3.2.2 Mandatory sustainability reporting

In 1999, the Swedish Environmental Code (Miljöbalken, 1998:808) amending the Annual Accounts Act companies (Årsredovisningslagen, 1995:1554) imposed for the first time in Sweden, an obligation to include a brief disclosure of environmental and social information in the Board of Directors’ Report section of the annual report (Nyquist, 2003).2 In parallel to the Environmental Code, in 1998 the Swedish Accounting Standards Board (Bokföringsnaämnden, BFN) issued a statement “Guidelines on environmental information in the Directors’ Report section of the Annual Report” to improve the financial information related to the environmental impact of the companies.3 Companies were therefore, required to start reporting on whether the impacts have direct or indirect impact on their financial performance.4

Sweden has a Corporate Governance code since the 1st of July of 2005, revised in 2008, 2010 and last revised in 2015.56This code sets the guidelines to good corporate governance to be applied by listed companies on a “comply or explain” basis.7 Since the 1st of July of 2008 the Swedish Corporate Governance Code is applicable to all Swedish companies listed at the NASDAQ OMX Stockholm and NGM Equity. The management and administration of the Swedish Corporate Governance code is the responsibility of the Swedish Corporate Governance Board,8 which promotes good governance of listed companies.9Listed companies are required, under the Annual Reports Act and the Corporate Governance code, to publish a corporate governance report and make it publicly available.10 In accordance with the EU Directive 2006/46/EC, listed companies are required to prepare a corporate governance statement containing i) a reference to the corporate governance code that the undertaking has voluntarily applied; ii) reasons for any departure from this code; and iii) a description of the undertaking’s internal control and risk management systems as they pertain to the financial reporting process. The auditor should only attest that the corporate governance report has been prepared.11

The Swedish state-owned companies are subject to the same laws as privately- owned companies, e.g. the Companies Act (2005:551) ABL, the Bookkeeping Act (1999: 1078) BFL, The Annual Reports Act, (1995:1554) ÅRL and the Securities Market Act (2007:528).12 Since the 29th of November of 2007, in its role of active and responsible owner, the Swedish Government’ issued the “Government’s guidelines for external reporting”, requiring 55 state-owned companies to publish a sustainability report on a ‘comply or explain’ basis (Ministry of Enterprise, Energy and Communications, 2007) according to the international sustainability reporting guidelines from the Global Reporting Initiative.13 The guidelines for external reporting by state-owned companies complement the Swedish accounting legislation and generally accepted accounting principles.14 State-owned companies are required to publish the sustainability report together with the annual report (in the Director’s report section of the Annual report), either in separate or integrated with the annual report, independently certified and quality assured.15 The Swedish Government’s policy is aligned with the OECD’s Guidelines on Corporate Governance of State-Owned Enterprises and with the UN Guiding Principles on Business and Human Rights. It shows commitment to sustainability in order to achieve the goal of creating social value in the long term, setting an example to other countries.16

In compliance with the sustainability report requirements, in May 2009, KPMG Sweden conducted a desktop study of the implementation of the guidelines. The result was positive - 82% of the state-owned companies presented a sustainability report and the majority of the sustainability reports complied with the Global Reporting Initiative application level C. 81% of the sustainability reports had also been subjected to external assurance.

European Union

In 2005 the Annual Accounts Act (Årsredovisningslagen) was updated implementing the Accounting Modernization Directive (2003/51/EC) in the Swedish legislation and certain companies have to include non-financial information in the Board of Directors’ Report section of the annual report.17

On the 23rd of June of 2013, the EU adopted a Directive (2013/36/EU) on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms (the Capital Requirements Directive, “CRD IV”) and the Capital Requirements Regulation (575/2013) (CRR), on prudential requirements for credit institutions and investment firms, which is directly applicable to companies within the EU.18 It requires banks and other financial institutions to publish certain basic information including, turnover and public subsidies received on a country-by-country basis for each country in which the institution has a subsidiary or branch. This information must be audited and published as an annex to the annual report.19 This Directive was transposed into Swedish law in August 2014.

From the financial year 2016, under the Accounting Directive (2013/34/EU) adopted in June 2013 in the EU and under the Transparency Directive (2004/ 109/EC), certain undertakings operating in oil, gas, mineral and mining industries and other active in the logging of primary forests must report payments exceeding €100,000 EURO to governmental authorities in a special report adjacent to the annual report.2021

As an EU member state, Sweden was required to transpose the 2014 EU Non- Financial Reporting Directive to national law until December 2016.22 This Directive, adopted in November 2014, amends the Accounting Directive (2013/ 34/EU) adopted in 2013, and applies for the financial year of 2017. A memorandum published in January 2015 by the Swedish Ministry of Justice, explains that this Directive affects a wider number of Swedish companies than is required by the Directive, including large companies and public interest entities. The companies and public interest entities (including insurance companies and credit institutions), operating in the EU have to meet the Directive’s criteria, which include having more than 500 employees, a turnover of at least SEK 350 million and total assets of at least SEK 175 million. The Ministry of Justice estimates that the directive affects around 2,000 Swedish companies. The first reports are expected to be published in 2018 referring to financial year of 2017.