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The next steps in non-financial information reporting
The next steps in non-financial information reporting
Research into the decrees on non-financial information and diversity in the Netherlands in 2018 and 2017
Corporate reporting on sustainability, including social and environmental factors, with a view to identifying sustainability risks and increasing investor and consumer trust is becoming increasingly relevant. The disclosure of non-financial information is vital for managing change in the transition towards a sustainable global economy by combining long-term profitability with social justice and environmental protection. In this context, disclosure of non-financial information helps the company to measure, monitor and manage its performance and its impact on society.
In this research we have analyzed to what extent improvements are noticeable in 2018 annual reports compared with those from 2017 for a selected group of 44 Dutch companies that fall within the scope of the decrees. Our research demonstrates that companies have improved their reporting on non-financial information since the implementation of the decrees. In addition, we learned that because these decrees are highly principle based (a directive rather than a framework) companies may present non-financial information in a limited and fairly unbalanced manner.
Based on our research we define these five lessons
- A stakeholder analysis and non-financial materiality assessment in the annual report improves understanding of how non-financial topics are selected and defined.
- Explaining why certain non-financial topics are not applicable or material is required by the NFI decree.
- Integrating the non-financial risks into the existing risk management framework and defining risks in terms of how companies’ business impacts society and vice versa improves NFI reporting.
- Defining (SMART) KPIs for all the required topics or disclosing why a KPI has not been defined, is an NFI requirement.
- Expanding the diversity disclosures both in terms of the definition and to include the greater organization (and not just management level) improves the reporting on a company’s diversity policy.
We believe one of the biggest challenges in non-financial reporting in the upcoming years will be in the shift away from that companies seeing the decrees as a minimum standard for NFI-reporting they need to comply, and seeing this as an opportunity to communicate transparently to stakeholders about the company’s vision on their long term value creation in a balanced way.
Who do we work for?
The experienced and multidisciplinary KPMG team in the field of non-financial reporting works for large organizations that want to exploit the possibilities of reporting and are looking to create value from there. We work for example for organizations in the financial sector, manufacturing industry, to government organizations and web shops.
Do you want to know what KPMG can do for you in the area of non-financial reporting? Do not hesitate to contact Danielle Landesz Campen, partner sustainability.
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