The future of corporate reporting is sustainable business performance management
The future of corporate reporting is Sustainable Business Performance Management. Today, this seems to be true more than ever. Non-financial disclosure is a marketplace expectation for any company reporting information to stakeholders. It is more crucial than ever to give stakeholder a throughout picture of your organisations performance. Integrating non-financials to Corporate Performance Management can do that. Non-financials can provide a more reliable indication of future prospects than pure numbers can. They are less volatile than balance sheet figures and hold clues to the value drivers that sustain stakeholder loyalty. They also offer insurance against risks through performance monitoring and can portray the corporate personality — the ‘DNA’ of a company — that can make a company stand out in a competitive marketplace.
Recent regulatory developments in mandatory reporting also suggest that the value of non-financials is becoming visible. Based on revisions of the EU directives on non-financial reporting, several non-financial disclosure requirements have been established for European companies. Many of these changes date back to the implementation of so called EU Accounts Modernisation Directive (2003/51/EC). One of the objectives of the modernisation directive was to broaden the scope of the Review of the Board of Directors (BoD) from pure financial information to corporate responsibility covering economic, environmental and social issues and performance indicators.
For example in Sweden corporations with state ownership, are required to report their sustainability issues on a yearly basis. In Denmark the same requirement applies to more than 1000 corporation. In Finland we don’t have this tight reporting regulation yet, but we do have more pressure for the companies to report about their sustainability and non-financial issues. In Finland, the way this has been managed, is the change in the Accounting Act, which today requires certain environmental, and human resources information and indicators to be disclosed as a part of the Review of BoD. This development brings corporate responsibility directly to the board level processes and corporate responsibility information under the scrutiny of financial auditing. At the same time, metrics will continue to evolve, with environmental, social and economic indicators moving steadily toward a set of generally accepted standards applicable to all companies. Since there is clear legislative pressure for reporting you non-financials, why wouldn’t you do it properly? Why not use this data to improve your sustainable business performance management?
The future of corporate responsibility reporting is clearly integration, an integration of sustainability or non-financial issues to the corporate reporting processes and business performance management. As a result, the need for proper tools to manage data integrity has significantly increased.
We here at 2future have been developing our sustainability performance management tools from 1999 and during the past 24 months we have witnessed a clear change in the market environment. This change is twofold; first of all the demand for such tools has increased significantly and secondly the actual performance metrics and analysing capabilities of “sustainability as a business value” have clearly gained more importance. Those days of doing sustainability reporting for the sake of, yes, sustainability reporting are over. At least for the leading organisations. I would like to argue, that if you look at our sustainability software clients my rough estimate is, that only 30 to 50% of the information analysed within our sustainable business performance tools, actually get published. And this number is decreasing. It is sustainable business performance that matters.