Preparation and perceptions regarding mandatory non-financial reporting - evidence from Finland

Abstract

This study examines how the EU´s new non-financial reporting requirements impact sustainability reporting in Finland, how companies have prepared for the change and how the new requirements are perceived. The non-financial reporting requirements were implemented into the Finnish law from the beginning of 2017 and the companies need to publish the first non-financial reports in the first half of 2018, covering the financial year 2017. The empirical data for this study was gathered in the end of 2016 by interviewing seven Finnish companies covered by the new reporting requirements and four consulting companies who work with sustainability reporting and assurance.

The interviewed persons had a relatively positive attitude for the non-financial reporting requirements and there was little resistance for the change. The new requirements were in general not seen as a heavy burden, mainly due to their non-specific nature. Even though most of the interviewed companies already published certain sustainability information, many were in the process of developing their reporting and also one completely new company was about to appear into the arena of sustainability reporting. All interviewed companies mentioned several drivers for sustainability reporting, stressing the significance of stakeholders’ needs and demands, and most of them said that they would have probably developed their sustainability reporting even without the non-financial reporting regulations. However, in some companies it was clear that the requirements had been the last needed trigger to start reporting or developing the sustainability reporting further. The findings of this suggest that the new non-financial reporting requirements do have an impact on sustainability reporting in Finland and there can be an effect also on companies who have already published sustainability information in the past. None of the interviewed companies were only eyeing the minimum possible way of meeting the non-financial reporting requirements and many had considered how they could benefit from the reporting. The companies also emphasized the importance of a report that focuses on aspects that are relevant especially for their business. The previous literature indicates that mandatory sustainability reporting may contribute positively to the reporting quality and the findings of this study are in line with this suggestion.

This study provides completely new information related to the preparation for the regulatory change and about the actual practices the companies are aiming to follow while reporting the mandatory non-financial information. These aspects are examined broadly in the study and also regulatory aspects that remain unclear are raised. For the regulators it is important to note that the Finnish law related to non-financial reporting is not clear in all parts and at least in the end of 2016 there were different interpretations especially related to the timeline for publishing the information.