ArmInfo.“If in business life ESG principles are based on trusting relationships being formed between a company and multiple actors, from shareholders, communities to regulators, then non-financial reporting is a step towards its formal and real strengthening. This opinion is shared by Narine Melikyan, the Corporate Governance Center’s Director, who has spent decades developing and implementing internationally recognized and widely applied corporate governance standards in the business environment of Armenia.
In Melikyan’s opinion, it isn't enough for stakeholders that companies only produce good products or provide quality services. They also want to see the mission of the companies in the definition of public-oriented goals, and their honest and transparent implementation. That’s why a question arises: In what state is Armenia’s business sector in this regard?
To answer this question, between August 31 and September 15 of this year, the Corporate Governance Center conducted the “Non-Financial Reporting Issues in Armenia” research to discover the characteristics and development opportunities of non-financial reporting practice in Armenia. The Center’s Director mentions that the Research was conducted through an expert survey that identified current issues in the field, which were presented as the Research results.
Thus, while revealing the picture of the key non-financial issues of Armenian companies, experts emphasized corporate governance issues (G). In second place are social problems (S), and as for the environment (E), the experts did not exclude this component. However, only 13% of experts voted for the climate change issue, which in international practice is considered a “locomotive of ESG movement” and an investment risk.
Clarifying the Research results, Narine Melikyan states that she shares the approaches of Armenian experts because although environmental and social issues are more visible and attract the attention of the general public and media, good governance is the solid foundation that companies need to develop and implement an effective sustainability strategy.
Experts attribute the lack of corporate reporting and transparency in Armenia to weak or underdeveloped corporate governance practices (77%), lack of legislative regulations (57%), and law enforcement mechanisms (50%). According to 3/4 of the experts, the primary issue to be addressed through non-financial reporting is enhancing the investment attractiveness of companies.
Continuing to present the Research results, Narine Melikyan mentions that a significant majority of the respondents (83%) view competent state authorities as a driving force for promoting non-financial reporting in Armenia and agree that the state should encourage and support companies with non-financial reporting practices.
As examples of companies with experience in developing and publishing non-financial reports, Melikyan highlighted some Armenian banks that prefer to report all or some of the non-financial aspects of their activities through annual reports. However, only eight banks have such a practice, and the remaining 10 equate corporate reporting with financial reporting.
Summing up, Narine Melikyan admitted that in terms of non-financial reporting and transparency, Armenian companies are taking their first steps. To strengthen them and turn them into a trend, there is a need for cooperation between all interested parties. A cooperative platform represented by the Business Integrity Club can play its role in this regard. Additionally, she underscored the need for raising awareness within the business sector concerning these issues. The “10 Questions and Answers about Non-Financial Reporting” handbook developed by the Corporate Governance Center should serve this purpose.
It's important to highlight that the Research Report and the Handbook were developed by the Corporate Governance Center with the support of the Center for International Private Enterprise (CIPE) within the framework of the “Europe and Eurasia: Creating Enabling Environments for Constructive Capital – Phase IV” project.