Asiakastieto’s unique ESG data covers all businesses in Finland. The operations of Finnish companies are mainly responsible, as only about 5 per cent, or 36,000 companies, have anything to note in their ESG information. Correspondingly, 9% or 60,700 companies are pioneers in sustainability, i.e. their ESG information is positive.
Since 2017, Asiakastieto has been compiling a unique sustainability database, which also contains the ESG data of all Finnish companies, also e.g. associations and foundations. The compilation of a similar database has also started in Sweden in 2022, where UC, part of the Enento Group, is responsible for the service.
Asiakastieto has examined the information related to the environmental, social and corporate responsibility of about 700,000 Finnish companies in its database. According to the study, there is currently something to note in the operation of about 36,000 companies.
”The scale is quite wide, but there are no remarks on the companies’ ESG data about little things. Typically, the remark is based on a judgment or penalty payment imposed on the company, incomplete contractor liability information, or, in its most serious case, a business ban on operations imposed on a person in charge. There are more than 500 such companies in Finland, although according to the law, a person subject to a business ban should not participate in the company's operations in any position of responsibility,” says Riku Salminen Service Development Director at Asiakastieto.
Other information leading to remarks is e.g. payment defaults and deficiencies in data security and the fulfilment of GDPR obligations. A remark in ESG information is a clear indication that starting a business relationship with the company should be carefully considered and at least further clarified before making a decision.
In most cases, the remarks concern the G area of sustainability, i.e. administrative deficiencies or breaches, for which the information is the most comprehensive to date. About 400 companies have a remark on social responsibility (S) and 50 companies on environmental responsibility (E).
Remarks concerning sustainability are clearly the most common in the areas of nutrition and construction. 11% of restaurants, or about 2,100 businesses, have remarks. In the building construction and specialised construction industries, a total of about 6,400 companies has remarks, representing 8.5% of all companies in the sector.
ESG deficiencies increase financial risk
According to Asiakastieto, deficiencies in the company's processes or direct violations of responsibility clearly anticipate an increase in financial risk. According to the study, almost 80% of companies that have obtained an ESG remark have a high financial risk rating.
”We already have strong evidence related to modelling work that, for example, a court ruling anticipates a clear increase in a company's risk of payment default and bankruptcy, which means that it is definitely worth considering in credit, investment and partnership decisions, for example. To have an irresponsible company in the own supply chain can also cause damage to the reputation, the overall impact of which is even greater than a direct credit loss,” Riku Salminen notes.
The number of criminal judgments handed down to companies has varied between around 70 and 200 in recent years.
“Last year, judgments were handed down to 90 companies and a total of 2.8 million in damages were imposed. The amounts must, of course, be proportionate to the size of the company. Especially in a smaller company, it can be difficult to cope with the compensation payment alone - especially if the reputational damage associated with irresponsibility weakens business opportunities and stops cash flow,” Riku Salminen illustrates.
Companies (23,400) with a turnover of less than EUR 200,000 have the most ESG remarks, but even big companies do not come through according to Finnish standards. With a turnover of more than EUR 20 million, 360 companies have indications that sustainability issues are not fully in order.
Competitive advantage is still offered to the pioneers of sustainability
In Asiakastieto’s sustainability database, the amount of information is growing all the time, which also improves the resolution. According to a recent study, 60,700 companies have positive observations in at least one area of sustainability (E/S/G).
For example, they have environmental, occupational safety or quality certificates, or their financial ratios are strong throughout.
Such companies, for which no aspect of sustainability is negative based on the information, can be called pioneers of sustainability based on the information. Riku Salminen encourages all entrepreneurs and business decision-makers to think about the angle from which they should start their own sustainability work. Banks and other financiers already strongly guide companies not only to act responsibly but also to report on it.
”The information must be comprehensive and comparable so that it can be easily utilized. The extensive ESG reports of listed companies are, of course, important, but it is difficult for financiers to use the information they provide in decision-making because it is not comparable. Banks and other financiers need the same ESG information on all their corporate customers in order to be able to meet their own tightening obligations and automate their own credit decision processes, ”says Riku Salminen.
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Written by Asiakastieto