At the turn of the year, the new sustainability reporting rules will be applied in earnest. In the first phase, companies with at least 500 employees will have to include sustainability reporting in their 2024 financial year. The same obligation will also apply to listed SMEs in two years' time.
In the previous EU legislation on mandatory sustainability reporting for certain large companies, introduced in 2016, the requirements were relatively restrained. Here in Sweden, we actually chose to implement a stricter threshold for who must report a statutory sustainability report the following year than the EU had done. The requirement itself, that the largest Swedish companies must report on their sustainability efforts, has thus existed for a few years.
But at the beginning of the year, the EU presented an update, the Corporate Sustainability Reporting Directive (CSRD). This stricter directive is now written into our domestic Annual Accounts Act.
In reality, the tightening means stricter requirements for content, how reporting should be done, how responsibility is divided, how quality assessments are carried out and so on. All in all, considerably greater demands are placed on the information provided by the companies covered. By linking the rules more to global standards, more responsibility is placed on companies for their impact on society and the environment.
The report must also be reviewed by a third party.
The bottom line, of course, is that greater accuracy will be needed.
Which in turn raises the importance of good system support. When implementing CSRD, there are many data points to include and whose figures and data should be included in the reporting obligation. The data requested also needs to be structured so that what is collected is based on the same question.
If not, the comparisons will obviously be flawed.
Johan Lindblad, partner account manager at InExchange, believes that companies that have switched completely to electronic invoicing, and both send and receive e-invoices, are in a position to collect data quite easily.
- There is a lot of data that can be retrieved via invoices in an ERP system. If it comes in electronic form, all the information is stored in the system from the start, Johan emphasizes.
- But if you have to look afterwards, it immediately becomes cumbersome. "How was it now, have we purchased environmentally classified material?". At that point, you have to start going into the lines to be sure. And then the next question is: is the job done? Or have you just interpreted the invoice as a picture? In that case, it is not a given that the lines are included. Then you have no details, only the total amount. The rest of the information must be looked up manually.
In the first phase, large public interest companies with more than 500 employees will be required to include a sustainability report in their 2024 financial year, to be released as a report in 2025. At EU level, the revised directive means that the number of companies covered by the legislation will increase fivefold. Previously, around 10 000 companies were affected. Now, around 50,000 companies will have to comply with this compliance requirement. In Sweden, it is expected to double. From 2,000 to 4,000 companies.
But even those companies that do not yet have to report on sustainability, according to Johan Lindblad, benefit from adapting to the regulations that so far only the largest players have to live up to.
- Why wait until the last second? Johan asks himself rhetorically and compares it to how it was when the law on mandatory e-invoices to the public sector was introduced (2019). That, too, was a paragraph preceded by an EU directive.
- Then some stressful situations arose. Not only for private companies but also for public administrations. I can imagine that this could be something similar. There are a lot of new things coming up all the time and it's easy to get caught off guard if you don't plan well in advance. "What is this? How are we going to deal with this requirement?". It's never a good idea to start at the last minute.
Johan Lindblad also objects to the view that EU directives of this kind are sometimes seen as a burden. If you feel that way, you have misunderstood the reasons why sustainability reporting has been introduced in the European Community.
- The requirement has not been introduced to create more reports. It is aimed at ensuring that you have good sustainability work, of course. Sure, it's easy to think negatively and see it as more administration, but that's thinking backwards. Rather, it is something that develops the company, says Johan and adds:
- Instead, focus on how the data should be collected and focus on environmental work. For example, by getting started with electronic invoices. It is a good help along the way.
Why sustainability reporting?
"The purpose of sustainability reporting is to provide financial markets with access to environmental, social and governance information that is reliable, relevant and comparable. It should help to direct capital towards sustainable investments to achieve sustainable growth. In addition, it should facilitate the management of financial risks arising from climate change, depletion of natural resources, environmental degradation and social deficiencies."
Excerpt from the final report:
The inquiry into sustainability reporting (SOU 2023:35).
Read more at this link "New rules on sustainability reporting"