Disclosure of non-financial information increases complexity in reporting

There is no turning back, the need to make information available to investors, shareholders, consumers, employees, etc. in a transparent and responsible manner has become a priority for the Finance and Sustainability Departments.

Companies will be required to disclose environmentally sustainable economic activities, and the specification of the methodology to comply with the disclosure obligation. COMMISSION DELEGATED REGULATION (EU) 2021/2178.

“Article 8(2) of Regulation (EU) 2020/852 requires non-financial companies to disclose information on the proportion of turnover, investments in fixed assets and operating expenses (“key performance indicators”) of their activities related to assets or processes linked to environmentally sustainable economic activities.”

Furthermore, the Regulation mentions that it is necessary to ensure a uniform application of the disclosure requirements set out in Article 8(2) of Regulation (EU) 2020/852 by non-financial companies subject to Articles 19a or 29a of Directive 2013/34/EU. Rules should therefore be laid down to further specify the content and presentation of the information provided for in Article 8 of Regulation (EU) 2020/852, including the methodology for complying with such rules, with a view to enabling investors and the public to adequately assess the proportion of environmentally sustainable economic activities (“activities that conform to the taxonomy”).

In view of the entry into force and implementation of the Delegated Climate Act at the end of 2021 and the material difficulties to assess in 2022 the application of this Regulation in 2022, the disclosure should be limited to certain elements and qualitative information, while the rest of the provisions would start to apply as of January 1, 2023 for non-financial companies and as of January 1, 2024 for financial companies.

Non-financial companies shall disclose the information referred to in Article 8(1) and (2) of Regulation (EU) 2020/852 as specified in the Annexes to the Regulation where the tables are shown using the templates in Annex II to this Regulation.

And what is the information to be disclosed for non-financial companies?

From January 1, 2022 to December 31, 2022, non-financial companies shall only disclose the proportion of taxonomically eligible and non-taxonomically eligible economic activities in their total turnover, their investments in fixed assets, their operating expenses and the qualitative information referred to in section 1.2 of Annex I relevant to this disclosure.

Key performance indicators for non-financial companies, including any accompanying information pursuant to Annexes I and II of this Regulation, shall be disclosed as of January 1, 2023.

And what is the content of these key indicators to be disclosed by non-financial companies?

  1. Key performance indicators related to sales volume
  2. Key performance indicator related to capital expenditures (CapEx)
  3. Key performance indicator related to operating expenses (OpEx)

But these indicators should be accompanied by complementary information regarding:

  • Accounting policy with respect to turnover calculations, investments in fixed assets and operating expenses, in addition to other requirements included in the Regulations.
  • Assessment of compliance with Regulation (EU) 2020/852 descriptions and explanations of the nature of economic activity according to the taxonomy contributes to compliance with the requirements of the Regulation.
  • Contextual information non-financial companies shall explain the figures for each key performance indicator and the reasons for any changes in those figures in the reporting period.

Taxonomies, regulations, indexes… it is increasingly necessary to homogenize information so that we can all speak the same language, and there is clearly a great challenge for legislators and regulators to achieve this, and for companies to be able to do so.

Many companies are working to transform themselves into “net-zero” organizations, and this requires, among other things, being transparent, involving the organization, financing the transformation, retaining talent, involving other stakeholders …

There are no magic solutions, but there are actions that can help us. Digitalization is one of them that, together with good advice and knowledge of the regulations to be complied with, will allow us to better adapt to these changes in the reporting of non-financial information.

From Laragon we offer our accumulated experience in the realization of this type of projects since 2007 with the latest technology from our partners.

We create joint teams with your teams and advisors to ensure that the transparency and quality of information disclosure meets the expectations of your stakeholders.

About Laragon

We are a consulting firm based in Spain and Latin America specialized in process digitalization projects and we want to bring technology to the reach of organizations. Since 2006 we have been applying Innovative Technologies to improve key Business Processes in Sustainability Strategies: Environmental Management and Sustainability, Health and Safety, Risk Management and Regulatory Compliance. To learn more about Laragon, feel free to browse our website or send us an email at [email protected].