Sustainability in state-owned companies
Sustainability is becoming more and more important for the competitiveness and shareholder value of companies. As an owner, the State expects companies to lead the way in sustainable business.
The State’s expectations with regard to sustainability are described in the Government Resolution on State Ownership Policy. The State-owner’s sustainability programme, the first of which was published in 2024, is a more detailed plan for putting the policies outlined in the resolution into practice.
Sustainability report is annually disclosed in Report on State Annual Accounts: Annex 4 State corporate holdings.
The State expects sustainability to be part of the strategy and business model of state-owned companies and to be taken into account in the remuneration of their management. The boards of directors are responsible for ensuring that companies operate sustainably. Companies are expected to identify sustainability issues relevant to their business and set ambitious objectives in those areas over the short and long term. At their annual general meetings, companies are expected to report to shareholders on the attainment of their sustainability objectives, the measures taken to achieve them and the objectives set for the coming years.
As a shareholder, the State requires companies to integrate sustainability into their remuneration schemes. Remuneration must take into account the sustainability objectives that are essential for the company’s business. Companies in emission-intensive sectors should introduce incentives related to climate impacts, especially when it comes to the remuneration of management.
State-owned companies must take human rights into account both in their in-house activities and across value chains. When assessing human rights impacts, the State expects companies to exercise due diligence: companies must have clear processes for identifying, preventing, mitigating and remedying adverse human rights impacts arising from their activities and value chains, as well as for monitoring the measures taken to address them.
Companies must have ethical business principles in place that also include guidelines for combating corruption and means to ensure that employees and business partners have adopted and committed to these practices.
State-owned companies are required to take into account the target of the Paris Agreement on climate change to limit the rise in global temperature to 1.5 degrees Celsius and the Government’s objective of a carbon neutral Finland by 2035.
Companies must set targets for climate and environmental impacts that are measurable and ambitious in relation to their reference companies, and must draw up action plans to achieve them. The State expects companies to base their emission reduction targets on scientific knowledge (e.g. Science-Based Targets, SBTs) or to have another transition plan in place to mitigate climate change.
The State expects companies to combat biodiversity loss in their activities and increase measures to strengthen biodiversity. Companies must recognise the biodiversity impacts of their entire value chains along with their potential dependence on natural resources and the ecosystem over the long and short term. Companies must identify the essential biodiversity impacts of their operations and draw up action plans that include objectives for managing risks and reducing adverse impacts while promoting positive impacts related to biodiversity.
Integrating sustainability into the business of state-owned companies
As an owner, the State ensures that sustainability is integrated into the business of state-owned companies through board appointments and in general and company meetings.
The company’s main decision-making body with regard to ownership steering is the board of directors. As such, its composition is of great importance to the State as an owner. In selecting board members, due consideration is given to corporate sustainability competence. The State regularly analyses the composition of the board of directors in relation to the company’s strategy and future prospects. At the same time, the State assesses whether the board has the level of sustainability competence needed for the company to respond to challenges and seize opportunities.
At the general meeting, state-owned companies report to shareholders on their ESG objectives and their attainment.
Topics related to sustainability are also discussed regularly in meetings between companies and representatives of the State.
Monitoring and analysing sustainability
Sustainability is an integral part of ownership steering. The State monitors and analyses sustainable operations of companies as part of its ownership strategy work. The Ownership Steering Department has a sustainability team that focuses on developing and coordinating sustainability in state-owned companies.
Based on companies’ sustainability data and reporting, the State draws conclusions about which sustainability issues affect the company’s success and whether it is sufficiently integrated into the company’s strategy and objectives. The Ownership Steering Department also assesses whether the company is fulfilling its duties and achieving its sustainability expectations required by the owner. The State takes these issues into account in each company’s ownership strategy and discusses them regularly with the management.