How do European companies report on the social and environmental impact of their business activities? To answer this question, the Alliance for Corporate Transparency presented a large-scale review in Brussels this week. For the first time, an extensive data set has been available, which analyses the sustainability reports of 1,000 European companies.
A total of 96 % of the companies reviewed published information on so-called “non-financial information” - so far positive at first glance. About 60 % of companies published this information within the their Annual Report, fewer than 40 % within the scope of a separate report. However, taking a closer look at the quality of the analysed reports, researchers recognized a significant need for improvement. Only about 38 % of the reports provided structured information on their business policy, risks and results. Only ca. 22 % of businesses - hence, every 5th business - also published Key Performance Indicators (KPIs) on sustainability criteria in adequate form in their reports.
Lack of integrated sustainability strategies and governance structures
Entrepreneurial behaviour can have an impact on many sectors. About half of the businesses identified at least a strategic risk due to their activities. However, subsequently only 7 % of companies explained how the respective risk is reflected in their business strategy. In the specific risk analysis, about 25 % of businesses stated that their activities might have an impact on climate change - this is the most recognised specific risk for everyone. About 24 % of the companies identified specific risks for the environment or labour laws and 14% in the area of human rights.
Many risk analyses are not accompanied by a corresponding governance structure: only in 14 % of businesses, the board concerned itself with sustainability issues and just in 4 % sustainability targets were voted on in the Annual General Meeting. Only 14 % of sustainability strategies were reviewed by independent authorities and only 8 % of concepts follow science-based targets.
Climate crisis, environment, labour and human rights
In particular the climate crisis exposes the need for revision: only about a third of businesses have determined climate targets. The figures are hardly better even in particularly affected sectors, such as energy and finance. Even though almost all reports include information on labour rights, many are often lacking substantially important information: only between 5-10 % of reports include information on living wages, trade unions or outsourced workers. Concerning human rights, only 7 % of companies refer to complaint and appeal procedures and only 20 % have due diligence procedures in place - an interesting indicator for the Due Diligence Directive demanded by trade unions, NGOs and the AK .
AK analysis: Legislative need to catch up
The AK too has recently analysed the sustainability reports of Austrian businesses and in doing so recognised “still a lot of room for improvement” and a “legislative need to catch up”. This concerns the relevant EU Directive, the Non-Financial Reporting Directive as well as the Austrian implementation of this legal act. The EU Commission has now also identified a need for action and has presented Roadmap to review the Non-Financial Reporting Directive. This week a public consultation was also launched and a proposal for a revised legal act will follow at the end of the year. The data now published data by the Alliance for Corporate Transparency as well as the analysis of the Chamber of Labour show clear lines of action for the revision.