Managers attentive to sustainability: why the NFS is important

Sustainability reports: the value added to the company balance sheet

Sustainability can no longer be excluded from the balance sheets of companies, whether small or large. The Council of Ministers of 23 December 2016 definitively approved the provision which transposed Directive 2014/95/EU on non-financial information into Italian law and since then, the obligation for some categories of companies has become increasingly stringent in terms of time.

Approximately 60% of company managers realize this at a global level, although still only 24% consider that the costs of sustainability initiatives outweigh the benefits brought by them. This is what emerged from the Capgemini Research Institute report, “A World in Balance”. The data therefore demonstrates a change in trend relating to the perception that companies have regarding issues related to this world, but the same cannot be said for increases in investments.

The social dimension is also reaching its peak of attention with over half of executives claiming to be implementing practices aimed at improving objectives in ESG fields.

Non-financial statement

It is important to underline a first difference between the sustainability report and the non-financial statement, as the former focuses on the relationship with stakeholders, while the DNF has as its main objective that of attracting capital for new investments.

This reporting is based on the new sustainability reporting principles. First of all is that of relevance from a double perspective: on the one hand the impact on the actors involved and on the other, a financial balance sheet. The term “impact relevance” refers to the reflection of the company towards the outside and therefore, precisely, the impact it has on its main stakeholders. The term “financial relevance” refers, however, to the “outside-in” and is more similar to a company balance sheet. Information is to be considered relevant and will be part of the report if from a financial point of view its omission or incorrect indication can influence the decisions of users of the company information resulting in significant financial effects on it. In this case, it is necessary to evaluate risks or opportunities that arise from sustainability issues and which could impact the company’s financial position, economic result and cash flows.

The actors involved are mainly stakeholders, such as workers, suppliers, consumers, communities and authorities, as well as the involvement of users of sustainability reporting.

The areas to be covered by law in Non-financial statement there are at least 5:

1. Environment: analysis in terms of use of energy and water resources, renewable and non-renewable, of greenhouse gas emissions and pollutants;

2. Social: deals with the company modus operandi regarding health and safety, health risk and other types of dangers. We also talk about social and cultural development strategies of the territories in which the company operates;

3. Personnel Management: this part illustrates the initiatives aimed at combating the exploitation of child labor and gangmastering, improving the working environment and guaranteeing inclusion and gender equality;

4. Human rights: the company explains in this part the actions implemented against the violation of human rights or any discrimination;

5. Anti-corruption: here the tools that the company uses to defeat active and passive corruption (committed by and against the company) are reported.

The perception of sustainability in the company

The report revealed a gap between the perception of managers and that of consumers regarding an increasingly widespread topic of greenwashing. In fact, 33% of consumers globally consider this activity as an integral part of companies’ sustainable approach and only 17% of executives think this is a consumer perception. Those most worried about this phenomenon are the young people of Generation Z, 50% of whom are skeptical.

To understand with an example the phenomenon of perception of greenwashing let’s look at the case of the Boeing 787 Dreamliner operated by Virgin Atlantic and which took off from London’s Heathrow airport, heading to New York. This is a flight powered by SAF (Sustainable Aviation Fuel): what is hoped will somehow be the future of flights. SAF is the generic term for all aviation fuels produced without the use of fossil feedstocks, such as oil or natural gas. SAF is a key technological solution for more sustainable flights and is essential for the energy transition in aviation.

But the aviation industry is under pressure from numerous environmentalists for the damage it causes to the environment. This flight was considered “greenwashing” precisely because of the desire to make people perceive a different way of dealing with flights and the consequences for the healthiness of the air and the quantities of emissions.

Why the DNF is important

Since ESG criteria weigh more and more heavily on the perception of the value of a company and its business results, the NFS fits into this area by photographing the strategy implemented by the company to manage in an effective, inclusive and circulate issues of social and ethical impact. The aim is to explain in detail the policies adopted on safety and health (public and of its collaborators), the environment, respect for human rights and the fight against corruption.

It is therefore not just a way to “wash away” any conscious or unconscious damage caused to the environment, but it concerns a duty that is required of companies and governments to safeguard the balance of the Planet.