A lot has happened since the publication of Law 11/2018 on the Non-Financial Information Statements (EINF). In less than four years, we have gone from haste, uncertainty and ignorance to planning and analysis of what companies want to say in these non-financial reports.
All of us who have been confronted for the first time with the elaboration of an EINF We have experienced that feeling of having to carry out a complex and almost unmanageable exercise.
Many areas of the company are involved and the information to be presented is not always available in our systems in the way it is required.
¿What is an NFI and how can we plan it?
When preparing an NFI (Non-Financial Information Statement) or what is also known as a sustainability report, there are certain considerations to take into account that can help us to make this exercise much easier:
1.Plan a calendar in advance
It is important to know the internal timing of the different departments of an NFIA that have to provide the information to be reported, distinguishing between quantitative and qualitative information.
2. Identify sustainability indicators
The indicators that allow us to follow up and support legal requirements, must be adapted to the reality of the company and their reporting must be accessible to the teams in charge according to the means at their disposal. It is therefore very important to carry out this identification sufficiently in advance to ensure that the information can be available in time for the signature of the report.
3. Assign responsible persons
In addition to the person who coordinates the collection of information and drafting of the report, each indicator must have a responsible person assigned to it, who will know its content in advance and the deadlines for responding. It is also necessary to assign people in charge of chapters or themes, experts in the field who can validate the contents to be presented in the report, as well as its drafting.
4. Define the structure
The structure of the document can be done in various ways, either in accordance with the sections of the Act, or based on the most relevant issues resulting from the company's materiality analysis. The material aspects indicate those aspects that can influence the development of the business or that are considered by our stakeholders to be of high priority. We should therefore focus on these aspects when structuring our report.
5. Writing "enjoyable".
Try to avoid repetition and overly technical terms. A report that is too long does not mean that it is of better quality or that the company has a higher degree of development in sustainability. It is important that the reader finds the relevant information in a clear and simple way, responding to their concerns and highlighting the company's work throughout the year.
6. Interim reviews
It is highly advisable to plan the execution of the report with sufficient time to allow for at least two rounds of review of content and form, once the manager has verified that the report complies with legal requirements. In this way, we will ensure that the opinion of the most senior managers is taken into account and that the version that reaches the board for signature is validated by all of them.
7. Sustainability is not a one-off issue
The sustainability in a company is not an issue to be dealt with at the beginning of the reporting period. 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 the environmental, social and governance activity of a company throughout the year.
It is important that someone within the organisation collects these actions, plans and initiatives so that when we start preparing the report, we know in advance what new content we have and how to get the relevant information.
Legislative developments in 2022
Since the publication of Law 11/2018, the European Commission has continued to make progress in the implementation of the European Green Pact and the Sustainable Finance Action PlanThis has implied modifications or extensions to the information that companies must include in their reports and to whom these new rules apply.
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 year 2022 means for companies with more than 250 employees (originally it applied to companies with more than 500), this year 2022 means for companies with more than 250 employees (originally it applied to companies with more than 500). companies with more than 500 employees have to report on the eligibility and alignment of their activities with the European Taxonomy.
The Taxonomy is a list of activities considered sustainable by the European Commission. These activities have been defined for the EU's priority climate change objectives (climate change mitigation and adaptation) and the taxonomy for the remaining four environmental objectives (sustainable use of water and marine resources, circular economy, pollution prevention and ecosystem health) is expected to be available by the end of the year.
The Taxonomy report will pose a new challenge for companies as the requirements are complex, as is the way in which the financial indicators associated with the activities are to be reported.. In addition, the definitions are still very unclear in terms of interpretation, so this first exercise will not be straightforward.
More changes on the horizon for sustainability reporting EINF
Regulatory changes do not end with the Taxonomy. As part of the Sustainable Bail Action Plan, the Commission is preparing a new directive on sustainability reporting. Corporate Sustainability Reporting Directive (CSRD) which will come into force in October and will replace Law 11/2018 in Spain.
This directive will expand the information that companies must include in their sustainability reports, with an emphasis on environmental issues, human rights, supply chain, governance and social issues.
This directive shall enter into force on 1 January 2024. for companies to which the Non-Financial Reporting Directive already applies and will be progressively extended to all other companies, including those based outside the European Union in certain cases.
NFIDCs, obligation or opportunity?
These years of internal analysis of companies' sustainability and external reporting of their non-financial activity have raised awareness of the important role companies play in climate change mitigation and adaptation, the fight against social injustice and good corporate governance.
All this regulation is bringing about a transformation on how sustainability is integrated into business. Companies should take advantage of Non-Financial Reporting (soon to be Sustainability Reporting) to establish mechanisms to identify and collect sustainability-related information, manage environmental, social and governance (ESG) risks, develop policies and set targets for measurement and monitoring.
What started as a legal requirement is giving way to a great opportunity. Many companies, not just the large IBEX corporations, already see the benefits of sustainability reporting.
These reports help to organise ESG-related activity and lay the foundations for continuous improvement. In addition, they encourage reflection on the strategy and direction that companies are taking in the area of sustainability and requires them to be more rigorous in managing environmental, social and governance issues.
