ALTHOUGH MANY BIG COMPANIES ARE NOW OBLIGED TO PUBLICLY REPORT ON THEIR NON-FINANCIAL DATA, STILL 70% OF THEM DO NOT KNOW THE CZECH LEGISLATION LINKED TO IT. HOWEVER, COMPANIES DO REALIZE THAT IT IS IMPORTANT TO INFORM THEIR STAKEHOLDERS ABOUT THEIR ACTIVITIES IN THE SOCIAL AND ENVIRONMENTAL AREAS.
Why should companies pay attention to non-financial reporting?
It has been over a year that companies based on their size, turnover and tradability on the stock exchange have to take into account non-financial information about their social and environmental situation, human rights and corruption risks in their annual reports. This obligation stems from the European Directive No. 2014/95 / EU.
Prague-based CSR agency Flagship, which is the data partner of international organization Global Reporting Initiative, undertook a research about non-financial reporting in the Czech Republic in March 2018. The research was based on 50 middle and large companies with residence in this country and that are active in corporate social responsibility and its reporting.
Non-financial reports have positive feedback
“There is still a big amount of companies that have gaps in non-financial reporting and the whole area of CSR in the Czech Republic. 70% of companies don’t know the legislation related to it and if they do, they have just basic knowledge. On the other hand, it is great that non-financial reporting is perceived positively. Only 17% of companies think that it is just a current trend,” says Sandra Feltham, director of Flagship, which is the only agency in the Czech Republic specialized in sustainable business and non-financial reporting.
Advantages of reporting
Almost 96% of companies rightly know that non-financial reports should include results of CSR strategies. Thanks to this, companies can be perceived as transparent and have an ethical dimension. This kind of information is important for stakeholders, mainly for shareholders, investors, and employees and finally for communities and the society as a whole.
Other advantages are:
- Positive impact on PR
- Brand reinforcement
- Good name of company
Company credibility and investor interests are also increasing, as well as interest of job applicants and employee loyalty. Through reporting companies can work with their CSR strategically and have their internal matters in order. This helps to standardize company processes.
By issuinga non-financial report the company should be forced to change its process management according to the impact it has on its surroundings. This will probably include investing into processes and innovations that will improve production and offer more quality products or services. Stakeholders will appreciate this, so the investment will be profitable.
Motivation for publication of non-financial reports
The biggest motivation is legislation, company reputation and PR. Often companies say that they are feeling under pressure from their external head office, clients, investors, and local competition – good quality reporting of CSR strategy can be a competitive advantage.
It is also interesting that pressure from customers does not have a big effect on publishing non-financial reports. On the other hand, the generation of millennials can be motivating because these people are usually more interested in CSR. Moreover, CSR can be one of the aspects in decision-making when investing in company shares or buying their products and services. This behaviour is not a pressure; it is a natural need development of customers, investors and employees.
A GOOD NON-FINANCIAL REPORT SHOULD INCLUDE BOTH POSITIVE AND NEGATIVE IMPACTS ON THE SURROUNDINGS WHERE THE COMPANY IS BASED, THE COMPANY’S ENVIRONMENTAL AND SOCIAL DATA, AND, LAST BUT NOT LEAST,
THE COMPANY'S RELATIONSHIP TO SUSTAINABLE DEVELOPMENT. EACH REPORT SHOULD ALSO INCLUDE THE RESULT OF CSR STRATEGY INCLUDING VISIONS, GOALS AND VALUES. STAKEHOLDERS SHOULD PARTICIPATE IN REPORTING TOO.
Risks of false information
Of course all information must be true and verifiable. Eighty percent of companies are aware of the serious risks associated with misrepresentation in non-financial reporting.
Companies also realize that false information may reduce their credibility, damage their name, reputation and losethe trust of stakeholders (mainly the public and business partners). They are also aware of risks in the form of sanctions. They perceive false information as a legislative misconduct and a breach of legal obligations.
In conclusion, over 80% of companies claim that non-financial reports should be linked to annual reports. Thanks to this interdependence, it would be possible to track the impact of CSR strategy on the company.