One third of companies do not report sustainability information

Spain is 6 points above the European average and 11 points above the global average in the percentage of companies that do not share sustainability reports.

Almost 40% of Spanish companies are not yet ready to comply with the ISSB sustainability reporting regulation that will come into force in December.

Half of the companies that do not report on sustainability are unaware of the benefits of doing so.

One third of medium-sized companies in Spain admit that they still do not report on any of the aspects related to their greenhouse gas emissions, while 12% state that they do not have a reporting plan in place at the moment. This puts Spain six points above the European average (28%) and 11 points above the global average of 22.9%.

On the other hand, 65% of businessmen in Spain (3 points below the European average) say that they report some parameter related to greenhouse gas emissions, although only 24% of them are obliged to do so for their business.

These are some of the main conclusions of the international study carried out by Grant Thornton on more than 5,000 mid-market companies from 28 countries in relation to the preparation of sustainability reports. This study details the situation in which companies in our country find themselves before the entry into force of the new sustainability reporting standards to be published by the International Sustainability Standards Board (ISSB) at the end of this year 2022, which will require companies to provide information on their greenhouse gas emissions of scope 1, 2 and 3.

Ramón Galcerán, president of Grant Thornton, says, "It is necessary to take information on emissions as seriously as the damage they cause, otherwise we will not make significant progress in the fight against climate change. In this sense, the data from the Grant Thornton study shows that a significant percentage of medium-sized companies in Spain still have work to do in terms of preparing reports that measure their emissions".

Uneven preparation of Spanish companies for the entry into force of the ISSB standards

Despite the imminent entry into force of the ISSB standards, a high percentage of Spanish companies are still in the early stages of complying with the new code. Thus, 38% of companies say that for the moment they are identifying what will be new and planning the approach they will have to adopt.

On the other hand, 36% of Spanish executives say that their respective companies are already reviewing their structures and adapting their internal reporting processes in preparation for the approval of the new standard. Likewise, almost 26% say they are proactively testing new reporting approaches to cope with the new regulation before it comes into force.

At the European level, companies are also in a sensitive situation, although somewhat better than their Spanish counterparts with 32% (six points less than in the Spanish case) in an early phase of pre-planning for the novelties of the new regulation.

Jaime Romano, Partner in charge of Sustainability Strategy at Grant Thornton, emphasizes that "The positive evolution of these data in recent years, which implies a greater commitment of mid-market companies to incorporate ESG actions in their strategies, reflects the progressive business awareness and the need to prioritize these actions in their different business models".

Knowing the benefits of preparing sustainability reports: the weak point of many Spanish companies.

As can be seen from the research carried out by Grant Thornton, 47% of businessmen who have not yet introduced sustainability reports in their company do not know what benefits it would have for their organization to carry them out, 13 points more than the European average. Almost three out of ten (27%) believe, however, that sustainability reporting would enhance their reputation with stakeholders, while 17% believe that it would benefit them by demonstrating compliance with legislative requirements. A further 13% of executives believe that it would help them to access other markets and another 13% believe that it would help contribute to the overall goal of achieving zero emissions.

Another noteworthy aspect of the companies that do not yet carry out sustainability reports is the reasons given by their managers for not doing so. Thus, 40% say that they do not have significant levels of emissions to make a report in this area and 13% say they do not actively manage carbon emissions because they do not have objectives or targets in this area. For another 13% there is no clarity on what companies are expected to report. It is noteworthy that 20% have no specific reason for not carrying out sustainability reporting.

In relation to the companies that already carry out sustainable reporting, 28% of the organizations consider that the main benefit for the company is focused on increasing its reputation with stakeholders while for 26% these reports help to achieve the overall goal of zero net emissions, followed by the identification of an increased competitive advantage in the sector (26%), the demonstration of compliance with the requirements and increased preparedness to respond to climate-related risks for the business (24%).

For Sergi Puig-Serra, Audit Partner at Grant Thornton, "the sustainability report we have prepared at Grant Thornton shows the need for companies to understand what their obligations are, what are Scope 1, 2 and 3 emissions, and to start collecting this information. Companies should incorporate ESG-trained professionals who are capable of integrating sustainability in a cross-cutting manner throughout the organization. Sustainability should not be perceived as specific and temporary actions, but should be part of the DNA of the company, of its strategy and mission; this process of change must be carried out with the absolute conviction of the highest management bodies of the companies that should be responsible for integrating these aspects into the culture of the organization".

Companies prioritize integrating sustainability throughout the organization and aligning themselves with external reporting standards.

Medium-sized Spanish companies starting out in ESG (environmental, social and governance) reporting consider it necessary to prioritize certain aspects in order to increase the credibility of their reports. This is the case of alignment with external reporting recommendations, which is a priority for almost 35% of Spanish companies. Thirty-four percent consider that another necessary aspect is the integration of ESG measures at all levels of the organization, while 29% believe it is essential to carry out solid tests of the control environment that generates ESG information.

Following these trends, 25% believe it is a priority to ensure that internal auditors review ESG reporting methods and 25% prefer to benchmark ESG reporting against other companies in the industry. Ensuring an external audit of financial statements is a priority measure for 24% of managers, as is ensuring an external audit of non-financial information, a measure that 22% of respondents would activate in the first instance.

For Jaime Romano, "Obtaining information and its associated processes has become a priority for Spanish companies, which translates into the need to obtain and properly report data with a higher level of quality, which will result not only in the information generated in compliance with ISSB standards or other ESG aspects, but in an overall improvement of the information that will favor an improvement in their management and business decision-making".