Increasingly more companies are starting to publish sustainability reports, which as a management tool for businesses can have significant benefits.
by Aysu Katun, Green Economy Post
As a result of regulators requiring environmental and social reporting, and growing interest from customers, partners, employees, and other stakeholders in their company’s impact on its surrounding environment, increasingly more companies are starting to publish sustainability reports.
Sustainability reporting is designed to provide information on a company’s environmental, social and economic performance and impacts and the initiatives for improving performance in these areas. As stakeholders of organizations demand more transparency from profit and not-for-profit entities, environmental and sustainability reporting is a means to address this demand. The World Business Council for Sustainable Development (WBCSB) defines sustainability reports as “public reports by companies to provide internal and external stakeholders with a picture of corporate position on activities on economic, environmental and social dimensions.” Effective sustainability reporting quantifies, measures, and tracks environmental and social performance in the same form it tracks financial performance: with metrics analyzed over time.
The benefits of sustainability reporting as a management tool for businesses can be significant. The process of reporting highlights weaknesses and calls attention to areas of improvement that actually enhance their performance if management acts on this information.
The measurement and tracking procedures that must be put in place to gather data enable analysis of energy, water, waste, and purchases. These data are in turn accessible for making decisions on capital expenses, retrofits, and programs. Sustainability reporting prompts continual improvement and better data management, which in return improves business performance, operational efficiency and cost savings.
The utility of conventional financial reporting is increasingly disconnected from what stakeholders need and expect to make informed decisions. Sustainability reporting provides critical information for business analysis that is normally absent from financial reports and it facilitates financial reports with forward-looking information that could enhance the report users’ understanding of such key value drivers as human capital formation in the company, corporate governance, management of environmental risks and liabilities and the capacity to innovate.
Sustainability reporting also:
- Supports company strategy and shows commitment to sustainable development
- Serves as a guide to CSR and environmental programs, which facilitates continuity in the face of turnover and organizational shifts
- Enables companies to identify and address business risks and opportunities. Understanding risks and dealing with those risks appropriately saves companies time, money and avoids loss of reputation
- Ensures transparent communication and engagement with stakeholders in respect to the company’s sustainability performance and provides the consumer and other interest groups with all the relevant information to make informed choices. Thus sustainability reporting improves communication, trust and reputation with all stakeholders, including investors, credit agencies, customers, employees, and business partners.
- Helps to attract capital from green investors by identifying new markets and business opportunities and
- Demonstrates the long-term, sustainable financial value of an organization.
To help companies make informed choices when developing their sustainability reports, Deloitte has identified six best practices to consider based on a review of some of the country’s leading reporters:
Adopt appropriate key performance indicators (KPIs): Leading companies rely on internationally recognized KPIs to measure the performance of their corporate responsibility programs. In addition to aligning their report with standardized guidelines, these companies are increasingly adopting leading indicators to track performance, which aids in the design of their reporting infrastructures, the standardization of multiple business units and the adoption of an enterprise-wide reporting system.
Involve numerous stakeholders: To ensure corporate policies and reporting remain responsive to stakeholder needs, many companies are creating corporate responsibility advisory panels that bring together independent and sometimes adversarial stakeholders to advise the company and share their views on corporate responsibility practices and reporting.
Obtain third-party verification of non-financial information: Robust corporate responsibility programs include measures for non-financial information. As reliance on these reports by stakeholders such as the investor and financial communities continues to increase, so do the risks related to data quality and integrity. Leading organizations are increasingly managing this risk by obtaining third-party assurance on relevant non-financial performance information.
Leverage reporting efforts to further embed corporate responsibility across the organization: The development of a corporate responsibility report takes a significant amount of time, effort and resources. Leaders in corporate responsibility are effectively leveraging the intensive efforts of producing reports and are using the information to assist in informing and shaping their corporate responsibility strategies.
Cross-reference hard copy reports to corporate web sites: To reduce the amount of paper they use, many organizations produce short hard-copy reports that refer readers to more detailed information online. Often, the information available on corporate web sites allows stakeholders to drill down to details of particular interest to them.
Keep abreast of reporting innovations: Some industries display ongoing creativity in their reporting practices. Mining, forestry, and oil and gas companies often disclose corporate responsibility information at the individual site level. For their part, financial services organizations have begun to address sustainability from an investment standpoint. For organizations striving to create both social and business value through their corporate responsibility programs, there is always room for improvement.
Has sustainability reporting helped to improve your organization’s bottomline? If so, tell us how in the comments section below.
Photo Courtesy of Daniel Wildman.
© 2010, Aysu Katun. All rights reserved. Do not republish.