SDG accountability in large Spanish enterprises

Reporting non-financial information is a company’s main exercise in accountability to its stakeholders and can serve as a great catalyst for investments. It also helps companies link their business strategy to the sustainable economy, improve internationalization, and stay ahead of legal changes, among other things. 

The SDG Observatory promoted by the Center of LeadershipS and Sustainability of Esade and “La Caixa” Foundation analyzed the reports of 101 listed Spanish companies. The study evaluates the contribution of the private sector to various areas of sustainable development: progress in materiality, governance, prosperity, people, and the planet.  

More and more companies are reporting information about their sustainability progress. The percentage of companies that report non-financial information has climbed from 50% to 87% in five years. References to the Sustainable Development Goals (SDGs) have also increased, going from 26% in 2017 to 65% in 2022.  

With the approval of the new corporate reporting directive and the new sustainability reporting standards, we can expect a boost starting in 2024 in both the number of non-financial reports and the quality thereof. 

In the reports reviewed in 2022, the percentage of companies that mention the SDGs decreased compared to the previous year, dropping from 76% to 74%. Moreover, the references are less ambitious: the company's contribution to the SDG is described, but there is no explanation of the specific actions taken. 

Double materiality 

There has been a growing consensus on the importance of double materiality in recent years. The concept refers to companies not only assessing how external social and environmental factors may affect their results (financial materiality) but also how their business activity may affect stakeholders, society, and the planet (impact materiality).  

In 2022, 90% of companies included a materiality analysis in their reports. And although an analysis of environmental, social, and governance risks was generally included, it often focused solely on the consequences of these risks for the financial result, thus ignoring the double materiality approach.  

This approach implies that a company’s sustainability strategies must be legitimized by stakeholders. In this sense, the reports improved their descriptions of stakeholders: 70% of companies indicate who they are and 42% describe them in detail, even defining their role within the value chain. 

However, the number of companies that include direct stakeholder participation in their materiality analysis has dropped from 53% to 30%, even though including stakeholders would offer companies an alternative perspective to better understand their impacts on sustainability. 

Towards better governance 

Incorporating social and environmental criteria into the business aim demonstrates the company's willingness to integrate sustainability into its business model. However, only 32% of companies include social criteria, and 18% environmental criteria.  

The report highlights that only 40% of companies have a sustainability department, or 11% more than last year. Concerning gender equality, in 2022 the proportion of women grew on boards of directors (31%) and in the company management (24%), although it is still not enough. 

Regarding the presence of independent directors, only one-third of companies meet the minimum threshold of 50% recommended by the National Securities Market Commission (CNMV) for good corporate governance. The authors of the report point out that their opinion, which is free of conflicts of interest, has a positive impact on greater transparency and reduced corruption. 

On the other hand, although the new European directive (CSRD) requires the submission of audited reports, the number of companies that undergo audits has decreased to 62%. Likewise, only 3% of companies presented the report with an audit matrix describing the progress of each indicator.  

Elements of prosperity 

In general, the number of companies reporting improvements related to digitization has decreased, although this varies greatly from one sector to the next. While technology, finance, and consumer services improved, other sectors such as real estate, industry, construction, and consumer goods worsened. 

Digitization helps companies meet the SDGs but it can also entail negative consequences such as job losses, the widening of the digital divide, and the loss of privacy. That’s why the report calls for analyzing the underlying impacts of digitization and minimizing potential imbalances. 

In 2022, the percentage of companies that define their circular economy strategy increased to 81%. Half of the companies offer in-depth, detailed explanations of their strategies. Recycling continues to be the measure most often reported by companies, followed by reuse and reduction. By contrast, repair and remanufacture lag behind.  

People and the planet 

Almost all companies report having gender policies in place, but only 26% include specific and detailed data. Both figures represent a decline compared to the previous year. Likewise, only 40% report having policies to eliminate the wage gap even though companies with more than 50 employees are required to report them since 2022. 

Regarding work-life balance policies, the study shows that 25% of companies do not have one. Similarly, 39% also failed to report anti-harassment policies.  

As for data on impact on the planet, slightly fewer companies report a reduction in electricity consumption and carbon emissions. However, there was an increase in the percentage of companies (30%) that have joined the Science-Based Targets (SBTi) initiative, which aims to provide strategies to reduce GHG emissions. 

There was also a significant increase in companies that report consuming some type of renewable energy, going from 65% to 92%. However, most companies do not specify how much this renewable energy represents over total consumption.  

In contrast, scope 3 emissions (which include all emissions throughout the value chain) are still not being reported by enough companies, with only 47% offering this data.  

Of the 101 companies, only one reported in detail on its hazardous waste management protocol. However, more companies reported that they apply policies to reduce their carbon footprint and protect biodiversity, although without going into any detail about them.