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Preparation of the Non-Financial Report

(methodology for non-financial information reporting)

In accordance with Article 18 of Law 25, dated 10.05.2018 “For Accounting and Financial Statements”)

European Commission Communication 1 “Guidelines on non-financial reporting”

1. INTRODUCTION

Law 25, dated 10.05.2018 “On Accounting and Financial Statements”, entered into force on January 1, 2019. The new accounting law aligns with Directive 2013/34/EU primarily on matters of classification of economic units and groups, as well as in the requirements for the preparation of the management report, the non-financial report, and the internal control report. The new law has also improved some requirements related to the publication of financial and non-financial reports.

Greater transparency is expected to make units more resilient and perform better, both financially and non-financially. Over time, this will lead to increased business and employment, as well as increased confidence among stakeholders, including investors and consumers. Transparent business management also aligns with the goal of longer-term investments.

The requirements for providing explanatory notations for non-financial information apply to certain large entities with more than 500 employees, as the cost of obligating small and medium-sized entities to implement them may outweigh the benefits.

Units are required to provide important and useful information necessary to understand their development, performance, position, and impact of their activities, rather than an exhaustive and detailed report. Furthermore, explanatory notes can be provided at the group level and not by each economic entity, a subsidiary within a group. The directive also gives units considerable flexibility to provide relevant information in the way they deem most useful, including in a separate report.

Non-binding guidelines

Article 18 Law 25/2018 refers to the obligation that large entities, which are of public interest and exceed the average criterion of 500 employees during the reporting period, have to include in their activity report a non-financial report, which contains the necessary information for a better understanding of the economic unit's development, performance, position, and the impact of its activity related to the environment, social and employment issues, respect for human rights, anti-corruption, and bribery issues. This article outlines the main issues that the non-financial report should contain, while this guide provides further clarification on what should be included in each of the sections of the non-financial report, including key non-financial performance indicators (KPIs), general and sectoral, with the aim of enabling important, usable, and comparable explanations prepared by economic units. […]".

This Guide transposes the European Commission's Communication “Guidelines on Non-Financial Reporting”, a document that has taken into account current best practices, international developments, and the results of other related initiatives within the Union.

Despite this FAQ Guidance, units may choose to use a broadly accepted, high-quality reporting framework, partially or in full compliance with it. Units may rely on an international, European Union, or national reporting framework and, if so, should specify the framework they use.

The KKK encourages units to take advantage of the flexibility in the requirements outlined in Article 18 of the accounting law when disclosing non-financial information. The guidance in this document is not intended to inhibit innovation in reporting practices.

Different reporting frameworks – national, European Union, or international

In the preparation of this Guidance, KKK it refers to the EC Communication “Guidelines on non-financial reporting”. The principles and content described in the EC Communication “Guidelines on non-financial reporting” are primarily based on frameworks such as:

CDP – Previous Projects for Explanatory Notes on Carbon;
Climate Reporting Standards Board;
OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, and its Supplements;
Eco-Management and Audit Scheme (EMAS) and Sectoral Reference Documents;
European Federation of Associations of Financial Analysts of Key Environmental, Social, and Governance Performance Indicators, a Guide to Integrating Environmental, Social, and Governance KPIs into Financial Analysis and Corporate Valuation;
Global Initiative and Reporting;
OECD-FAO Guidance for Responsible Agricultural Supply Chains;
Guide to the Strategic Report of the Financial Reporting Council (UK);
Instructions for the Multinational Enterprises of the Organisation for Economic Co-operation and Development (OECD)
Guiding Principles for the Business and Human Rights Reporting Framework;
ISO 26000 and the International Organization for Standardization;
International Integrated Reporting Council;
Model Guidance on Reporting Environmental, Social, and Governance Information for Investors of the Sustainable Stock Exchanges Initiative (United Nations);
The Natural Capital Protocol;
Instruction for Environmental Impact of Production and Organization;
Board of Sustainable Accounting Standards;
Sustainabilty Codes of the German Council for Sustainable Development;
The Tripartite Declaration of Principles concerning Multinational Enterprises and social policies of the International Labour Organization;
Global Impact (United Nations);
Sustainable Development Goals (United Nations), Resolution of September 25, 2015 Transforming our world: The 2030 Agenda for Sustainable Development;
Guiding Principles (United Nations) on Business and Human Rights that implement the UN's “Protect, Respect, and Remedy” framework.;

Important

This document has been prepared in accordance with Article 18 of Law 25/2018 “On Accounting and Financial Statements” in order to assist interested entities in presenting non-financial information in a relevant, useful, consistent, and more comparable manner. This document contains non-binding guidance and does not create new legal obligations.

Units using this Guide may also rely on another international, EU or national framework. This document does not constitute a technical standard nor should the non-financial reporting preparers, nor any other party, whether acting on behalf of a preparer or otherwise, claim that the non-financial report is in compliance with this document.

2. PURPOSE

The purpose of this Guidance is to assist entities in presenting high-quality, material, useful, sustainable, and more comparable non-financial information (on environmental, social, and governance matters), in a way that promotes rapid and sustainable growth, employment, and transparency for stakeholders. This non-binding guidance is proposed within the framework of the reporting requirements stipulated in the Accounting Law. The guidance aims to help entities draft a material, concise, useful, and compliant non-financial report in accordance with the Law's requirements.

In drafting the Guidance, considerable efforts have been made to avoid undue administrative burden, excessive explanations or a poor form of „tick the box" exercise.

This non-binding guide emphasizes important, useful, and comparable non-financial information, in accordance with Article 18 of the accounting law on the disclosure of non-financial and diversity information by large, public-interest entities exceeding the average criterion of 500 employees during the reporting period.

This guide is for units subject to the Accounting Law's reporting requirements, to provide non-financial information in their activity performance report. However, this non-binding guide may represent best practice for all units providing non-financial information, including other units not covered by the scope of the Accounting Law.

This guide is adapted to the context of the activity progress report. According to Article 18 of the Accounting Law, the activity progress report includes the non-financial report.

The aim of preparing this document is to ensure a balanced and flexible guide for reporting non-financial information in such a way that it helps entities present material information consistently and coherently. This guide should assist, as much as possible, in ensuring comparability between economic entities and sectors.

This approach acknowledges the wide diversity of businesses and sectors involved, as well as the circumstances that entities must reflect in their reporting. Considerable effort has been made to avoid a „one-size-fits-all" approach.„one size fits all and also a methodology„more descriptive‟.

The Guidance recognizes the importance of links and relationships between information (connectivity), whether these are between different aspects of non-financial information or between financial and non-financial information.

3. MAIN PARTNERS

Presented Informational material

Article 18 of the Accounting Law stipulates that the units in question:

...will include in the activity progress report a non-financial report containing information to the extent necessary to understand the development, performance, position, and impact of the unit's activity...

Materiality is a concept commonly used by preparers, auditors, and users of financial information. A full understanding of an entity, including the key components of its value chain, helps in identifying key issues and assessing what makes information material.

SNK 1 Financial Statement Presentation, paragraph 7 and SC 1 The overall framework for the preparation of financial statements, paragraph 70, defines material information as “information is material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions that primary users of general purpose financial statements make about the reporting entity, which provides financial information about a specific economic entity.”. The materiality of individual voices is evaluated in the context of other similar voices.

The law introduces a new element to consider when assessing the materiality of non-financial information by referring to the information„to the extent necessary to understand the impact […] of the activity (of the unit) (Article 18 of Law 25/2018 “On accounting and financial statements”.

When non-financial information is disclosed, it is important to consider the impacts of an entity's activities. Impacts can be positive or negative. Disclosures of material explanatory information should include both types of impacts clearly and in a balanced manner. The non-financial report is expected to present a fair view of an entity's information, to the extent necessary for relevant stakeholders.

Information material must be assessed in a specific context. Information that may be material in one context may not be in another. The issues considered to be included in the non-financial report are specific to the circumstances of the entity, taking into account concrete situations and sectoral considerations. Entities within an industry are likely to share similar environmental, social, and governance challenges, for example due to the resources they rely on to produce goods and services, or the effects they may have on people, society, and the environment. Therefore, it may be appropriate to directly compare relevant non-financial information between entities in the same sector.

Units can report on a wide range of potential issues. A unit assesses which information is material based on its analysis and how important that information is for understanding the unit’s development, performance, position, and impact. This materiality assessment should consider internal and external factors.

Several factors can be considered when assessing the materiality of information, including:

Modeling business, strategy, and key riskspurposes, strategies of a unit, the approach of management and systems, values, material and non-material assets, the value chain and key risks, all are considered important.
Key sectoral issuesSimilar issues are likely to be material for units operating in the same sector or sharing the same supply chains. Issues already identified by competitors, customers, or suppliers are likely to be relevant to a unit.
Interested the respective stakeholders' expectationsthe units are expected to engage with the relevant stakeholders and seek to better understand their interests and concerns
The Impact of ActivitiesUnits are expected to consider the current and potential severity of the impacts of the activity. This includes the impacts of products, services, and business relationships (including supply chain aspects).
Public policies and regulatory incentivesPublic policies and regulations can affect the specific circumstances of an entity and impact materiality.

Units can explain their internal governance arrangements and the processes used to conduct their materiality assessment. Materiality assessments are expected to be reviewed at regular intervals to ensure that reported issues continue to be, or cease to be, material. Assessments should be more frequent in more dynamic and innovative units and sectors, or in units that change and improve their business models or policies, including the process due diligence. However, they may be less frequent in more stable circumstances.

3.2 True, balanced, and understandable information is presented

The non-financial report must present a fair view of favorable and unfavorable aspects, and the information must be assessed and presented in an impartial manner.

The non-financial report should consider all possible and credible inputs, taking into account the information needs of the respective stakeholders. Information users should not be misled by material misstatements, therefore the entity cannot omit material information by overstating immaterial information.

The non-financial report should clearly distinguish facts from views, opinions, or interpretations. Information can be made fairer and more accurate through, for example:

appropriate internal governance arrangements (e.g., some independent members of the Supervisory Board or a committee thereof entrusted with responsibility for sustainability and/or transparency matters);
strong and reliable audits, internal control and reporting systems;
effective stakeholder engagement; and
security services, independent, provided by parties outside the unit.

Information can also be made more understandable by using simple language and consistent terminology, avoiding the model of standard repeatable phrases, and when necessary, providing definitions for technical terms.

Information material should be provided in the proper context to make it easier to understand. For example, the performance of a unit can be presented by referring to its strategies and broader goals. Units are expected to describe how non-financial issues relate to their long-term strategy, key risks, and policies.

A unit must explain the scope and limitations of the information presented, especially when some information relates only to one or a few of its segments, or excludes specific segments.

Understandability can also be improved by explaining internal matters related to non-financial information, such as measurement methods, underlying assumptions, and sources.

The non-financial report is not just about providing a list of key performance indicators (KPIs). To properly understand the development, performance, position, and impact of an entity, both qualitative and quantitative information must be presented. While quantitative information can be effective in reporting some non-financial matters (performance indicators, targets, etc.), qualitative information provides context and makes the non-financial report more useful and easier to understand. A combination of narrative reporting, quantitative information, and visual presentation elements makes communication more effective and transparent.

Presenting information in a common business language, in addition to the official language of a unit, is likely to improve transparency and help make information more understandable to relevant investors and other interested parties.

3.3 Comprehensive yet concise information is presented

In Article 18, the accounting law stipulates that the units in question:

‘[… ] The activity performance report will include a non-financial report containing information to the extent necessary to understand the development, performance, position, and impact of the entity's activity, in relation to environmental, social, employee matters, respect for human rights, anti-corruption, and bribery […]‘

At a minimum, material information should be provided for specific categories of issues that are clearly reflected in this article. This includes:

environmental, social, and employee matters;
Respect for human rights;
anti-corruption issues and

The units must also present any other material information.

Explanations of material information are expected to provide a complete picture of the entity in the reporting period. This refers to the breadth of information presented. However, the depth of information reported for any particular matter depends on its materiality. An entity should focus on providing the breadth and depth of information that will help stakeholders understand the development, performance, position, and impact of its activities.

The non-financial report is also expected to be concise and avoid immaterial information. The presentation of immaterial information can make the non-financial report less understandable by diminishing the weight of material information. General or immaterial information should be avoided.

The non-financial report may include internal cross-references or signposts to be concise, limit repetition, and ensure connectivity with other information.

Presents strategic and predictive information

The report is expected to provide information on the business model, its strategy and implementation, and explain the short-term, medium-term, and long-term implications of the reported information.

Units are expected to present relevant information about their business model, including their strategy and objectives. The non-financial report provides information on the strategic approach to relevant non-financial issues; what a unit does, as well as why it does it.

By providing information on objectives, best practices, and commitments, a unit can help investors and other stakeholders to read the unit's performance within a given context. This can be useful when assessing future outlook. External monitoring of commitments and progress towards objectives promotes greater transparency to stakeholders. Objectives and standards can be presented in qualitative or quantitative terms. Where appropriate, units can present significant non-financial information based on scientific scenarios.

Forward-looking information allows information users to better assess the ability and sustainability of an entity's development, position, performance, and impact over time. It also helps users measure the entity's progress toward achieving long-term objectives.

3.5 Presents stakeholder-oriented information

Units are expected to consider the information needs of all relevant stakeholders. However, units should focus on the information needs of stakeholders as a collective group and not on the individual needs or preferences of shareholders or on unreasonable information requests from atypical stakeholders.

Depending on the case, collective groups may include, among others: investors, workers, consumers, suppliers, customers, local communities, public authorities, vulnerable groups, partners, and civil society.

Units should provide important and useful information regarding their engagement with relevant stakeholders and how their information needs are considered.

For example, ISO 26000 and the OECD Guidelines for Multinational Enterprises provide useful guidance on this.

Stable and coherent information is presented

The non-financial report is expected to be in line with the other elements of the business performance report.

The clear link between the information presented in the non-financial report and other information provided in the management report makes the information more useful, relevant, and cohesive. The management report should be seen as a single, balanced, and coherent set of information.

As the report contents are interconnected, explaining the main connections makes it easier for investors and other interested parties to understand material information and interdependence.

The content of the non-financial report should be consistent over time. This enables users of the information to understand and compare changes in a unit's development, position, performance, and impact in the past and present, while also comparing it with reliable information about the future.

Consistency in the selection and methodology of key performance indicators is important to ensure that the non-financial report is stable and reliable. However, updates may be necessary as key performance indicators can become outdated, or new and better methodologies can be developed that improve the quality of information. Entities are expected to explain any changes in reporting policy or methodology, the reasons for their change, and their effects (for example, by restating past information, clearly indicating the effect of changes in reporting policies or methodologies).

4. CONTENT

Units are expected to identify the specific thematic aspects and material information to be included in the non-financial report in a fair, balanced, and comprehensive manner, including stakeholder engagement.

The information in the non-financial report is interconnected. For example, the results reflect not only what an entity does (given this through its business model, policies, and strategies) but also the entity's specific circumstances and risks, as well as how effectively the entity manages those risks. Explaining the key connections and interdependencies improves the quality of the report.

During the preparation of the non-financial report, units must take into account the rules for the protection of personal data.

4.1 Business Model

Article 18 (1) of the Accounting Law specifies that the non-financial report contains information, which includes:

„a brief description of the unit's business model‘

A unit's business model describes how the unit generates and sustains value through its products or services over the long term. The business model provides context for the overall performance report. It offers an overview of how a unit operates and the rationale for its structure, describing how it transforms inputs into outputs through its business activities. In simpler terms, what a unit does, and why it does it.

When describing their business model, units may consider including relevant explanatory information regarding:

their business medicine;
their organization and structure;
markets in which they operate;
objectives and their strategies;
Trends and key factors that can influence their development in

Units can use key performance indicators to explain their business model, key trends, etc.

Units are expected to explain their business model in a clear, understandable, and factual manner. A business model is an existing fact. Units should avoid providing immaterial information of a promotional or aspirational nature that distracts from material information.

Units are expected to highlight and explain in the reporting year when material changes occurred in their business model.

4.2 Policies and Due Diligence

Article 18 (1) of the accounting law states that the non-financial report contains information, including:

„a description of the policies pursued by the unit in relation to those matters, including the implementation of the due diligence process;‘

Units must present material information providing a true view of their policies. They should consider providing information on key non-financial aspects, main objectives, and how units plan to achieve their objectives, as well as how they are implementing this plan. Any information provided will take into account the specific circumstances of the unit. In explanatory notes and the non-financial report, a unit may explain the responsibilities and decisions of the Management Board and how resource allocation relates to objectives, risk management, and intended outcomes. For example, a unit may explain relevant governance aspects, including the Supervisory Board.

Processes due diligence relate to policies, risk management, and outcomes. Processes due diligence undertaken by an entity to ensure it is working towards a concrete objective (e.g. to ensure carbon emissions are below a certain level or that supply chains are free from human trafficking). Processes due diligence assist in identifying, preventing, and mitigating existing and potential adverse side effects.

Units must provide explanatory information about the processes of due diligence implemented, including, where necessary and proportionate, information on its suppliers and subcontracting chains. Units may also consider providing information on the decisions made in their creation and how processes are intended to function, particularly regarding the prevention and mitigation of adverse side effects. Units may also consider providing relevant information for setting goals and measuring progress.

The units are expected to highlight and explain any material changes in their core policies and processes. due diligence during the reporting year.

It may occur that a unit has not drafted policies for certain matters which it continues to consider material. This unit must provide a clear and reasoned explanation for not drafting these policies. Other non-financial reporting requirements continue to apply (for example, business model, principal risks, etc.).

Article 18 (2) of the Accounting Law states that “where the entity does not pursue policies in relation to one or more of the matters provided for in paragraph 1 of this Article, the non-financial report shall provide a clear and reasoned explanation for so doing.”

4.3 Results

Article 18 (1) of the accounting law stipulates that the non-financial report must contain information, including:

“benefits of these policies;”

Units should provide a useful, fair, and balanced overview of the benefits of their policies.

The non-financial information presented by entities should help investors and other stakeholders understand and monitor the entity's performance.

Providing relevant information regarding policy benefits can offer beneficial insights into an entity's strengths and weaknesses. The non-financial report should comprehensively and concisely reflect the results of an entity's operations and activities.

Units may consider explaining the relationship between financial and non-financial outcomes and how this is managed over time.

The analysis of results should include key non-financial performance indicators. Entities are expected to provide information on the key performance indicators they consider most useful in monitoring and evaluating progress and supporting comparability between entities and sectors. Where appropriate, entities may also consider presenting and explaining this information in relation to objectives and best practice standards to be followed.

4.4 Main risks and their management

Article 18 (1) of the accounting law states that the non-financial report shall contain information, including:

„riskn main relating to the matters concerning the economic unit's exploitation activity, including, where necessary, business relationships, products or services, which are likely to cause mutual impact and how the economic unit manages their risk;

Units must present information on the main risks and how they are managed and avoided. These risks can be related to their activities, products, or services, their supply chain and business relationships, or other aspects. A perspective on short-term, medium-term, and long-term risks can be included in the report. Units are expected to explain how the main risks might impact their business model, operations, financial performance, and the impact of their activities.

A unit is expected to present material information on key risks, whether they arise from its own decisions or actions, or from external factors. The unit shall explain the processes used to identify and assess such risks.

The provision of explanatory information, where important and proportionate, should include material information on supply and subcontracting chains. The notes should also include material information on how an entity manages and mitigates key risks.

A unit is expected to highlight and explain any material changes in its principal risks, or in the way it manages them in the reporting year.

4.5 Key Performance Indicators (KPIs)

Article 18 (1) of the accounting law states that the non-financial report shall contain information, including:

„threeGuess it main of non-financial performance in relation to specific businesses;

The non-financial report must include explanatory, descriptive, and key performance indicator-related information.

Units are expected to report those non-financial performance indicators that are useful, taking into account their specific circumstances. KPIs should be consistent with the methods used by the unit in internal management and risk assessment processes. This makes the information in the report more relevant and useful, as well as improving transparency. The explanation of high-quality KPIs, which are widely recognized (for example, methods widely used within a sector or for specific thematic issues), can also improve comparability, particularly for units within the same sector or value chain.

A unit must explain the KPIs that are necessary to understand the development, performance, position, and impact of its activities. Some KPIs may be useful for a wide range of business units and circumstances. Other KPIs are more closely related to the issues and circumstances of a particular sector. Units are encouraged to explain material, general, and sector-specific KPIs. Considering their specific circumstances and the information needs of investors or other stakeholders, units are expected to provide a fair and balanced view using general, sectoral, and unit-specific KPIs.

Users of information tend to highly value quantitative information as it helps them measure progress, check for consistency over time, and make comparisons. Appropriate explanations of KPIs help make the non-financial report more understandable.

TKPs are also considered effective tools for connecting qualitative and quantitative information and for creating internal reporting linkages. They enable units to provide a balanced and comprehensive overview concisely and effectively.

KPIs should be used consistently from one reporting period to another to provide reliable information on progress and trends. Reported KPIs may naturally evolve over time for business or technical reasons. In these instances, units should explain why the KPIs have changed. Units may consider restating historical information where appropriate and clearly and effectively explain the impact of these changes.

Units can explain the data collection, methodology, and framework they are built upon. They can also provide an analysis of the KPIs presented, explaining for example why KPIs increased or decreased in the reporting year and how KPIs may evolve in the future.

Units can present KPIs in the context of objectives, past performance, and comparison with other units, as applicable.

4.6 Thematic Aspects

Article 18 (1) of the Accounting Law states that the units in question „include in the management report a non-financial report, which contains the necessary information for a better understanding of the development of the economic entity itself, its performance, position and the impact of its activities related to the environment, social and employment issues, respect for human rights, anti-corruption and bribery issues [...]’.

Providing material explanatory information should ensure a balanced and comprehensive view of a unit's development, performance, position, and impact.

In certain circumstances, units may consider that providing detailed information regarding pending or ongoing negotiations would cause serious prejudice. However, providing a summarized, non-prejudicial overview can still contribute to achieving the overall objective of transparency.

Thematic aspects are often interconnected. For example, an environmental issue connected to a unit's activities, products, or supply chain may also have an impact on the safety and/or health of consumers, employees, suppliers, or on brand reputation. Units are expected to provide a clear, fair, and comprehensive overview covering all material aspects of an issue.

The following issues constitute a non-exhaustive list of thematic aspects that entities are expected to consider when disclosing non-financial information:

Issues environment

A unit is expected to provide important information about the current and potential impacts of its activities on the environment, and how current and foreseeable environmental issues may affect the unit's development, performance, or position.

This may include:

Explanatory notes on materials for pollution prevention and control;
environmental impact of energy use;
Direct and indirect atmospheric emissions;
use and protection of natural resources (e.g., water, soil) and protection of biodiversity;
waste management;
environmental impacts from transportation or from the use and disposal of products and services; and
product and service development

Units may refer, where appropriate, to material information provided in the context of specific environmental reporting requirements.

Issues social and employee

The units are expected to provide material information on social and employee matters. This includes:

implementation of the legislation in force that governs labor relations;
diversity issues, such as gender diversity and equal treatment in employment and occupation (including age, gender, sexual orientation, religion, disability, ethnic origin, and other relevant aspects);
employment issues, including employee consultation and/or participation, employment and working conditions;
trade union relations, including respect for trade union rights;
human capital management including restructuring management, career management and employment, reward system, training;
Occupational health and safety;
customer relations, including customer satisfaction, accessibility, products with potential effects on their health and safety;
impacts on vulnerable consumers;
marketing and responsible research; and
community relations, including the social and economic development of communities

Units may find it useful to rely on widely recognized and high-quality frameworks, for example the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Multinational Enterprises and Social Policy, or ISO 26000.

Respect human rights

Units are expected to provide material information on the possible and actual impacts of their operations on rights holders.

It is considered „best practice" for an entity to express its commitment to respecting human rights. This commitment can define what the entity expects from its management, employees, and business partners regarding human rights, including fundamental labor standards. The information can explain whose rights the commitment addresses, for example, the rights of children, women, national minorities, persons with disabilities, local communities, small farmers, victims of human trafficking, and the rights of workers, including those working on temporary contracts, workers in supply chains or subcontractors, migrant workers, and their families.

Units should consider providing material explanatory information on the process due diligence for human rights and the processes or agreements implemented to prevent human rights abuses. This may include, for example, how a unit's contracts with businesses in its supply chain address human rights issues and how a unit eliminates potential negative impacts on human rights and ensures appropriate redress if human rights have been violated in any instance.

Issues anti-corruption and bribery

The units are expected to provide material information on how they manage issues and phenomena of corruption and bribery.

Units may consider providing explanatory information on how they are organized, make decisions, and manage themselves, as well as the resources allocated to combat corruption and bribery.

Units may also consider explaining how they assess the fight against corruption and bribery, how they take action to prevent or mitigate adverse impacts, how they monitor effectiveness, and how they communicate on this matter within and outside the unit.

Other

Supply chains

Entities, where material and proportionate, are expected to provide material information about supply chain matters that have a significant bearing on their development, performance, position, or impact. This would include information necessary for an overall understanding of an entity's supply chain and how relevant non-financial matters are taken into account in supply chain management.

If a unit considers that providing detailed information on pending or negotiated developments (issues) would be seriously prejudicial, it may fulfill the general objective of transparency by providing summarized information that is not seriously prejudicial.

Minerals in conflict zones

Units, when important and proportional, are expected to provide significant information regarding the process. due diligence to ensure responsible supply chains for tin, tantalum, tungsten, and gold from conflict-affected and high-risk areas.

The units are expected to provide important information regarding the performance of policies and practices due diligence, as well as their results, regarding the supply of minerals from conflict zones. They must also demonstrate the steps taken to implement the „five-step framework"3 in the approach due diligence risk-based, in the mineral supply chain as defined in the OECD Due Diligence Guidance, taking into account their position in the supply chain.

Units are expected to present TKPs regarding the nature and number of identified risks, measures taken to prevent and mitigate these risks; and how the unit has strengthened its efforts in the process due diligence over time.

Performance Indicators These include:

proportion of significant direct suppliers who have adopted and implemented a policy of due diligence for the supply of minerals from conflict-affected and high-risk areas, in accordance with the OECD Due Diligence Guidance;
responsible sourcing of tin, tantalum, tungsten or gold originating from conflict-affected and high-risk areas; and
the percentage of significant clients who contractually require information about the process due diligence for minerals originating from conflict zones, according to the guideline for due diligence to the OECD.

5. INFORMATION ON BOARD DIVERSITY

This section offers specific guidance aimed at helping large listed entities prepare their Board Diversity Policy description, which will be included in their internal management report4. The Board Diversity Policy description is not part of the non-financial report. Therefore, this part of the guidance does not anticipate the need to provide material diversity information as part of the non-financial report.

Article 19 of the Accounting Law requires large entities with public interest to present in their internal management report:

„a description of the various policies implemented concerning the executive and supervisory bodies of the economic unit regarding aspects such as age, gender, or educational and professional background, the objectives of these various policies, how they have been implemented, and the results for the reporting period

„kYour The economic unit does not act according to the rules/internal management code of the company, it must provide an explanation of which parts of the internal management code it does not apply and the reasons for these deviations.;

„kYour The economic unit has decided not to link to the provisions of a certain internal management code, it explains the reasons for this.

Aspects of diversity

The diversity policy description must specify which diversity criteria have been applied and explain the reasons for their selection. When selecting these criteria, all relevant aspects of diversity must be considered to ensure that the Board of Directors has sufficient diversity of views and expertise necessary for a good understanding of current issues and long-term risks and opportunities related to the unit's business. When assessing the necessary profiles for optimal diversity of the Board of Directors, the nature and complexity of the unit's business, as well as the social and environmental context in which the unit operates, must be taken into account.

Aspects of diversity should generally cover age, gender, or educational and professional background. When relevant due to the geographical location of the entity and the business sector in which it operates, it is also appropriate to include geographical preference, international experience, expertise in relevant sustainability issues, employee representation, and other aspects, for example socio-economic background.

In selecting a candidate for Board membership based on defined diversity criteria, generally accepted rules and principles of non-discrimination must be considered.

Objectives

Units should describe specific and measurable objectives for the relevant aspects of diversity. It is particularly useful to set quantitative objectives and deadlines, especially regarding gender balance.

Implementation and results

Units should demonstrate how their diversity policy objectives are taken into account in the planning, selection, appointment, and subsequent evaluation. Units should also demonstrate the role of the competent committees of the Governing Council in these processes. Units should also demonstrate whether information on diversity criteria and objectives has been made available to shareholders when they elect or re-appoint members of the Governing Council, where necessary.

Units must report on the implementation status of their diversity policy and its implementation results, at least since the last reporting period, for all aspects of the diversity policy. If diversity objectives are not met, the unit must indicate how it intends to meet them, including an anticipated timeframe within which these objectives should be met.

Source (Author): National Accounting Council.

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