Unit 13 Flashcards
What does it mean sustainability ? What is sustainable development?
Any consideration of sustainability reporting requires a definition of sustainable development and what sustainability means.
Sustainable development was defined in the Brundtland Report (1987) as development that has the aim of: “Ensuring the needs of today’s world are met while at the same time ensuring that the ability for future generations to meet their own needs is not compromised”
What are the sustainable development goals?
In September 2015, all 193 United Nations (UN) member states ratified a set of 17 Sustainable Development Goals to provide a framework for achieving prosperity within the limits of the planet.
There is increasing pressure to achieve the 2030 Agenda for Sustainable Development, which was endorsed and adopted by all United Nations Member States in 2015.
SDGs are the path to follow to act in a sustainable manner, ensure a peaceful and prosperous world, protect (the) people and the planet today and in the future.
What is a sustainability report?
The 2023 UN Sustainable Development Goals Report (Special Edition) clearly showed that the world is lagging in reaching it started on each of the 17 goals due to a multiplicity of factors, including COVID-19, conflicts, climate change and rising costs of living
What is the influence of SDGs?
With, the 2030 Agenda, world leaders agreed to free humanity from poverty, to protect the planet for current and future generations, and build peaceful and inclusive societies.
Currently, SDGs influence policy development. For example, ending poverty should be achieved by setting strategies that advance healthcare (particularly during the COVID-19 pandemic), sustain education, reduce inequality, etc. Given this pressure, it becomes essential to observe and measure the advancements of SDGs. In particular, the contributions towards these goals made by all kinds of organizations need to be measured and disclosed.
What companies think about SDGs?
Companies need to align their goals to the long-term goals of society, as articulated in SDGs. These will be the successful companies. Major corporations as well as SMEs need to prove they are operating in line with SDGs. These latter companies represent the majority in the world. For example, in Europe there are 25 million SMEs, which represent 99.8% of enterprises, being a significant source of job creation and prosperity (Generali, 2022).
Thus, it becomes relevant to track progress against SDGs with internal and external reporting, as these goals are the compass (GRI and USBS, 2020; p. 9) towards a liveable future and healthy generations
Why accounting is useful related to SDGs?
Accounting is a system that can contribute to this overall aim by considering the SDGs in business operations. Accounting allows for planning, managing ,reporting and disclosing of the progress of companies towards the contents of the 17 SDGs of the 2030 Agenda, such as gender equality, climate action, decent work and economic growth (Farneti et al., 2019).
However, not much has been done to report against SDGs. Explicit reference to SDGs in disclosure requirements remains limited. Instead, there is the need to better measure and disclose how organisations impact in relation to the SDGs.
What are the most important SDGs?
The followings goals are particularly easy to understand and integrate into existing corporate strategies:
•SDG no. 8, which refers to decent work and economic growth;
•SDG no. 12 on consumption and production practices, that also encourage companies to adopt sustainable practices and integrate sustainability information in their reporting cycle
•and SDG no. 16, which refers to inclusive societies and accountable institutions.
These are examples of topical issues with reference to sustainable development which perfectly address company impacts and should be disclosed. Hence, organisations can use the SDGs to influence the formulation of plans, aligning their goals to SDGs and reports against them.
What is SER?
Social and Environmental Accounting and reporting (SER) refers to public disclosures on the social and environmental performance of an entity aimed at outlining the social and environmental effects of the actions of the organization.
DISCLOSURE OF NON-FINANCIAL AND DIVERSITY INFORMATION BY CERTAIN LARGE UNDERTAKINGS AND GROUPS
DIRECTIVE 2014 n.95 indicates that specific undertakings must disclose specific aspects
Identifying, measuring and disclosing social and environmental information is vital to acquire the required knowledge about a company for stakeholders who need to make decisions daily .
WITHIN ACCOUNTING…SER
EU citizens expect organizations to understand the positive and negative impacts they have on society and the environment and to prevent, manage, and mitigate any negative impacts, regarding also their global supply chains.
DIRECTIVE 2014 n.95 indicates that specific undertakings must measure and assess the value of environmental, ethical, and social issues. Thus, the process of formal measurement and valuation has started in Europe.
ARTICLE 19A NON-FINANCIAL STATEMENT.
Large undertakings which are public-interest entities exceeding on their balance sheet dates the criterion of the average number of 500 employees during the financial year shall include in the management report a non- financial statement containing information to the extent necessary for an understanding of the undertaking’s development, performance, position and impact of its activity, relating to, as a minimum, environmental, social
and employee matters, respect for human rights, anti-corruption and bribery
NEW PROPOSAL REGARDING CORPORATE SUSTAINABILITY REPORTING: MAIN DEVELOPMENTS
The EU proposal (2021) was designed starting from the sustainability reporting requirements set in the previous Non-Financial Reporting Directive, incorporating the proposal with the objectives of the European Green Deal. The proposal requires common reporting standards, which will also greatly facilitate the digitalization, assurance and enforcement of sustainability reporting.
NEW PROPOSAL REGARDING CORPORATE SUSTAINABILITY REPORTING: MAIN REQUIREMENTS
– to extend the scope of reporting requirements to additional companies, including all large companies and listed companies (except for listed micro-companies), thus even listed SMEs.
– to provide assurance of sustainability information; in the earlier NFRD instead, this aspect was left to the legislation of national governments and this led to very few countries requiring the assurance. Now all the above- mentioned undertakings need to be assured.
– to provide more details about the information companies should report on and
require them to do so in line with mandatory EU sustainability reporting standards; a great number of details are needed based on the proposal that will be finalized by the end of 2022. As a consequence, more specific, transparent information will be supplied by companies.
– to ensure that all information is published as part of company management reports, and disclosed in a digital, machine-readable format.
-to include information on intangibles, among which intellectual, human, social and relationship capitals such as brand or intellectual property intangibles related to research and development; skills development, reputation capital, human health,
NEW PROPOSAL REGARDING CORPORATE SUSTAINABILITY REPORTING: SUBSIDIARY
The proposal that will be reviewed and adopted by the end of 2022 is very powerful because it will guarantee the same form of disclosure for all the EU member states in line with EU legislation. “Only the EU can ensure that rules on sustainability reporting are consistent with other EU laws, including the Sustainable Finance Disclosure Regulation and the Taxonomy Regulation, and with delegated and implementing acts adopted pursuant to those regulations… The EU intervention can ensure a significant contribution to global policy developments, in order to better defend the interests of European companies and other stakeholders.”
NEW PROPOSAL REGARDING CORPORATE SUSTAINABILITY REPORTING: PROPORTIONALITY
The proposal also refers to listed SMEs and, in general, requires for organizations to be able to disclose information including that related to their value chain.
The proposal takes a proportionate approach to determining which companies will be subject to mandatory reporting requirements exempting listed micro-companies from mandatory reporting obligations. It indicates that the Commission will embrace standards for large companies and separate proportionate standards even for SMEs.
In addition, more time has been given to develop SMEs standards that are required to be adopted by 2026.
However, given that in 2023 all large and listed companies (except for listed micro- companies) will be required to disclose, SMEs should accelerate the process of disclosure, if they want to do business with large companies and be part of their supply chain.
