Non-Financial Reporting emerging as a top trend for
companies and their suppliers in 2018
WHAT IS NON-FINANCIAL REPORTING?
Non-financial reporting, or ESG reporting was traditionally thought of as simply publishing a sustainability report. However, increasing stakeholder expectations along with government and industry regulation is increasing the focus on this issue and placing it along with financial reporting on the board room table. For instance, the EU’s Non-Financial Reporting Directive outlines a holistic range of topics, under the headings of ethics, society, diversity and the environment, and mandates companies to report their business impact as part of their annual reporting cycle. Non-financial reporting is expanding from general descriptions of policy approaches, to tracking and reporting of quantifiable metrics on the organization’s approach to material issues over time.
HOW ”NON-FINANCIAL REPORTING” GOES BEYOND A REPORT
Although your organization may already have a sustainability report, it is critical that your organization is also tracking metrics within these topics areas to better to communicate and demonstrate continuous improvement to stakeholders. Not only beneficial from a disclosure perspective, but understanding the true impact of your organization’s policies and programs can have significant risk reduction. Moreover, regulations like the EU’s directive, and stakeholders are beginning to expect or even require such metrics to be evaluated on a regular basis. These expectations can include both the organization’s performance as well as the performance of associated third parties.
In addition to having a holistic standard encompassing the many topics under non-financial reporting, Verego also offers a suite of tools to help organizations identify, prioritize, and monitor metrics around these topics both within their organization and within their supply chain. The figure below shows how the EU’s Directive goes beyond simply reporting requirements and how those requirements are addressed through Verego’s Evaluation Criteria and Services.
WHAT TOPICS ARE CONSIDERED “NON-FINANCIAL”?
As mentioned above, companies are expected to report on a broad range of non-financial topics. While it may be easy to prioritize one or two of these non-financial issues within your organization, the breadth of the issues covered by the EU’s Directive and shared by the expectations of many stakeholders and investors continues to grow. The expectation is that companies will address the issues most relevant and material to their business, requiring organizations to conduct a materiality assessment to identify the relevant topics to feature in non-financial reports.
In addition, companies can benefit significantly from having their data and performance of these material issues validated by third party organizations. Verego’s Social Responsibility Standard (SRS) is one such 3rd party validation, offering one of the most comprehensive approaches to non-financial reporting, combining aspects addressed under frameworks such as the GRI, OSHA, CDP, ISO 27001, and more.
The figure below shows how the five AREAs of the Verego SRS Standard (i.e. Leadership, Ethics, People, Community, & Environment) encompass the primary topics under the EU’s Non-Financial Reporting Directive and other frameworks. Combined with Verego’s materiality process, an organization’s validation to the SRS Standard can be used to identify, verify and report on the key non-financial issues facing an organization.
RECOMMENDED STEPS FOR NON-FINANCIAL REPORTING
As required by the EU’s NFR Directive, the first step many organizations take toward producing a report is to conduct a Materiality Assessment. Materiality Assessments collect internal and external stakeholder feedback to identify and prioritize key topics related to corporate responsibility and non-financial reporting. Once these topics are identified it is important to identify metrics to help track the performance of these issues across your organization and even within your organization’s supply chain. Finally, some organizations look to validate the performance on these topics and seek certification to recognize their organization through reports, badges, or awards.
Verego has developed a suite of tools to help tackle each level of these performance management and reporting requirements, each designed in line with leading best practices and our comprehensive SRS Standard. In addition to our Materiality Assessment, Verego offers an Assurance Program through an online platform to track performance metrics related to corporate responsibility, both across an organization’s global sites and within their supply chains. Finally, our SRS Certification program has validated the social responsibility performance of leading global organizations and aspiring thought leaders within each of Verego’s 5 SRS Standard AREAs. Regardless of an organization’s maturity towards non-financial reporting, Verego can support and recognize your organization’s social responsibility and responsible sourcing goals.
As indicated in the figure above, Verego offers a range of services which can help organizations tackle their need for comprehensive non-financial reporting.
While non-financial reporting can have its own set benefits, such as incorporating social and environmental risks into operational efficiencies, the services from Verego can also provide the following:
- Issue Identification – All Verego services are grounded through our Social Responsibility Standard, which covers a diverse range of topics across all five of the Verego SRS AREAs (Leadership, Ethics, People, Community, & Environment)
- Materiality – While the Materiality Assessment itself can help an organization directly prioritize a range of issues, the Assurance Program and SRS Certification can allow help to identify strengths and gaps for how your organization and your suppliers approach these issues.
- Recognized Framework – Beyond the internationally recognized SRS Standard, the suite of tools are designed to address each level readiness for non-financial reporting as well as across the potential scope of assessment, including a specific site-level up to an entire enterprise.
- Data Collection – One of the most critical components to each of these services is the collection of data from stakeholder engagement through the Materiality Assessment to collection of internal and third party data for performance management through the Assurance Program and Certification.
- Validation and Certification – Although some organizations produce their own sustainability report, the services offered by Verego provide validation that not only the issues being reported are most critical to your operations but validation and certification of your operations and your suppliers operations strengthens this communication to regulators and investors expecting or requiring these non-financial reports.
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