Non-Financial Statement (DNF): strategies, reporting and value creation

Increasingly, transparency around environmental and social policies, and around ESG criteria in general, is influencing the way we perceive a company’s value, with important repercussions on its future prospects and growth performance. On this horizon, the Non-Financial Statement (or DNF) can be a key tool for the future of companies.

The Non-Financial Statement consists of a detailed report that can accompany financial and economic reporting, and which describes the status quo of all corporate social responsibility policies implemented by a company.

In this article we will look in detail at what the DNF is, and explore how it can be integrated into medium- and long-term business strategies with the goal of creating value and growth in line with the principles of transparency, sustainability, and accountability.

WHAT IS THE NON-FINANCIAL DECLARATION AND WHO SHOULD MAKE IT?

The Non-Financial Statement (NFD) is a report that companies must prepare to communicate information regarding their environmental, social and governance (ESG) impact and is intended to detail the company’s policies on safety, health, environment and active transparency and anti-corruption policies. The document must be submitted on annual basis, within 3 months after the end of the financial year and, as we will see below, for some entities today it is a regulatory requirement.

It contains a set of indicators and KPIs and a level of transparency that goes beyond financial reporting, and allows recipients to take a holistic view of the company and its impact, and understand how it manages non-financial issues that may affect its long-term performance.

The DNF is a report that contains social and environmental information and data, with a focus on corporate sustainability policies, personnel management arrangements, anti-corruption efforts, information management, and governance.

According to the current regulatory framework, the entities required to respond to the Corporate Sustainability Reporting Directive (CSRD) and thus to prepare the DNF are large public interest companies and those with more than 500 employees, but this obligation will be extended in 2025 in general to all large companies, in 2026 to listed SMEs, and in 2028 also to non-EU companies with an annual turnover of more than €150 million in the European Union or with a branch office in the EU.

This set of deadlines is aligned with the medium- and long-term goals of greater social and environmental responsibility of companies regarding their impact, and the promotion of investments on transparent realities that operate within a horizon of concrete and measurable sustainability.

DNF OR SUSTAINABILITY BUDGET?

While at first glance they might appear to be similar documents, the sustainability report and the Non-financial Statement are different instruments, in terms of their main objective and target audience, although both contain data and reporting on ESG and non-financial indicators.

• The sustainability statement or report is a document prepared for the use of all stakeholders of the company, including consumers, partners, customers, suppliers, etc. It serves as a tool for transparency and dialogue with the outside world, which positions the company as a responsible and transparent stakeholder. Stakeholders can therefore refer to the Sustainability Report to understand the company’s overall impact on the local area, society and the environment, and to assess its commitment to sustainable growth.

• The Nonfinancial Statement, on the other hand, fits within the horizon of European policies on sustainable finance. It is primarily aimed at financial stakeholders, such as investors and capital providers, to whom it provides information in addition to the annual financial statements that is useful for making investment decisions.

While the sustainability report aims to manage the relationship with stakeholders, the Non-Financial Statement focuses on transparent and detailed communication to attract future capital for new investments.

TRANSPARENCY AND DECISION-MAKING FOR DNF REPORTING

Reporting in the Non-Financial Statement must adhere to established criteria of transparency and accuracy in order to provide a clear picture of the company’s activities and its social responsibility policies.

To do this, it is important that it be prepared following guiding principles:

• It must contain an accurate data collection, using reliable data collection systems to ensure the accuracy of the information;
• It must adopt internationally recognized reporting standards, such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB);
• It is good practice to use external verification by independent third parties to ratify the information reported, thus increasing the credibility of the document.

CREATING VALUE FOR THE COMPANY WITH DNF

While for many entities to have a DNF is a regulatory constraint, there are also many companies that choose to embark on this path voluntarily, and place the DNF within a broader, long-term strategy, interpreting it as an opportunity to create value. Let’s see how:

• Attracting new investment: investors are increasingly interested in the implications of a company’s ESG performance as an indicator of stability and future growth;
• Customer loyalty: companies that demonstrate a transparent commitment to sustainability, distancing themselves from greenwashing, greenhushing and opaque communications, tend to build stronger and longer-lasting relationships with customers;
• Improving operational efficiency: sustainability-oriented practices and updates can lead to a reduction in operating costs, for example through improved energy efficiency and reduced waste;
• Employee motivation and engagement: a working environment marked by transparency, ethics and sustainability is also a workplace that attracts and retains talent by aligning corporate values with employees personal values.

The Non-financial Statement can be a tool of transformation for companies that decide to adopt it. Beyond regulatory compliance, it can really provide an opportunity to reassess your strategic approach by integrating sustainability into the machinery of business operations.

Through transparent reporting and the choice of policies based on responsibility and sustainability, companies can not only improve their reputation, but also lay the foundations for long-term growth.

In this economic landscape, where social responsibility and environmental sustainability are increasingly at the center of global attention, DNF represents a decisive step towards success on the long path.