it applied to companies with more than 500), this 2022 year means for companies with more than 500 employees have to report on the eligibility and alignment of their activities with European Taxonomy.

Taxonomy is a list of activities considered sustainable by the European Commission. These activities have been defined for the climate change objectives that the EU has established as priorities (mitigation and adaptation to climate change) and it is expected that by the end of the year the taxonomy relating to the remaining four environmental objectives (sustainable use of water and marine resources, circular economy, pollution prevention and ecosystem health) will be available.

The Taxonomy Report will pose a new challenge for companies since the requirements are complex, as well as the way in which the financial indicators associated with the activities must be reported. In addition, the definitions still present many doubts as to their interpretation, so this first exercise will not be simple.

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More changes on the horizon for sustainability reports EINF

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Regulatory changes don't end Taxonomy. Also part of the Sustainable Finance Action Plan, the Commission is preparing a new directive on sustainability reporting (Corporate Sustainability Reporting Directive, CSRD) which will be released in October and will replace Law 11/2018 in Spain.

This directive will expand the information that companies must include in their sustainability reports, focusing on environmental issues, the defense of human rights, the supply chain, governance and social issues.

This directive It will take effect on January 1, 2024 for companies to which the Non-Financial Reporting Directive already applies and will be progressively extended to other companies, even those with headquarters outside the European Union in certain cases.

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The EINF, obligation or opportunity?

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These years of internal analysis of sustainability by companies and external reporting of their non-financial activity have made it possible to generate greater awareness of the important role that companies play in mitigating and adapting to climate change, the fight against social injustices and good corporate governance.

All of this regulation is representing a transformation of How is sustainability integrated into business activity. Companies should take advantage of the preparation of Non-Financial Reports (soon on sustainability) to establish mechanisms that allow them to identify and collect information related to sustainability, manage environmental, social and governance (ESG) risks, develop policies and establish measurement and monitoring objectives.

What emerged as a legal requirement is giving way to a great opportunity. Many companies, not just large IBEX corporations, are already seeing the benefits of preparing sustainability reports.

These reports make it possible to organize the activity related to ESG aspects and lay the basis for continuous improvement. In addition, they promote reflection about the strategy and direction that companies are taking in the field of sustainability and requires them to be more rigorous when it comes to managing environmental, social and governance aspects.