The Swedish implementation of the EU directive on disclosure of non-financial information covers two thirds of net turnover in the corporate sector and two thirds of the carbon dioxide emissions in the business sector. The Swedish listed companies’ sustainability reports appear more transparent and comparable than in our neighbouring Nordic countries, but there is room for improvement.
In October 2014, an EU directive was adopted that required that certain large undertakings, with more than 500 employees, should prepare an annual non-financial statement containing information relating to environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. The aim of the reporting requirement, which applies for the financial year starting on January 2017, is to enhance the transparency and comparability of the non-financial information disclosed throughout the Union.
Sweden implemented the new regulations on 1 December 2016, by means of amendments to the Annual Reports Act (1995:1554). The Swedish reporting requirement applies to all undertakings that
The Swedish implementation is thus wider than what is required according to the EU minimum level, partly as it covers companies with more than 250 employees on average, which is half the number stated in the directive, and partly as it applies to all companies, and not just traded companies or certain financial institutions.
In this memo, From voluntary to mandatory sustainability reporting, Growth Analysis analyses Sweden’s implementation of the EU directive on non-financial reporting. The report forms part of the framework project Can the financial market’s sustainability assessments contribute to the business sector’s green conversion and if so is there a role for the state?
Using firm-level data and data on production-based emissions at industry level for 2015, we investigate the share of Sweden’s business sector, economy and greenhouse gas emissions covered by the more wide-ranging reporting requirement.
Has the sustainability reporting of Swedish companies become more transparent and comparable over time?
Growth Analysis has also investigated the transparency and comparability of Swedish sustainability reporting over the last four years, whereof the last year under directive requirements. We interpret a transparent sustainability report as the quantity of sustainability information that the company disclose. Comparable sustainability reporting is interpreted as the coherence of the sustainability reports, thus whether companies choose to disclose equal sustainability information. Growth Analysis uses the Nordic Compass database, which contains information on ESG indicators for around 400 companies that are traded in the NASDAQ OMX Nordic Large and Mid Cap segment, about 40 per cent of which are companies with their headquarters in Sweden and most of the remaining in the other Nordic countries. Nordic Compass includes 80 ESG indicators, divided into the categories Environmental, Social, and Governance indicators, and covers four years; from 2014 to 2017.
The comparability of the sustainability reports has been investigated by statistical tests of the coherence of the disclosed information across sustainability reports.
By implementing the EU directive on non-financial reporting broader than the prescribed minimum level, more than half of the Swedish corporate sector is covered in terms of added value and greenhouse gas emissions. Although Swedish firms appear to be reporting, on average, a larger quantity of sustainability information in a more coherent way than our Nordic neighbours, there is room for increased transparency and comparability. In a few years, it will be possible to investigate whether the reporting requirement has these effects.
Serial number: PM 2018:22
Reference number: 2018/070