Performance is only relevant when it is measurable and reporting is unnecessary if it is not accurate. This is important to remember before your company begins the journey of sustainability reporting. Before we continue, it is good to explain what sustainability reporting is. Sustainability reporting is the communication of the actions taken by a company to achieve environmental, social, and governance (ESG) goals.
Sustainability reporting has come a long way in recent decades. It started in the 1960s as a corporate trend when organizations started to realize that their societal obligations went beyond profit making. The trend gained momentum with early sustainability reports focusing on environmentalism.
In the 1980s, social and governance components were added to complete the ESG trio. More demands for accountability in the 1990s led to different organizations creating robust standards for measuring sustainable performance. The most prominent of these reporting standards is by the Global Reporting Initiative (GRI). Other organizations with globally accepted frameworks for reporting sustainable performance include:
- CDP- Carbon disclosure project
- The Sustainability Consortium
- IIRC- International Integrated Reporting Committee
- SASB – Sustainability Accounting Standards Board etc.
How companies get sustainability reporting wrong
Despite best intentions, global standards for sustainability reporting are not perfect. Some of these reporting standards were created at a time when corporate sustainability was just an afterthought. That led to many companies only using shiny reports to give themselves a publicity boost. Sometimes, the information in sustainability reports are inaccurate, lopsided, and cannot be independently verified. The loopholes in current standards allow some firms to misrepresent data instead of making actual efforts that yield impact.
Another issue with the current state of sustainability reporting is how complex it can be. There are close to 200 different reporting standards and companies are expected to subscribe to several of them when reporting. Some of these reporting frameworks are industry-specific (e.g. SASB), while others like GRI are more generic in nature. Satisfying the data requirements for different reporting standards can be time-consuming for companies. This gets more complicated for companies who report on activities not directly related with their business operations. Sometimes, leading to data overload where companies collect more data than they can make sense of.
Finally, some companies see reporting as an end to itself. They generate yearly sustainability reports, even set some goals, but struggle to gain any value from the findings. Sustainability reports are not trophies to be won every year and kept on the shelf. They are supposed to be actionable, and a company is supposed to use the findings to improve on their decision making and commitment to positive impact.
In light of the shift in aspirations from carbon neutrality to nature-positive, it is important for companies to rethink not only the goals that are set but also the methods or parameters used to report on those goals.
What investors (and other stakeholders) need from sustainability reporting
Sustainability reports contain very valuable information to companies that compile them. Because they provide an overview of how a company has impacted the environmental, social and economic aspects of the society. However, other stakeholders like investors also use the data from sustainability reports to make critical decisions. Regardless of the role different stakeholders play, they all prioritise the same thing – timely and accurate information disseminated regularly. For example;
Investors always seek profitable opportunities with significant positive impact on the planet. Sustainability reporting helps them to balance risky investments with active participation on issues like regeneration and social justice.
Impact Partners need credible reports to know if their impact goals are compatible with a particular firm’s corporate objectives.This can help them know which firms to collaborate with or what impact activities to focus on. Impact organizations also have to do reporting of their own to take stock of much they have achieved during a period and how they can improve.
The general public need reports that are transparent from companies committed to positive impact. They need reports that clearly show what the most impactful actions are and how they can contribute as well. Finally, sustainability reporting helps the general public to identify companies with similar values, so that they can make conscious choices.
Want to know more about the shift in sustainability reporting? Check out this episode of Ask the Digital Sustainability Expert!
The way forward.
Digital technology has now provided us with new tools that can report on sustainability better. These tools make it easier to monitor and quantity impact. Digital technologies such as big data, remote sensing, satellites, machine learning are not only reducing the costs but also the amount of efforts required for measuring performance.
A major advantage of using digital technologies for reporting is that now it is easier to independently verify the claims that firms make in their disclosures. For example, it might have taken a lot of effort in the past to figure out how much fossil fuel a firm uses in its operations. But with satellites and geo-tracking technology, the impact of the firm’s logistics can be accurately calculated.
We have identified three aspects of sustainability reporting where digital technologies can be very useful;
- Data Collection: remote sensors, geo-mapping, bluetooth
- Data Analysis: artificial intelligence, machine learning, big data
- Data management: visualization dashboards, databases, cloud storage etc.
Also, there are holistic software platforms like Brightest and Diginex with customized features to help firms remain strategic in their sustainabilty reporting. Tools like these automate the entire reporting process, enable collection of real-time information and ensure high levels of data security.
In the end , a report is only as good as the tools used in generating it. Sustainability reporting is not any different. It is good for companies to drive positive impact through their business activities. But it is equally important for them to tell us what they have done and how they intend to improve on it.
To learn more about how you can improve your sustainability reporting, book an intro call with Handprint today.