Getting Sustainability Reporting Right: Three Trends to Know

Sustainability reporting is being used more frequently as a strategic tool for businesses to address popular interest in socially and environmentally responsible products.

Showcasing impact and stakeholder engagement are top priorities, and three trends are giving shape to the most successful reports.

Purpose is Moving to the Centre of Attention

There’s a growing understanding that employees and customers want to buy and work for companies that have a stated social purpose. In its 2016 survey of CEOs PwC found this is becoming a cultural value for today’s generation of workers: more than 80% of employees ranked meaning as the most important factor in their daily work. As a Certified B Corp, our view is that the real goal of a purposeful business is to make a profit so that the business can do something meaningful. This demand for purpose and meaning can provide a framework for a company’s sustainability programmes.

Grant Thornton, one of our clients, recently re-invented their purpose as ‘Enabling a vibrant economy’, under which they seek to stimulate growth, not for its own sake, but to nurture thriving communities and cities that ‘enable all of us to pursue our ambitions’. This newly defined purpose now acts as both a point of engagement for current and potential staff, and a compelling reason for customers to buy services from them.

In Japan alone, some 320 companies will integrate their sustainability and financial report in 2017.

This is accelerated by the uptake of integrated reporting. In 2013, the International Integrated Reporting Council released its first set of principles and concepts for integrating sustainability and financial reports. By the end of 2016 there were 1,500 companies doing some form of integrated reporting with particular engagement in South Africa and Japan. Integrated reporting demands companies illustrate how they create value beyond financial terms, outlining their social, environmental and human impacts. Investors increasingly see this as a way for companies to explain their long-term value creation models and plans. This isn’t isolated to a fringe group of impact investors: Larry Fink, Chairman and  CEO of the world’s largest investment firm, Blackrock, has made clear calls for corporate leaders to look to the long term.

Shared, Global Context in the Sustainable Development Goals

For years, best practices in reporting such as the Global Reporting Initiative (GRI) have encouraged companies to frame the context of their sustainability reporting, and ideally in the CEO statement at the beginning of the report. The CEO’s statement details how future business, environmental and social trends are going to impact the business, and demonstrates the company’s plans to mitigate risks and harness opportunities.

Align your sustainability plans with the Sustainable Development Goals to make a valuable, positive impact.

The Sustainable Development Goals (SDGs), which were introduced in 2015, provide a framework for every organisation to assess their performance and illustrate their contributions. The 17 goals and their 169 targets are aimed at all countries, governments, businesses and individuals, giving every company a framework to contextualize their corporate responsibility and sustainability efforts. Achievement of the SDG targets will make the world a safer, more responsible, and fairer place. By mapping their efforts to them, reporting companies are able to answer, ‘How are we going to make a positive difference in the world?’

Report on What Matters

In the past, companies were expected to cover in their sustainability reports a lengthy, daunting and sometimes irrelevant list of topics. Those days are over.

Direct senior management attention by connecting sustainability and long term, organizational health.

The fourth version of the GRI principles makes reporting on what matters the new norm. Previous versions suggested that companies should report on a whole range of topics across social, environmental and economic pillars. Since then, the GRI has reinvented itself as a set of standards. The focus on ‘materiality’ (to use the jargon) remains and continues to grow in significance as companies realize it’s the way to focus on the issues relevant to them—and their stakeholders.

Increasingly, sustainability professionals within businesses are using materiality as a frame to get senior management’s attention on the future health of the business. The world’s largest steelmaker, Arcelor Mittal, is very transparent about its own ‘materiality story’. Having looked at global trends, conducted reputation surveys and considered the commercial challenges facing its business, Arcelor Mittal moved from a traditional corporate responsibility approach to what it calls ‘strategic materiality’. This led it to create 10 sustainable development outcomes in areas such as energy and carbon, supply chains and community. By setting these outcomes—mission statements for each of these key material topics—Arcelor Mittal is setting its direction.

Elements of Strategic Sustainability

Centralizing purpose, using the SDGs to define your context in a globally recognized framework, and focusing report contents on what matters to your enterprise are three trends to know as you embark on your materiality work and reporting. All are strategic in nature. Get these right and you can be confident your sustainability reporting will be meaningful and useful, and inspire the confident engagement of stakeholders and shareholders.

 

Adam Garfunkel is Managing Director at Junxion, and has worked in corporate social responsibility and sustainability for over 20 years. His expertise in the Materiality, the Global Reporting Initiative and the Sustainable Development Goals has been drawn on my clients including Hongkong & Shanghai Hotels, Nordea Financial, and adidas. Reach Adam at adam@junxion.com.

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