Bank of Lithuania: issuers are invited to pay more attention to sustainability information disclosure
Sustainability information is disclosed unevenly by the companies listed on AB Nasdaq Vilnius stock exchange. The Bank of Lithuania prompts the companies to increase their focus on this area and provide a more detailed information to the public, including internationally.
“We see that some of the companies are highly focused on sustainability and social responsibility. For example, one company is among 10% of the best rated food and drink sector companies in the world in terms of sustainability. However, some other companies still need to catch up. Sustainability principles are gradually becoming mandatory, whereas the companies following them gain various additional benefits, as the principles become more important to employees, customers, suppliers, investors and all other stakeholders,” says Vaidas Cibas, Head of the Capital Market Supervision Division.
The Bank of Lithuania published the overview of disclosure of compliance with sustainability-related environmental, social and governance (ESG) principles by the 21 companies listed on AB Nasdaq Vilnius stock exchange in their annual reports or social responsibility reports. The central bank also provided recommendations.
Sustainability information was disclosed by 13 companies. 8 of them published social responsibility reports and disclosed sustainability information voluntarily, while 6 companies took advantage of an exemption and did not publish such reports. The majority of the companies disclosed sustainability information in separate social responsibility reports.
9 out of 21 companies stated that they had prepared a sustainability strategy and had created the procedures to integrate sustainability factors in their operations. However, by now only a small part of the companies link their sustainability strategies with their business models and take into consideration the strategy results.
Information on business models, sustainability strategies and risks as well as their assessment and control is properly disclosed by less than a half of the companies. The Bank of Lithuania notes that it is not sufficient to just disclose the policy, the company’s or group’s strategy and key risks. It is important for those reading the reports to understand how the adopted strategy is linked to the business model, what are the results of the policy applied and how the management is involved in these processes and controls them. When providing information on key risks, the companies should disclose how they are managed and controlled. Information on the management of key risks should be assessed from the short-term, medium-term and long-term perspectives.
The majority of the companies (16 out of 21) used key performance indicators (KPIs) in their reports. 10 companies disclosed these indicators comprehensively by including almost all areas related to environmental, social and employee, anti-corruption and anti-bribery matters as well as respect for human rights. However, 5 companies did not disclose non-financial indicators in their annual reports or presented indicators related to a certain area only (for example, employees). In the opinion of the Bank of Lithuania, the companies should explain why the KPIs used are important for the company and how each of them is related to the company’s objectives as well as provide comparative historical data and calculation methodologies.
Although the companies strive to disclose as much information as possible in their annual reports, only a very small share of it is available to the public. For example, the Bloomberg information system shows the ESG indicators of only 2 companies. The Bank of Lithuania prompts the companies to provide more ESG information and key indicators via public information portals. This would enable the assessment of their activities by independent international experts and attract investor attention.
The assessment and improvement of sustainability factors is inseparable from each company’s activity. According to Republic of Lithuania legal acts, large public interest undertakings or their groups with the average annual number of employees exceeding 500 as of the last day of the reporting financial year are required to include a social responsibility report in their annual report or to prepare a separate report.