Non-financial reporting has seen many significant developments over the years.
While in the past, companies were free to choose whether they wanted to publish information on those of their activities that affected sustainability, this became a legal requirement on 25 January 2017 – at least for some types of companies, decided based on their size.
With the introduction of Legislative Decree No.254 of 30 December 2016, Italy aligned itself with European Directive 95/2014, which requires companies to publish a non-financial declaration in addition to their financial statement.
Let’s take a look at what non-financial reporting is all about.
What is non-financial reporting?
Non-financial reporting came about to ensure transparency and corporate responsibility in companies’ impact on social and environmental sustainability.
The initial documents designed for non-financial reporting were the Social Report and the Environmental Report.
Over time, though, these two documents have been replaced by what we now know as the Sustainability Report.
According to the definition of the Italian Stock Exchange, the Sustainability Report is “a report produced by a company or a public organization to provide its stakeholders with information on the economic, environmental and social impacts caused by its activities”.
To produce a Sustainability Report, many companies refer to the GRI reporting standards, published by the Global Reporting Initiative.
The need to have a broader picture of companies’ impact on the environment and the community in which they operate has recently caused the Sustainability Report to evolve into something called the Integrated Report.
According to the framework published by the International Integrated Reporting Council (IIRC), an entity comprising regulatory bodies, investors, companies, legislative bodies, accounting professionals and NGOs working to improve corporate reporting, the Integrated Report highlights the way a company generates value in the short, medium and long term through a mix of strategy, governance, performance and prospects. Here too, the criteria used are designed to analyze three types of impacts: environmental, social and governance, known commonly as ESG in the English-speaking world.
Despite the fact that many companies were already using effective non-financial reporting tools, it’s become apparent in recent times that it is necessary to standardize this new form of reporting and make it more coherent.
Legislative Decree No. 254/16 therefore introduced a requirement to produce a non-financial declaration, a document in which companies set out all the activities they have undertaken in the fields of environmental protection, HR management, respect for human rights and the fight against corruption.
The importance a company gives to the various areas examined is often shown through a graph based on something known as a “materiality matrix”, commonly used in international best practices.
Why translate non-financial reporting?
Non-financial reporting is a strategic document because it sets out in granular detail the actions taken by a company far beyond its mere financial results.
It’s widely accepted now that businesses are a key stakeholder when it comes to the world’s chances of achieving the Sustainable Development Goals set out in the UN’s 2030 Agenda.
This is a new frontier of corporate social responsibility – one that was mitigated 20 years ago in Italy through Legislative Decree No. 231/2001 and the introduction of the 231 Organizational Model, a collection of organizational procedures and provisions that exclude or limit the criminal responsibility of companies in the event that their employees commit crimes.
More and more companies are launching various ESG-related projects as they look to respond to the global challenges that we must all tackle together.
However, this positive action can sometimes linger below the surface – at least, this was the case, until non-financial reporting was given the prominence it deserves.
Publishing this document sets out all the measures implemented and commitments made by companies in the field of sustainability.
Making the triple bottom line public allows people to understand the efforts being made every day by companies to guarantee financial prosperity, protect the environment and contribute to the growth and development of society.
Non-financial reporting isn’t some technical tool that can only be understood by a select group of regulatory experts. Instead, it’s an explanatory document that communicates to all stakeholders, in a transparent, accessible way, the innovative activities undertaken by companies. A business’s reputation is often enhanced by this.
Promoting sustainable initiatives increases the credibility of a company in the eyes of its shareholders and investors, as well as boosting consumer confidence.
To summarize, far from just being a box that needs to be ticked to ensure regulatory compliance, the non-financial declaration has become a strategic governance lever.
Translating non-financial reporting enables companies to communicate with a wider audience, outside their country of origin, thus allowing more people to become aware of and understand their activities.
This significantly boosts the reputation of a company, as their efforts are recognized and appreciated all over the world.
At Way2Global, our mission is to use our translations not only to facilitate communication, but to overcome cultural barriers and allow people all over the world to learn about progressive companies striving to be more sustainable.
Need to translate your company’s Sustainability Report or non-financial declaration? Get in touch!