All of a sudden, everyone is now scrambling to gain full understanding of what non financial information really is; all thanks to the various legislations in response to the European Union (EU) Directive 2014/95/UE that aimed at making businesses realize that we only have one planet to live in – many claims abound of the possibility of living in other planet but until then, we have to protect what we have
Organizations are often faced with the challenge of making decisions that heavily rely on input from all kinds of sources. Some of this information come in the form of raw data that are from being numeric talk more of being financial in nature. A quick review of sources of external information shows that valuable information can come from any source.
Finance literature is filled with commentaries and hypes about how to make sense from financial information that can be found on an organization’s financial statements. In this post on non-financial information, I will be posing some thought-provoking questions (some may be rhetoric in nature) that will help activate the thinking acumen of business manager.
Non-financial information (NFI) are those non-monetary externalities that business’s activities activate. Some school of thoughts argue that most social and environmental issues that we now face are caused by the non-measurable influence that businesses have on the climate. While some believe that human interactions would still have similar effect in the absence of businesses. I will leave you to make your choice regarding which line of argument to follow.
My aim in this article is to stir a line of thinking that business leaders can follow to create a win-win situation for all and sundry.
Three (3) critical questions that business leaders must ask in their quest to effectively address the issues around nonfinancial information are:
- Will our nonfinancial information help us remain competitive?
- Can we pay more attention to our non-financial information?
- What are our competitors doing about their non financial information?
What are examples of non-financial information?
In this section of this article on nonfinancial information are Nine (9) non-financial information examples that entities will have to focus on in the course of doing their normal profitable business activities.
9 examples of nonfinancial information and how they can help solve business problems
- Organizations Cultural tone: the organizational tone of a business forms that largest part of the nonfinancial information that entities deal with. They range from those written and unwritten rules of business entity. Putting in the necessary efforts into finetuning the cultural tone of a business is always a worthwhile investment to make. The problem is that not very many top managers understands how to go about this.
- Carbon footprint: no company can proudly say with some level of confidence that they know how much impact their business activity footprint is leaving on our planet.
- Employee attitude and morale: it is what it is that the most important asset of an organization is often classed as non-important. The attitude and morale of employees would have been taken seriously if organizations truly value their workforce. Only very successful businesses take time to appreciate what their employees are going through – no wonder they attract and retain the best staff. It is not always about employee remuneration scheme, it goes way beyond that. Problems of great resignation can be better managed if only employers can just take the time to do the needful.
- Community perception: how the host community of an entity perceives it goes a long in determining the success or otherwise of the organization. It is very hard to quantify this perception.
- Suppliers and vendors relationship: vendor and suppliers’ relationship are a major pillar in the business community architecture, yet no one can reasonably put monetary value to this relationship and report them. The best that anyone can do is derive indirect value of the supply chain.
- Succession plan structure: having a very solid succession plan is an invaluable asset that is so important to the going concern of a business yet very difficult to put monetary value to.
- Cyber avatar: believe it or not, businesses now have online persona that real people have real connection with. This network has real value but very difficult for anyone to confidently say what it is.
- Diversity of our workforce: there is power and immense wealth in diversity. We all know that companies with optimal mix of diversified workforce tend to do well, but I don’t think anyone can correctly tell you the monetary value of having a diversified workforce.
- Level of CSR and ESG: the latest buzzword amongst business leaders and regulatory bodies revolves around ESG and CSR. A lot of noise is currently being made about these terms but there is still no clarity about these terms.