Non-Financial and Sustainability Reporting Practices

Euronext Corporate Services partnered with Tennaxia for the 10th edition of the pan-European sustainability reporting practices study. The survey was conducted amongst CSR and sustainability professionals and sought to understand how environmental and social factors may change the nature of non-financial reporting, as well as gaining insight on best practices. 

Webinar

Ulrike Heindl, Business Development Director at reporting software and consulting firm Tennaxia was joined in a webinar to reveal and discuss the study results by Tennaxia’s CSR Business Line Director, Solène Garcin-Charcosset, and Ghislain Boyer, ESG Advisory Associate at Euronext Corporate Services.

The survey

There were 200 companies across Europe that participated in the study, reporting back directly to ECS and Tennaxia. Two-thirds were listed companies, with over half of the respondents registering more than €1 billion in annual turnover. 

Governance

The study showed that, despite the increase in regulation surrounding sustainability reporting and social pressure relating to the climate crisis, sustainability teams are not growing in numbers. In fact, 46% of respondents have teams of between one and three members, with another 18% employing four or five sustainability professionals.

Solène Garcin-Charcosset suggested this could be explained by CSR activities now also forming part of the regular function of other departments. Indeed, the survey saw a rise in the number of companies in which directors had a role in sustainability reporting. This shows that the weight afforded to sustainability matters is greater than ever. 

Ghislain Boyer theorised that this could be driven by a number of factors, including the recovery from the COVID-19 pandemic, the increasing climate and social pressures and a movement towards companies questioning their business model and considering how to adapt practices to stay relevant to investors and customers. 

Climate risk and reporting

Climate remains the most pressing risk factor for companies, with 87% recognising the need to mitigate environmental pressures on their businesses. Solène Garcin-Charcosset discussed the need for double materiality when dealing with this topic; not only considering the effect of climate change on the company but also the company’s effect on climate change. 

Whilst Ghislain Boyer was not surprised to hear that climate was the hot topic for companies, he found it remarkable that so few businesses actually committed to specific climate reporting. He expressed his hope that companies will demonstrate better transparency and granularity of reporting on climate efforts in the future to help meet the goals of the Paris Agreement.

Attractiveness and retention

Solène Garcin-Charcosset addressed another of the pressing risks to companies, that of attractiveness to employees and retention of talent. She discussed how reporting on this area had not traditionally been formalised, but businesses were beginning to recognise the need to factor messaging into their CSR efforts to meet the expectations and values of staff members. 

KPIs and reporting

Although the Corporate Sustainability Reporting Directive (CSRD) will dictate areas in which companies will have to provide reporting, Solène Garcin-Charcosset warned them not to rely solely on the directive to provide a complete reporting framework. 

It is important for companies to create their own, unique set of targets and KPIs based on their materiality analysis. The CSRD requirements are merely the base on which to build your own fine-tuned, specific and valuable non-financial reporting strategy.

Ghislain Boyer felt that companies needed to remember that they need to comply, but they also need to perform. He expressed the importance of a company’s trajectory and the need to set milestones to ensure you are on track. 

He also suggested that KPIs were important not only for reporting compliance but also for accessing funding from banks and other financial institutions. 

Investor relations

Ghislain Boyer discussed how financiers and investors are increasingly looking to communicate directly with companies to gain access to their ESG data. This shows the importance of robust data collection and reporting practices. 

Being able to communicate non-financial data with stakeholders is an essential part of investor relations and leads to debates within organisations over the criteria to use to choose which ESG ratings agency to work with. Companies must weigh up the importance of the credibility of the agency, the effect the result has on investors and other criteria.

Ghislain Boyer also confirmed that climate change policy is by far the most pressing topic for investors when communicating with companies in which they invest or are looking to invest. He warned organisations to prepare to answer questions in this area at their AGM.