Non-financial reporting law

Non-financial reporting law

Law 11/2018: scope, challenges and possibilities of the latest law on corporate sustainability

Until now, large Spanish companies were only obliged to publish their financial information. They will now also have to report on their environmental and social impact. The cause is the law 11/2018 on non-financial information and diversity, which originates from a European Directive: 2014/95/EU.

This measure, aimed at strengthening investor and consumer confidence, brings with it a new challenge for businesses in Spain. The greatest difficulty in complying with Law 11/2018 lies in “the professionalisation, automation and control of data management processes”, according to EY’s analysis (pdf). The challenge is great but the medium-term benefits are large.

What environmental indices should a company measure?

Taking into account current regulations, business reports should cover aspects such as the level of pollution, the promotion of the circular economy, waste management, sustainable use of resources or the protection of biodiversity. For most companies, reporting their environmental impact correctly takes the form of monitoring these indices:

  • Direct CO2 emissions.
  • Indirect emissions (employee mobility, travel, transport of goods).
  • Water consumption.
  • Waste generation.

How can a company take advantage of environmental measurement?

The first outcome of measuring environmental impact is to ensure compliance with Law 11/2018. But there are clear benefits to be derived:

  1. These data shed light on strategic decisions.
  2. Through comparisons between time periods or workplaces, good practices are identified and targets for improvement are defined.
  3. Environmental indices provide the evidence needed to obtain tenders and contracts.
  4. Annual and comparative measurement facilitates a realistic and positive communication plan.
  5. Demonstrating improvement in KPIs is also the key to accessing new forms of finance such as green loans.

Which companies are affected by Law 11/2018?

Law 11/2018 will have a staggered and incremental implementation. Since its entry into force, it has been compulsory for companies with more than 500 employees that, in addition, are public interest entities or have met at least two of the following criteria for two consecutive financial years:

  1. Total asset items exceed €20M.
  2. The net amount of the annual figure exceeds €40 million.
  3. More than 250 employees.

From 2021, the law will also apply to companies with more than 250 employees, which considerably increases the number of organisations in Spain that will be obliged to report their non-financial information.

By using appropriate measurement tools, companies simplify the process of calculating and analysing environmental impacts. GreeMko’s mission is to facilitate the transition from reporting to active management. As Mar Robles says: “Companies need time to discover potential savings, identify improvements and communicate the actions that are taken. Technology can give them that time”.