Sustainability Reporting: What, Why and How

Communicating Sustainability performance

Communicating Non-Financial impacts or Sustainability Reporting is not a new thing now. Many global, regional, national organizations are communicating their sustainability / Triple Bottom Line / Non-Financial performance by various means e.g. through a separate sustainability report, as a part of Annual Financial Report, Directors’ Report, etc. While such reporting is crucial for disseminating sustainability information among stakeholders, it is also used as a tool to showcase an organization’s adherence to the specific guidelines - defined by external bodies, such as Global Reporting Initiative-GRI** (www.globalreporting.org) and / or by regulatory authorities – (National Voluntary Guidelines-NVG) Ministry of Corporate Affairs, (SEBI-Business Responsibility Reporting-BRR) SEBI, etc.

Producing such report is challenging. It takes a lot of internal data collecting, analyzing, recording and developing actual sustainability report. Organizations, by and large resort to such practices out of statutory enforcement or in some cases… with a view… “everyone else is doing it, so why don’t we?” but, in these cases, organizations quite understandably fail to see the actual value of sustainability reporting.

Different Conceptions of Sustainability Reports

There are organizations that produce sustainability reports for sharing information with stakeholders and there are ones that are aligned with guidelines / frameworks like GRI. However, in both the cases, the fact is that there is an under-acknowledged gulf when it comes to “how the idea of reporting was conceived and the processes followed to do the reporting”.

Organizations some time produce a glossy report, highlighting its sustainability achievements in their own ways; while sometimes they may do so with reference to / in adherence with GRI or equivalent framework. But in general, such reports exhibit organizations sustainability successes against as defined a metrics-based perspective, describing the actual journey of repositioning the organization.

The first type of reports (without adhering a structured framework), are often marketing-driven documents published for stakeholders and for the society at large; communicating self-professed progress achieved by the organization. With such an approach, the critiques reasonably criticize that such organizations simply provide its own narrative or supposed progress, which leads to futile exercise, except for the supposed and tangible gains in sentiment and brand perception achieved from stakeholder and the public perception / appreciation instead of deriving real value from the reporting practices, aligned with a structured framework like GRI.

However, the very spirit of reporting is neither undermined nor diminished in terms of a benchmarking and continuous-improvement perspective.

The New Companies Act in India requires specificIndian companies (based on market capitalization) to spend 2% of their average net profits (from the previous three financial years) towards CSR expenditure and to disclosed the impacts.

Benefits of Producing Sustainability Reports?

• Develop vision and strategy on sustainability,
• Improve management systems, internal processes and set goals
• Identify weaknesses and strengths
• Attract and retain employees
• Connect departments and encourage innovation
• Raise awareness with the executive team
• Achieve competitive advantage and leadership
• Attract investors

The Value of Recognition

• Enhance reputation, achieve trust and respect
• Transparency and dialogue with stakeholders
• Demonstrate commitment to sustainability
• Enable comparability and benchmarking

Objectives of producing sustainability reports:

• Accountability/transparency to stakeholders
• Improving public perception and brand image
• Improving processes, culture and sustainability technology
• Achieving competitive advantage
• Staying abreast of best practices in sustainability performance

While boosting accountability, and staying competitive result in to improving sustainability-related processes, it also helps benchmarking against competitors in terms of achieving Operational Excellence and holistic sustainability.

Let’s dive more into the motivation behind reporting and look at why organizations actually do it, what are the key benefits of process and how can organizations derive value from reporting.

Why Sustainability Reporting:

Some organizations report with a “Me Too” objective. If the organization is in the stratosphere where all or most competitors / customers disclose their sustainability footprints, it’s natural that the organization too feels the need of doing so. However, knowing that reporting is not an end unto itself, the organization must find the value that can be derived from reporting.

Since the sustainability performance—and that of the competitors—is publicly disclosed, it pauses a great opportunity for the organization to benchmark progress against them and to strategize its sustainability initiatives – both short term and long term. In other words, Reporting must not be for the sake of reporting or out of pressure but with clear and specific objectives of deriving value from reporting.

How to do the Reporting?

The reporting process must be based on continuous improvement model. Any organization, planning to adopt sustainability reporting practices, should devise a strategy to discover improvement opportunities, embed policy environment, have systems to measure impacts and data warehousing mechanisms in place, set SMART sustainability goals and embrace widely accepted framework for such reporting.

Most importantly, if the organization is considering reporting or even is doing so, it is essential to determine how reporting can be factored back into its sustainability strategy and to ensure that it derives value from reporting and actually improve overall organizational performance.