For Finnish companies, the mandatory elements of sustainability reporting are determined by the EU’s Corporate Sustainability Reporting Directive (CSRD) and national legislation. Mandatory elements include environmental responsibility, social responsibility, and good governance (ESG), which are reported in accordance with ESRS standards. Certain companies of a specific size will be subject to these reporting requirements in phases, starting in 2024. The report must be published as part of the annual report, and the information must be externally verified.
The Importance of Sustainability Reporting for Finnish Companies
Sustainability reporting has become a central part of Finnish companies’ operations. Instead of merely financial indicators, stakeholders now expect comprehensive transparency regarding companies’ social and environmental impacts. Stricter EU regulations, particularly the CSRD Directive, have significantly changed reporting requirements, making them more detailed than before and mandatory for an increasing number of companies.
Sustainability reporting is no longer just a legal obligation, but a strategic tool. Well-executed sustainability reporting can provide a competitive advantage, attract socially responsible investors, and enhance a company’s reputation. Modern financial management requires the integration of sustainability into corporate operations management and data management.
Companies need to integrate financial and sustainability data in a comprehensive manner, which requires effective systems and analytical tools. This helps identify risks, spot opportunities, and make data-driven decisions.
Which companies are required to prepare a sustainability report in Finland?
The scope of sustainability reporting requirements in Finland will expand significantly with the implementation of the CSRD Directive. In the initial phase, the reporting requirements will apply to large public-interest entities (PIEs) with more than 500 employees. These include listed companies, credit institutions, and insurance companies, which must prepare their first CSRD-compliant reports for the financial year starting in 2024 (to be published in 2025).
In the next phase, starting in 2025, the reporting requirement will be expanded to cover all large companies that meet at least two of the following criteria:
- Total assets of over 20 million euros
- Revenue of over 40 million euros
- An average of more than 250 employees
In the third phase, starting in 2026, the reporting requirement will also apply to publicly traded SMEs (excluding micro-enterprises). For other SMEs, reporting is voluntary, but they should still prepare for reporting, as large companies may require sustainability data from their supply chains.
It is important to note that the timelines refer to the fiscal year for which the report is prepared, and the report itself is always published the following year.
What information must a sustainability report include under the new EU regulations?
The sustainability report must include comprehensive information on the environmental, social, and governance impacts of the company’s operations in accordance with the ESRS standards. The reporting is divided into three main areas:
Environmental responsibility encompasses climate change mitigation and adaptation, pollution prevention, the protection of water and marine resources, the circular economy, and the protection of biodiversity and ecosystems. Companies are required to report on their greenhouse gas emissions and climate goals, for example.
Social responsibility encompasses employee well-being, human rights, and the impact on communities. The report should describe working conditions, equality, diversity, occupational safety, and the observance of human rights throughout the supply chain.
Good corporate governance addresses corporate management practices, the prevention of corruption and bribery, tax policy, and transparency. In addition, companies must describe how sustainability is integrated into their business strategy.
Reporting should apply the principle of dual materiality: information should be reported both on how environmental and social issues affect the company (financial materiality) and on how the company affects the environment and society (impact materiality).
How is data for sustainability reporting collected and verified?
Collecting sustainability data requires a systematic process and effective systems. The process begins with a materiality assessment, which identifies the sustainability issues that are relevant to the company. Next, metrics and data collection methods are defined for each reporting area.
Data collection often draws on multiple sources:
- Enterprise Resource Planning (ERP) systems for financial and operational data
- Energy Management Systems for Environmental Data
- HR systems for employee data
- Supply chain management systems for supplier data
The collected data must be analyzed and processed into a reportable format. Modern data management utilizes data platforms that integrate information from various sources and enable effective analytics. Automated reporting tools facilitate regular reporting and reduce errors.
The CSRD Directive requires that sustainability disclosures be subject to external assurance. Initially, limited assurance is required, but this will later transition to reasonable assurance. External assurance requires that the data collection process be documented, reliable, and traceable.
What are the potential consequences of failing to report?
Failure to comply with sustainability reporting requirements can have significant legal and reputational consequences for a company. In Finland, the Financial Supervisory Authority acts as the supervisory authority and may impose administrative sanctions, such as public warnings or fines, for failure to meet reporting obligations.
In addition to financial penalties, failure to report can have a negative impact on a company’s reputation and relationships with stakeholders. Investors, customers, and partners increasingly expect transparency on sustainability issues, and inadequate reporting can lead to a loss of trust.
Access to financing may become more difficult as banks and investors assess companies’ ESG risks with increasing scrutiny. Sustainable financing criteria require reliable sustainability reporting, and inadequate reporting can increase the cost of financing.
Failure to report can also undermine a company’s competitiveness, as many large companies require sustainability data from their suppliers. Without proper reporting, a company may lose business opportunities.
Summary: The Future of Sustainability Reporting and HSolutions’ Support
Sustainability reporting requirements will become stricter in the coming years, and an increasing number of Finnish companies will fall under the reporting obligation. Integrated systems and effective data management will play a key role as companies strive to meet the requirements set by the CSRD Directive and ESRS standards.
The key elements of successful sustainability reporting are:
- Reliable and automated data collection
- Powerful data analytics
- Integrating sustainability data into financial management
- Clear and transparent reporting
In the future, more advanced AI solutions will make it easier to analyze sustainability data and measure impact. At the same time, reporting requirements are likely to expand to cover the impacts of the entire value chain in ever greater detail.
An expert partner can help build robust systems for managing sustainability data and integrate them into the company’s financial management. Solutions that combine financial planning, data management, and analytics provide a solid foundation for developing sustainability reporting.
The key is to start preparing early and view sustainability reporting as an opportunity to steer the business toward greater sustainability—not merely as a legal obligation.