From the 1st January 2017 the EU’s Non-Financial Reporting Directive requires companies to report annually on their sustainability performance. This will affect approximately 6,000 large European companies. In the UK this is enacted in the Companies Act 2006, introduced via statutory instrument 2016/124. It requires companies and qualifying partnerships to include a non-financial information statement in their annual strategic report. This new legislation takes a different, strategic and forward looking, approach to reporting the impact they are making in their communities.
The non-financial information statement must include information on the company’s development, performance and the impact of its activity. It should cover details on the business model, due diligence process and management of principal risks. Other mandatory areas include:
This will require finance departments to collect and collate non-financial information, both quantitative and qualitative from many sources throughout their organisations and then combine this with financial information to produce the final regulatory reports.
Often referred to as ‘the final mile’ in financial reporting this part of the reporting process has often been fraught with issues around delays, accuracy and security that have led to significant risk. With this legislation it has just got more complicated and therefore increased that risk.
The problem most companies have with this is, having collected numbers in a rigorous and controlled way, they then need to share these number widely across the organisation to get the associated, and very important, narrative that brings clarity to what the numbers mean. At this point they resort to email, telephone, Excel, Word and Pony Express (not really!) losing all the control and often the security associated with the process so far!
For the finance departments in this situation it is going to get a lot worse unless they look to improving both the processes and technology for combining of numbers and narrative. The problem is many maybe under an illusion they are OK as highlighted in the recent research done by FTI Consulting:
‘While 93% of the companies feel they are prepared for the new legislation and 75% acknowledge that investors are more likely to invest in companies that adhere to the new rules, only 7% of the institutional investors surveyed believe that companies are fully prepared for the new rules.’
With such a large difference of opinion between organisations and investors the answer is going to be somewhere in between, which means there is going to be a large number of organisations that need to take action, and fast, if they are going to comply with this new legislation and give investors the information and confidence, they need.
Fortunately, help is at hand. Modern Cloud-based reporting solutions like Oracle Enterprise Reporting Cloud Service enable organisations to link Microsoft Office directly to multiple sources of data as well as a central repository. So no more rekeying data into Excel or Word, which ensures the accuracy of the numbers reported. Add to this document creation, workflow and security so each user only has access to the numbers and the part of the report they are responsible for and organisations dramatically reduce risk as well as speed up and properly manage the process. Imagine being able to achieve all of this this using the tools you are familiar with today, without changing your existing enterprise systems, and all for a low cost monthly subscription!
Here at Brovanture, we've been working with organisations for over 10 years to improve their reporting processes and technology especially around the ‘final mile’ of financial reporting. We can provide both the knowledge and technology to help you meet the requirements of this new legislation or just your usual management and regulatory reporting needs. Message us to find out more!