ICGN Statement and Guidance on Non-financial Business Reporting

1. ICGN Statement and Guidance on Non-financial Business Reporting Alejandro Mañosas Martín Mario Méndez López Noelia Pérez López NereaVillabrilleSeca

2. ICGN Statement on Non-financial Business ReportingIntroduction, Disclosure and Transparency • Investors require comprehensive financial and non-financial disclosure by investee companies to make informed investment decisions. • Increasing importance of non-financial variables on business performance measurement. Human resource management, supply chain management, development and protection of intellectual property rights and other intangible assets and so on. Impact on value creation trough business reputation, customer satisfaction and loyalty, and capacity to innovate among others. • Non-financial business reporting contributes to achieving the objectives of disclosure and transparency of the ICGN.

3. ICGN Statement on Non-financial Business ReportingThe quality of reporting • Standardized reports within and between companies help investors in making decisions and comparative analysis. • Good financial information must meet certain requirements: • It should be informative and easily understandable. • It must bring the necessary information, do not over or missing. • It should explain the company’s strategy and key performance thanks to it, its risks and opportunities and how power is distributed within it. • It should be easily accessible to all people that want to know about the company and must be a guarantee that the data are reliable. • These key points are designed so that, together with the financial information, non-financial one helps investors to make a good decision.

4. ICGN Guidance on Non-Financial Business ReportingBackground and Expectations of non-financial business reporting • Conventional financial reporting describes what has already occurred. This information is crucial for understanding a company’s results, but it does not capture intangible elements which are very important in value creation. • Non-financial information is other than financial statements, which is relevant to investment decision making. • To complement the information provided by traditional accounting, non-financial business reporting should provide information regarding historical performance, risks, opportunities andprospects for the company in the future. Failure to recognize these risks and opportunities could be problematic in the long-term, which is the time horizon of institutional investors. • Investors want information about how a company creates financial value and deals with issues that affect its financial performance. • It is also important to provide information on how specific measures have been developed and adopted from one year to another so that changes in performance over time can be evaluated.

5. ICGN Guidance on Non-Financial Business ReportingBasic requirements from a shareowner and investor perspective • In order to be valuable for shareowners and investors, non-financial business reporting should: • Support and enhance the information in the financial statements and include forward-looking elements. • Be material, relevant, timely and focused. Being material means that it is likely to affect investors’ decisions. It should meet market guidelines and include just the necessary information. • Describe the company’s strategy and how the board approaches it. • Be accessible, integrated with other information related to the company and easy to understand. • Use key performance indicators that allow comparisons with other firms and over time. • Use objective measures of intangibles if possible. If it is not possible, it should use evidence-based estimations. • Be strengthened by independent assurance in order to enhance the credibility and reliability of the reported information.