Corporate social responsibility (CSR) reporting
CSR reporting obligation: Which companies does it apply to and what is required?
An Accounting Act amendment approved on 29 December 2016 requires certain types of company to report on their corporate social responsibility (CSR). The reporting obligation applies to large undertakings that are public-interest entities, i.e. listed companies, credit institutions and insurance companies with an average of more than 500 employees during the financial year. In addition, the company’s turnover must be greater than EUR 40 million or its balance sheet total more than EUR 20 million.
The legislation is based on an EU directive and obligates the companies to report on their policies concerning the environment, their employees, social issues, human rights and tackling corruption and bribery. The reporting should also include a brief description of the company's business model and explain the risks related to its policies and how the risks are managed.
The legislation includes an element of flexibility in that although it requires certain information to be presented, companies may themselves decide the form in which this is done. The legislation does not therefore specify the particular information or figures that companies should provide on different subjects, nor does it point to any particular reporting format that should be followed. The aim is that the legislation should work as well as possible in different sectors, as the CSR challenges can be very different from one sector to the next.
Companies may provide a statement as part of their report on operations. Alternatively, their CSR reporting may be presented as a stand-alone statement or as a separate report based on an international reporting framework. If a separate report is produced, this should meet the information requirements set out in the legislation and the company should publish it either in conjunction with the report on operations or, alternatively, on the company’s website within six months of the date on which the financial statements are published. If the company publishes a separate report, there should be reference to this in the report on operations.
The company may decide not to report information concerning negotiations, or concerning events or matters that transpire as negotiations proceed, if the company has good grounds to believe that publication of the information would seriously damage its commercial position. In such cases, it is nevertheless required that the omission of information does not prevent an accurate and fair understanding of the impact of the company’s operations, results or financial standing.
In accordance with the legislation on reporting, the corporate governance statements of listed companies employing more than 250 people must also include information on the company’s diversity policy and the implementation and results of that policy.
Companies therefore now have a reporting obligation, but also a fairly free hand in how they meet this obligation. If this regulatory measure does not produce the intended results or does not succeed for some other reason, the European Commission may propose changes to it in the report which, under the terms of the directive, it is required to present at the end of 2018.
The first reports on CSR and diversity are required to be issued in 2018 for the 2017 financial year. The Commission is also soon to publish non-binding reporting guidelines for companies for the purposes of compliance with the legislation.
Prior to the legislative changes described above, an obligation was imposed on companies that operate in the extractive industry or in harvesting of wood from primary forests, to publish a statement about payments made to national governments. Such a statement must be released within six months of the end of the financial year.
In order to implement the new European sustainability reporting Directive (2022/2464), the Parliament of Finland is currently discussing a Government proposal 20/2023 on which the Economic Committee has submitted its report 5/2023. The legislative amendments in the proposal are intended to enter into force on 31.12.2023 so that reporting in accordance with the new provisions will start in spring 2025 for the data for 2024 of the largest enterprises. Reporting obligations will be more precisely defined in accordance with the Commission Regulation on them.
More information:
- Act amending the Accounting Act (1376/2016) (in Finnish)
- Act amending chapter 7 of the Securities Markets Act (1377/2016) (in Finnish)
- Act amending the Securities Markets Act (1278/2015) (in Finnish)
- Decree of the Ministry of Finance on the obligation of securities issuers to disclose periodic information (in Finnish)
- Non-Financial Reporting Directive (2014/95/EU)
- Commission’s guidelines on non-financial reporting
- Accounting Board’s recommendation 7 September 2017 (in Finnish)
- Government proposal (20/2023) (in Finnish)
- Committee report (TaVM 5/2023) (in Finnish)