The combination of complete, truthful, reliable and understandable financial information and the transmission of it with transparency to stakeholders by companies has so far been a fundamental instrument to generate confidence in the markets.
But the profound transformations that have occurred in the last year and a half as a result of the impact of the coronavirus, the rapid penetration of digitization or the prominence that non-financial information has taken in the demands of the stakeholders They have built a new, more complex and demanding scenario crossed by the uncertainty that the adaptation of companies demands.
That binomial formed by good information transmitted clearly has not changed. But the level of demand has, which has increased, as well as the challenges they face to manage data that generates trust.
CFOs know this well. They are not only asked for a more active role and more presence in all areas of the business. Now they are also attributed responsibilities in the completion of non-financial information, or what is the same, sustainability. Some add sustainability issues to their charge.
liquidity is no longer enough. The social and environmental is essential
Financial information, accounting, numbers, liquidity, are no longer alone and are not enough. It is essential to integrate the social and environmental impact that the economic activity of the company will have. Harmonizing it in the different markets and with the different standards that currently exist is another challenge they face. All of this is part of this cultural change driven by young talent that has already reached companies and permeates their business model from the bottom up.
The challenges faced with these modifications were some of the aspects that were addressed in the meeting Transparency: the key in market confidence towards economic recovery, organized by Five days with the collaboration of the consulting firm KPMG.
Borja Guinea, partner responsible for auditing at KPMG Spain, outlined a current framework “of greater complexity” increased by “the Covid and the uncertainty” it generates. In this context, stakeholders give more relevance to the data and are, therefore, “more demanding” in terms of the content of the financial and non-financial information they request.
This implies the urgency of greater transparency that leads to an increase in the “need for supervision and control by regulators” and to an “improvement of internal control” in collaboration with the auditors, he explains.
Harmonizing the models around which sustainability information is organized and prepared is another of the fundamental issues that Guinea mentions. “In this part we need standards to know what to present and how to do it.”
Various institutions at European and global level are working in parallel in the creation of these sustainability standards. The European Commission is developing a new sustainability directive that could be ready in the first half of 2022. On similar dates a first set of draft standards for sustainability reporting is planned, prepared by the European Financial Reporting Advisory Group (EFRAG, for its acronym in English).
It is necessary to harmonize at a global level the form
in which sustainability is presented
At a global level, the international accounting regulator, the IFRS Foundation, has promoted a sustainability panel to develop international sustainability standards based on existing initiatives in the market.
“It would be very interesting for both initiatives to talk and understand each other to collaborate and achieve this unification,” explains María Ángeles Peláez, BBVA’s accounting director. In this entity they are concerned about the problems that groups with an international presence like yours are “faced with a huge emergence of sustainability standards that make it very difficult to homogenize all this information.”
From Sacyr, its financial director, Carlos Mijangos, also misses a series of harmonization criteria, at least from the sectoral point of view. “In the end there has to be a harmonization so that everyone can understand information on sustainability at least from companies in the same sector,” he argues.
Along this path where international groups such as Acerinox are facing new complexities, Miguel Ferrandis, its financial director, calls for the European Union to “print a clear real and moral leadership on this issue and direct a regulatory framework to harmonize” these behaviors.
Coping with the tsunami
Ferrandis is one of those who believe that “we are at the tsunami moment” of sustainability. “It is a continuous bombardment. There is a lot of farfolla. We have to be a little more selective ”, he reflects. The direction to follow can be summed up in “not letting ourselves be carried away by currents that make us lose business focus”. The way to do this is “to explain transparently that not everything is to produce more tons”, but also “how you produce them, how you reduce emissions and that there are other investment and return criteria”.
Sacyr has issued its first linked social bond
to a project
in Latin America
Mijangos sees it as “a freight train that has already started and in which more and more wagons have to be put in”. He gives as an example the first social bond that Sacyr has issued in Latin America, linked to an infrastructure project in a depressed area of Colombia. “People are willing to invest at lower costs if the money goes to something that is attractive to them from a social, environmental point of view.”
This paradigm shift is what the company is oriented towards. It is a process in which progress is made “little by little, we cannot go from night to day in just six months and without forgetting the production of benefits for your shareholders”, he adds.
It is one more sign of how markets already value this type of practice. “This is an unstoppable train. Stakeholders are not only demanding financial data. What they want is social and sustainable capital ”, intervenes Peláez. It is adding another modification, that of the paradigm of time. “From the short term in the financial to the longer term in the valuation of the company in sustainability”.
Money from the
European Union should be destined
to really modernize the country
And this is where, as Guinea asserts, “we as auditors have an important role to play. In a context in which the standards are not defined, being able to give suggestions about what other markets or companies do is a clear contribution ”.
From KPMG they warn about the loss of competitiveness that this level of demand can lead to Spanish companies compared to those that operate in other places. Ferrandis agrees in this regard and adds “the lack of transparency” to the lack of compliance with sustainability standards “of some competitors” such as China. “We play football and they play rugby,” he describes, and calls for “barriers to defend those who do our homework.”
None of this would be possible if, as Mijangos puts it, a “cultural change” had not occurred in companies by incorporating sustainability into their decision-making. This has happened in recent years and has also been closely linked “with the incorporation of a young talent who would not have joined if you did not have that commitment.”
Something that has been done, as Peláez maintains, “in a transversal way with the involvement of all areas and with a government model that helps to strengthen this awareness.”
Public-private collaboration; channel that money so that it reaches SMEs and the self-employed; agility in the identification and processing of projects; audit that these funds are actually being given what is planned, and use them in viable companies that are going to transform and modernize the country. These are the proposals of the intervening parties to effectively manage the 140,000 million that Spain will receive from the EU.
At Sacyr they are ready with a specific team and a package of 3,000 million in specific activities already identified.
At BBVA they are clear about the role to play to be an efficient system that takes this money to small and medium-sized companies and entrepreneurs.
Acerinox focuses on their use for the reindustrialization of the country in companies with growth plans.
Finally, KPMG will have a double function: to identify opportunities and to verify that its use is appropriate.
The speculation and volatility caused by the Reddit social network with the massive purchase of shares in the video game company GameStop is the antipodes of the practices recommended by the participants in the meeting. Avoiding actions of this type is complicated. Information moves very fast and the technological expertise of its young drivers has exposed weaknesses in the markets.
Mijangos believes that the real problem is that “leveraged purchases and no real money deposit” are allowed, so he is in favor of regulating “the Robinhoods on duty” that activate them. Ferrandis supports him, although he warns that “regulations are always behind and tend to make life more difficult for those who comply” compared to those who do not.
From BBVA they propose another reflection: “There are many and very complex. It is highly desirable that regulations have a flexible framework to be able to act very quickly in all kinds of situations. “