Wednesday February 5th, 2020 ARCO LAB

Non-financial reporting why bother? Because it matters!

non financial reporting matters for profit an non profit companies arco social economy research that males the difference

Nowadays companies are more and more under the spotlight as for the impact they generate affecting communities and their territories. We are assisting to a growing demand for greater transparency regarding non-financial reporting coming from civil society, regulatory bodies, socially responsible investors, international organizations and also from national and international legislations (such as the groundbreaking EU Directive on the disclosure of non-financial and diversity information – Directive 2014/95/EU). In other words, stakeholders are calling for a transparent disclosure of information concerning the so-called ESG – environment, social, governance – issues within and related to business management.

As for the business world, it is fundamental to promptly respond to this growing call because the companies’ success will soon be more and more dependent on their capacity to generate value, to limit the use of resources and energy consumption, to avoid negative impacts – such as carbon emissions- and maximizing positive effects – i.e. job creation, high quality and sustainable products and services. It is not only a matter of a company’s better market competitiveness, but of businesses’ responsibility, as it is more and more perceived nowadays.

Therefore, for those companies wishing to keep up with their clients and stakeholders’ growing demands and preferences, and willing to fully comply with the new regulations, it’s time to pull up their sleeves and delve into the non-financial reporting world. 

Identifying, measuring and reporting social, economic and environmental impact is equally important for private companies, non profit, third sector and public organizations!

Non-financial reporting: here is what you need to know

The term “non-financial reporting” refers to the reporting tools which organizations disclose to provide information on those non-financial aspects which are not considered in the traditional financial statements. Nevertheless, they have a significant relevance for the running of the organization itself and for the impacts it generates on the communities and their territories. For this reason, non-financial reporting tools allow stakeholders to get a much wider picture of organizations than from the traditional financial reports.

More specifically, a non-financial report informs on the environmental, economic, and social impacts generated by an organization or a company’s everyday activities. It also presents the organization’s values and governance model and demonstrates its sustainability strategy.

Non-financial reporting tools find a variety of synonymous terms such as sustainability reporting, triple bottom line reporting, corporate social responsibility (CSR) reporting, and more.

Why is sustainability reporting useful?

Sustainability reporting unfolds many advantages: we can point out to both “internal” and “external” positive returns, respectively:

Sustainability reporting allows private companies, public and third-sector organizations, to affirm their mission and pursued values, to acknowledge and measure their economic, environmental, social and governance performance and improvement, and, accordingly, to set goals and develop strategies in order to make the management of the organization more sustainable and efficient, and to manage change more effectively.

  Sustainability reporting is expressly “outside-oriented”, therefore aimed at systematically sharing information about the exchange relationships between companies/organizations and their stakeholders. In other words, it is the key platform for communicating sustainability performance and impacts.

The call for a greater transparency and accounting for stakeholders’ expectations and requests inevitably improves the communication channel. This holds even more true especially if stakeholders are directly engaged in the sustainability reporting practice. In this way, they help the organizations to understand the right way to be effectively responsible. In response, a greater accountability, reputation and stakeholders’ trust is to be expected.

For this reason, ARCO’s approach envisages stakeholder engagement and participatory methods in order to carry out a sound sustainability reporting practice in productive synergy with the organization’s key stakeholders.

How to draft a sustainability report?

In recent years we have assisted to a skyrocketing proliferation in worldwide sustainability reporting compulsory or non-obligatory requirements. This worldwide trend has been parallelly followed by an increase of non-financial reporting international and national models, standards and guidelines.

Sustainability reporting standards are, indeed, useful as they can support reporting practices not only in terms of increased comparability, but also in reducing selective disclosure and the risk of misleading information. Moreover, standards help creating a common, shared knowledge base about organizations, their activities, and their system of relationships. Standards are also useful for organizations themselves, in order to guide them in the reporting practice, even though, ultimately, social and environmental reporting is organization-specific.

In this respect, the GRI Standards are among the most used reference in sustainability reporting, followed by ISO 26000 Guidance on Social Responsibility, Social Accountability 8000 (SA8000®), the OECD Guidelines for Multinational Enterprises, the GRI-United Nations Global Compact Business Reporting on the SDGs, and many more.

However, sustainability reporting is not just a matter of writing down a list of required information and describing activities, even if following a Standard or a Guideline.

Sustainability reporting, in its most broad and profound meaning, implies investigating, analyzing, understanding, and perhaps, rethinking an organization’s functioning, management, strategy and vision, identifying and taking into account its broad impacts on stakeholders and on the environment, and the intended and untended changes it generates.

Don’t know where to start? We have your back.

ARCO will help you step-by-step in the whole process of sustainability reporting and stakeholder engagement. Our approach accounts for your organization’s unique features and activities, and ensures you are complying with the applicable legislations and your chosen reporting standard. Our methodology is intended to guarantee your capacity building and skill improvement in the sustainability reporting practice because we are aware that this is not a standalone practice, but the start of a new routine.

Our approach pursues a three-fold objective: we train and follow you throughout the entire reporting practice, we trigger and accompany your organization’s sound self-analysis process, and, together, we come up with a strong and ready-to-use communicating tool for your organization to disclose and disseminate.

These objectives are coherent with our interpretation of sustainability reporting as not merely a compliance practice, nor simply as a new marketing tool, but also, and more importantly, as a great opportunity for your organization to improve its sustainability, efficiency and effectiveness, both internally and with respect to its outward impact.

For further in formation on Non-Financial Reporting and Sustainabilty Reporting

Social Economy Unit

Carmela NittiCoordinator
carmela.nitti[at]arcolab.org
info[at]arcolab.org

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