Non-financial reporting: progress, but with room for improvement

Press release

Belgian listed companies have improved their reporting of non-financial information than two years ago. There are still some points requiring attention, however, and room for improvement. That is clear from an wide-ranging study conducted by the Financial Services and Markets Authority (FSMA), which makes recommendations for further progress.

Non-financial information covers a range of different topics, such as environmental, climate, social and employee matters, human rights and the fight against corruption. Unlike financial reporting, reporting on these topics is a relatively new requirement. Companies have therefore been going through a learning process as regards the way such reporting is done.

In its study published in March 2019, the FSMA took stock for the first time of the state of affairs in the area of non-financial reporting by large listed companies in Belgium. Since the previous study, sustainability reporting has developed significantly. It is partly for this reason that two years later, the FSMA once again conducted a study of non-financial reporting by listed companies.

The follow-up study first examines which areas have seen progress, and then at which areas still have room for improvement. The study is intended to give the companies in question a set of guidelines for drawing up a high-quality NFI statement, identifying good practices and making recommendations to that end.

Reporting is better in significant areas

The study shows that in two years’ time, the companies have made a good deal of progress. Non-financial reporting has significantly improved in important areas, such as environmental and staff policies. The non-financial information is of higher quality and focuses more specifically on the points that are essential for the company in question. Companies are also setting out more quantitative targets than in the past when it comes to non-financial topics. A large majority of the companies has drawn up an internal code of conduct or a code of ethics.

There is still room for improvement

However, there is still room for improvement. For example, reporting does not cover all (aspects of) non-financial topics equally thoroughly. Human rights and anti-corruption considerations are often presented with less detail, as is the description of the principal risks. The NFI statements often lack sufficient balance: there is a tendency to foreground the favourable elements, while devoting little attention to the less positive elements.

Preventing differences in reporting quality

In addition, it is important that all listed companies provide information of sufficiently high quality. We should prevent a gap arising between the ‘good students’, who keep improving, and the weaker ones that lag behind. The study shows that the BEL 20 companies generally provide more complete and specific non-financial information than other companies.

“With this study, the FSMA seeks to help all the companies concerned to improve the quality of their non-financial reporting,” according to Jean-Paul Servais, Chairman of the FSMA.