Report DNF 2021 - CONSOB AND ITS ACTIVITIES
Report 2021 on non-financial reporting of Italian listed companies
Report 2021 on non-financial reporting of Italian listed companies
Non-financial information as a driver of transformation
| The goals of the Report The Report analyses the evidence on the implementation of the Directive 2014/95/EU, transposed in Italy by the Legislative Decree no. 254/2016, also with the aim of highlighting the progressive cultural change triggered by the integration of sustainability into the corporate decision-making process. ... more |
| This Report examines, for the fourth year running, how Italian listed companies are implementing the Directive 2014/95/UE, transposed in Italy by the Legislative Decree no. 254/2016 (the Decree). The analysis covers, among the other things, those behaviours that may signal progress in the cultural transformation towards the integration of ESG (Environmental, Social and Governance) factors into the design of business models, corporate strategies and corporate governance models. The first section of the Report covers non-financial statements (NFSs) published pursuant to the Decree and focuses on the materiality analysis carried out by companies and on the Strategic plans presented to investors. It also examines certain effects of the economic and social consequences of the Covid-19 pandemic on the materiality analysis performed by companies during 2020. The second section of the Report explores the relevance of non-financial issues at the board level, in the light of the evidence gathered from the guidelines for board renewal and from the corporate governance reports, and of sustainability skills of board directors (BoD) in medium and large-sized companies, as resulting from publicly available information. The third part of the Report delves into the integration of non-financial factors into CEO remuneration policies. Finally, the report includes an Addendum with an analysis conducted by researchers Matteo La Torre and Paola Tamburro of the University of Chieti-Pescara, through a Natural Language Processing platform, aimed at verifying the evolution of environmental information rendered in DNFs over the period 2018-2021. |
| The three steps of ESG/multicapital integration into corporate governance and strategy Compliance with obligations on non-financial reporting can trigger a cultural transformation of corporate decision-making process that can be traced back to three phases: Awareness, Capabilities, Engagement. In this Report, the first two phases are identified through the analysis of NFSs and other publicly available corporate documents, while the third stage is appraised through the examination of the abstracts of Strategic plans. ... more |
| Awareness is the precondition for change. It originates from compliance with reporting obligations and develops into the acknowledgement of the relevance of ESG factors and of role they can play in the transformation process. As for compliance, corporate organisational arrangements for non-financial disclosure were analysed, whereas progress in the acknowledgement of the role of the ESG issues was captured through the examination of board involvement. In 2021, while the number of companies publishing a NFS and performing materiality analysis remained unchanged, some behaviours were more frequent than in the previous year. The involvement of the BoDs in the materiality analysis is recorded in 51 companies, up from 39 in 2020. Board inductions on ESG subjects rose to 53 compared to 32 in 2020, although this increase is also affected by the numerous inductions on the new version of the Corporate Governance Code. Out of the companies publishing the NFS, the sustainability committee was set in 89 cases, significantly up from 73 of the prior year. Capabilities building is captured with reference to the materiality analysis and consideration of ESG factors at the board level. As for the materiality analysis, in 2021 stakeholder engagement showed, for the first time, a slight decrease, maybe due to Covid-19 emergency (it was reported by 81 companies vs 83 in 2020), whereas both top managers and internal bodies as a whole were more frequently involved (respectively, 83 cases vs 74 in 2020 and 116 cases vs 114 in 2020). In addition, an increase was recorded both in the number of companies that used platforms for stakeholder engagement or advanced data analytics tools to enrich materiality analysis (14 issuers from 12 in 2020) and in the number of companies that put in place ESG data collection systems (26 from 20 in 2020). In addition, non-financial matters were more frequently addressed in training programmes for employees and managers (117 cases up from 107 in 2020). Consideration of sustainability appears to be more widespread at the board level too, probably also as a result of the amendments to the Corporate Governance Code in January 2020, as shown by the more frequent integration of ESG factors into board renewal guidelines (up from 19 over 50 issuers in 2020 to 25 over 49 in 2021) and into board self-evaluations (up from 37 to 45 companies over the same period). Finally, the integration of ESG criteria into CEO's remuneration packages rose substantially too (106 companies up from 63 in 2020), thus marking a booster of transformation. Engagement represents the last step in the transformation towards the integration of ESG factors into strategies and business models. In this phase, companies spontaneously carry out new integrated behaviours. To capture this stage, the Report analyses the abstracts of the Strategic plans, presented to investors in road shows and/or published in the Investor Relation section of the corporate website, in order to verify how and to what extent firms describe a strategy integrating and connecting financial and non-financial issues. In 2021, 63 companies (59 in 2020) published the abstract of their Strategic plan. Out of these, 30 mentioned some long-term business considerations; 16 connected their strategy to the UN Sustainable Development Goals; 8 issuers active in the Energy/Oil and Gas industry fully integrated in the disclosure of their strategy issues that generate value in the short and in the long term, describing the connections between financial and non-financial matters. |
| Addendum Environmental information in NFSs over time The report includes, for the first time, an addendum with the analysis of environmental information in NFSs published over the period 2018-2021, conducted by Matteo La Torre (researcher at the University ‘G. d'Annunzio' of Chieti-Pescara) and Paola Tamburro (data scientist). ... more |
| Over time, the information on companies' environmental performance and impacts has gained a significant role within corporate disclosure. This is particularly the case within non-financial reporting requirements of Legislative Decree 254/2016. The analysis aims at providing insights into the development of the environmental information disclosed by Italian companies in the 825 NFSs published from 2018 to 2021. These insights result from a longitudinal analysis of the environmental themes (also called topics hereafter) that shaped the NFSs. The NFSs analysis was performed by using the CORINA platform, based on a taxonomy whose semantic structure is inspired by the Global Reporting Initiative's standards for sustainability reporting. Thereafter, the environmental information collected was analysed through a probabilistic method of topic modeling (Latent Dirichlet Allocation – LDA) to identify the topics shaping the environmental themes of NFSs. Topics are latent semantic constructs lying in a corpus of textual data. They are hidden semantic structures in the text, represented by a set of concepts and keywords that make sense of each topic. The results of the analysis show that four years after the entry into force of the Decree 254/2016, Italian companies have enhanced their information systems on environmental aspects and the related disclosure, in terms of both the quantity of information and the range of topics covered. At the same time, the results highlight differences in the topics shaping the environmental information, due to the industry companies belong to and to the regime (mandatory or voluntary) of the NFSs adoption. |
The Report was prepared by:
Nadia Linciano (coordinator) - CONSOB, Head of the Research Department (n.linciano@consob.it)
Angela Ciavarella - CONSOB, Corporate Governance Department (a.ciavarella@consob.it)
Giovanna Di Stefano - CONSOB, Research Department (g.distefano@consob.it)
Ilaria Fabbiani - CONSOB, Corporate Governance Department (i.fabbiani@consob.it)
Lucia Pierantoni - CONSOB, Research Department (l.pierantoni@consob.it)
Livia Piermattei - Senior Advisor Methodos; Board Advisor for a Sustainable Success; Nedcommunity (l.piermattei@methodos.com)
The opinions expressed in the Report are the authors' personal views and are in no way binding on Consob.
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ISSN 2784-8809 [online]