3 minute read 18 Sep 2020
Girl meditating in the woods

Sustainability reporting in Slovenia - obligation or opportunity?

By Primož Kovačič

EY Slovenia, Associate Partner, Country FAAS Leader

Expert in Slovenian (SAS) and International Financial Reporting Standards (IFRS).

3 minute read 18 Sep 2020

EY Slovenia analysis of sustainability reporting in Slovenia shows much room for growth.

Everyone knows that we should recycle and reuse waste to act sustainably and be environmentally friendly. But how can key economic actors – companies and organizations – highlight the importance of sustainable development and help protect the environment, ensure stable growth, increase trust in the markets and reduce social inequality? One very important aspect is transparency. Non-financial reporting allows the companies to share their values and their approach to these global issues with the interested stakeholders.

More and more countries are adopting legislations that include sustainability reporting. In Slovenia, the National Assembly adopted the Act Amending the Companies Act (ZGD-1J), implementing legal requirements to disclose information on non-financial performance. These requirements are binding for large organizations (public interest entities) with more than 500 of employees on average on the cut-off date and organizations who are bound to prepare a consolidated annual report with more than 500 employees on average on the consolidated level. The annual reports of all companies who meet the criteria defined by the ZGD-1J must include the following:

  • Non-financial reporting statement (which must cover at least the information on environmental, social and HR matters, respect for human rights, and information on anti-corruption and anti-bribery measures); and
  • Description of their sustainable business model (presentation of the main sustainability related risks and the way the company minimizes these risks or responds in case of serious harmful effects on the society and environment).

Sustainability reporting is an opportunity to share company values with the interesed public.

EY Slovenia constantly encourages better sustainability practices, both in our people and our clients, as well as in the wider economy and society. As part of these efforts we analyzed the current level of sufficiency and adequacy when it comes to sustainability reporting in Slovenia. The aim of our internal analysis was to encourage all companies to include sustainability aspects into their strategic guidelines. In addition to the legally required elements of a sustainability report, we also focused on the content, the clarity of messaging, the innovation, the form of the report and we checked whether the report was independently reviewed. These factors separate sustainability-minded, responsible companies who really strive to do better from those who are merely looking to satisfy the letter of the law.

More than

50 %

of companies disclosed inadequate sustainability information

According to the latest publicly available information at the time of the analysis, around 90 Slovenian companies met the criteria for mandatory inclusion of non-financial information into their annual reports. However, only 33 of the reports we analyzed were prepared in accordance with the ZGD-1J. Six companies failed to include even a single legally required sustainability element, and more than half included insufficient disclosures. In general, the companies payed more attention to reporting on environmental, social and HR matters, and failed to disclose information on respect of human rights and anti-corruption matters.

European legislation allows the companies to report these matters in different reporting frameworks, currently there are more than 20. Our analysis of annual reports showed that Slovenian companies most often follow the GRI sustainability reporting standards. In 2017, GRI sustainability reporting framework was used by 93 % of the 250 biggest companies in the world, including 21 Slovenian companies.

When it comes to independent reviews of the reports by a third party, only four companies included into our analysis sought independent confirmation of their legal adequacy. Most European regulators, except for France, Italy and Spain, do not require a review of the non-financial part of the report. However, in 11 countries a reviewer must confirm that data in the sustainability report is consistent with the financial report. In Central, West and North Europe only large companies usually voluntarily submit their reports for review.

The results of our analysis show that most Slovenian companies do not recognize the importance of sustainability strategy and only do the bare minimum to meet the legal requirements. As such, our priority should be to spread awareness of opportunity afforded by sustainability reporting, as more and more stakeholders deem it just as important as the financial reporting. Company leaders must recognize the importance of sustainable development and follow examples of good practices from abroad, while also spreading information about their sustainability efforts through different channels.

Contact us

for more information on sustainability reporting

Summary

Sustainability reporting in gaining importance and several countries, including Slovenian, have included some form of it into their national legislations. It offers the companies an opportunity to share their values with the stakeholder. However, EY Slovenia analysis show that most companies in Slovenia still see it as an obligation and a nuisance.

About this article

By Primož Kovačič

EY Slovenia, Associate Partner, Country FAAS Leader

Expert in Slovenian (SAS) and International Financial Reporting Standards (IFRS).