Non-Financial Disclosure Statements: Transparency and Accountability

Introduction

In today’s business world, transparency and accountability have become key pillars for the success and sustainability of companies. In this context, Non-Financial Information Statements (NFS) play a crucial role in providing relevant information on a company’s performance beyond its financial aspects.

What are Non-Financial Information Statements (NFS)?

NFIs are reports that complement the financial statements, providing information on a company’s performance in areas such as:

• Environment: Environmental impact of the company’s activities, natural resource management, greenhouse gas emissions, etc.
• Society: Social impact of the company, labour practices, human rights, community engagement, etc.
• Governance: Corporate governance structure, risk management, business ethics, etc.

Importance of Non-Financial Reporting Statements

The preparation and publication of NPIs offers numerous benefits for companies, including the following:

• Improved public image and reputation: Demonstrates the company’s commitment to sustainability and corporate social responsibility, which can attract customers, investors and partners who value these aspects.
• Strengthening internal management: Enables companies to better identify and manage their social, environmental and governance risks, which can lead to greater efficiency and profitability.
• Regulatory compliance: More and more countries are implementing regulations requiring the submission of NFIAs, so their preparation is essential to comply with current regulations.

Who is required to submit Non-Financial Reporting Statements?

The obligation to prepare the NFS was introduced by Law 11/2018, of 28 December, which amends the Commercial Code, the revised text of the Capital Companies Act, approved by Royal Legislative Decree 1/2010, of 2 July, and Law 22/2015, of 20 July, on the Auditing of Accounts, with regard to non-financial information and diversity.

In this respect, the Commercial Code establishes that companies that prepare consolidated accounts must submit an IFRS, provided that the following requirements are met:

1. The average number of employees employed in the Group during the financial year is more than 500.
2. That they are considered to be public interest entities or that for two consecutive financial years they meet two of the following circumstances:

• Total consolidated asset items must exceed 20M euros.
• The consolidated net turnover exceeds 40M euros.
• The average number of employees employed during the financial year is more than 250.

A company shall cease to be required to prepare an ICFR if it ceases to meet any of the above requirements for two consecutive financial years.

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What should the Non-Financial Reporting Statements contain?

NFIAs should include the following information:

• Brief description of the Group’s business model. Business environment, organisation and structure. They should also report on the markets in which it operates, its objectives and strategies, as well as the factors and trends affecting its future development.
• Description of the policies applied by the Group, such as due diligence procedures for risk identification, assessment and prevention, including the measures that have been adopted.
• Results of the policies implemented in the Group, with non-financial key performance indicators to monitor and assess progress and to promote comparability across companies and sectors.
• Main risks (related to these issues listed above) associated with the Group’s activities.
• Key identifiers of non-financial results related to the Group’s business activity, which meet the criteria of comparability, materiality, relevance and reliability.

The NFS shall also include the following information:

• Information on environmental issues: Detailed information on the current and foreseeable effects of the Group’s activities on the environment, assessment procedures applied, environmental certifications, resources devoted to environmental risk prevention, etc.
• Information on social and personnel issues. Total number and distribution of employees by gender, country, age and occupational classification. Average number of permanent, temporary or part-time contracts, always broken down by gender, age and occupational classification. Average remuneration and its evolution by sex, age and occupational classification. Organisation of working time, number of hours of absenteeism, measures to facilitate work-life balance. Health and safety conditions at work, including accidents, frequency and severity. Information on equality, access for people with disabilities, etc.
• Information on respect for human rights.
• Information relating to the fight against corruption and bribery

And finally, information must be provided on society, specifically on the Group’s commitments to sustainable development, the inclusion in the purchasing policy or selection of suppliers of social, equality or environmental issues, as well as information on measures for the health and safety of consumers and complaint systems. It is also required to report on profits made on a country-by-country basis, if applicable, and taxes on profits paid, as well as public subsidies received.

Conclusion

In an increasingly demanding and competitive world, companies seeking long-term success must go beyond financial performance. Transparency and accountability have become key pillars for the sustainability and reputation of organisations.

NFIs are an essential tool for demonstrating a company’s commitment to these values. By providing relevant information on their social, environmental and governance performance, companies can:

• Strengthen the trust of their stakeholders: Customers, investors, employees and society in general increasingly value the responsible behaviour of companies. Transparency in non-financial reporting allows companies to build trusting relationships with these stakeholders.
• Improve risk management: Proper identification and management of social, environmental and governance risks can prevent situations that damage the company’s reputation and generate economic losses.
• Attracting and retaining talent: The best professionals seek to work in companies that share their values and are committed to sustainability. Transparency in non-financial information is a key factor in attracting and retaining talent.
• Contribute to a more sustainable future: Companies that take responsibility for their social and environmental impact can contribute to a more just and sustainable future for all.

At ILP Abogados, we are convinced that transparency and accountability are key to business success. Our team of NFI lawyers can advise you on the preparation, publication and auditing of these reports, helping you to comply with your legal obligations and make the most of the benefits they offer.

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