CSR and Reporting Non-Financial Performance

The European Commission has just closed a public consultation on non-financial disclosure by companies. This exercise is intended to draw out the value of CSR reporting, by consulting with firms and investors, on the types of information that are most useful to share.

This consultation happened at the same time as an ongoing Pan-European collaboration between more than 30 organisations in the region.

An initiative called ‘Valuing non-financial performance’ has been established through the organisation CSR Europe and is headed by big European firms including Telecom Italia and the Lloyds Banking Group. The premise of the group is that the market value of a company does not fully reflect the risks and opportunities of environmental, social and governance issues.

It is now trying to understand how improving this aspect of CSR positively affects business, how the knowledge that non-financial information is of value will lead investors to expect this data, and how companies themselves can use the data effectively.

The group was established to work out how non-financial performance measurements can be better integrated into mainstream business strategy, and then how to communicate this. It also aims to address investors’ failure to include non-financial indicators into the models they use to value companies.

All of the companies that have joined this group hope that a collaborative venture will be better able to define the most important non-financial performance factors. The group is termed a ‘laboratory’ as its job is to conduct investigations and ‘test’ which elements will work best.

It will help companies identify the significance of environmental, social, and governance (ESG) factors within their business and how to use the initial framework as it is developed. The group hopes this will encourage the inclusion of these particular elements of CSR in discussions between companies and investors.

In the first phase of the ‘laboratory’ project, there will be a review of different areas of non-financial performance and how these contribute to financial success for use as an evidence base. The group will then develop a framework of proposed metrics and strategies for managing and communicating key areas of non-financial performance – highlighting how they can boost financial success. They will also draw up recommendations on how companies and investors can communicate indicators of value created through non-financial performance.

The second phase of the project will involve the development of more practical tools, including management practice and policy recommendations.

This is just one of 20 different ‘laboratories’ around different CSR issues, which bring together businesses and stakeholders to solve CSR challenges. The others cover subjects such as: wellbeing in the workplace, supply chain management and mainstreaming diversity in the company. Each group is led by a group of companies and a stakeholder representative.

Photo credit: U.S Army Environmental Command