Sustainability reporting in Finland – A comprehensive guide
In case you’re wondering how sustainability reporting in Finland works, and/or you’ve been looking for answers for what to include in your sustainability report (vastuullisuusraportti in Finnish), or what legal requirements your organization is expected to fulfill, you’ve come to the right place. This blog article will give you an overview of the most commonly asked questions regarding sustainability reporting requirements and practices in Finland.
Who is legally required to publish a sustainability report in Finland?
In Finland, your company is legally obliged to publish a sustainability report, either as a part of your annual report or as a stand-alone document, if your company is considered to be an entity that is significant in terms of public interest. In a nutshell, entities that are significant with regards to the public interest, and thus required to publish a sustainability report in Finland, are defined to be:
- Insurance companies
- Credit institutions, both foreign and domestic holding an activity license in Finland
- Companies that are publicly traded
- Companies that have on average 500 or more employees during a financial year.
What is the legal basis for sustainability reporting in Finland?
The requirement for non-financial reporting has been applicable in Finland since 2016, and it stems from the European Union Directive 2014/95/EU as regard disclosure of non-financial and diversity information by certain large undertakings and groups. The EU directive has been implemented into Finnish national legislation as a part of the Accounting Act, Kirjanpitolaki, in Chapter 3a, called “Regarding disclosures of other than financial information”.
What are the content requirements for a sustainability report by Finnish companies?
In order to be in accordance with the applicable legislation, a sustainability report must contain a short description of the company’s business model, information regarding the company’s environmental and social impact, how it ensures that human rights are being respected in its functioning as well as the measures the business takes in order to mitigate corruption and bribery.
The management report must also contain a description of the policies the company follows in its operations aimed to manage and mitigate the risks related to the above-described issues. Additionally, the management report is required to contain a description of its internal due diligence processes.
Starting from 2021, Finnish companies have also been required to report on their internal frameworks that facilitate sustainable investment, in accordance with Regulation EU/2020/852, Article 8.
Which entity of the group should publish a sustainability report? Or should all group entities publish a sustainability report?
In the case of a group, in principle, it is sufficient that the mother company publishes a sustainability report, that covers all the group subsidiaries. In the case of fully Finnish groups, this holds true. However, in the case of a group with international operations, it is advised to consult individually on the sustainability reporting requirements set forth in each operating country’s local legislation.
What if my company is not able to disclose all the necessary data in its sustainability report?
On the basis of Accounting Act Chapter 3a §3, it is possible to exclude information that is still on the negotiation table, if the company is able to provide an explanation of a reasonable expectation, that publishing the information would cause severe harm to the commercial standing of the company. However, the requirement for being allowed such exclusion is, that the exclusion is not allowed to affect the correct and balanced understanding of the company’s development, results, or financial standing.
Is there voluntary sustainability reporting in Finland?
Companies of all sizes are allowed to publish their own sustainability reports. With smaller companies that are not yet bound by the legal requirement to publish a sustainability report, it is beneficial to publish the key sustainability-related markers of the company’s operations in a compiled document, as it enables the company to start practicing for the more rigorous reporting demands to be expected in the upcoming years in the European Union.
Naturally having a sustainability report even without a legal requirement has many benefits to the company. It conveys a message of the company’s reliability, transparency, and works as a great tool in the more demanding and sustainability-oriented competition for market shares. Additionally publishing a sustainability report as a smaller company enables a business to become a preferred supplier for larger companies affected by a reporting requirement, as well as for becoming the preferred provider in public procurements where sustainability is increasingly used as one of the bidding criteria.
What is the industry standard of sustainability reporting in Finland?
Most Finnish companies publishing professionally drafted sustainability reports use GRI Core or Comprehensive standard as their framework for sustainability reporting, as it covers the reporting requirements set forth in the legislation.
Some companies prefer to draft their sustainability report purely based on the existing law. However, that might make the work of the reporter more challenging and increase the risk of accidentally leaving out significant impact information, as the legislation is drafted in a way that gives the reporting company a lot of freedom in crafting its report, in order for the legal requirements to be relevant across all industries.
