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Companies Use Sustainability Reporting to Help Formulate Strategy

The most popular reasons for companies to engage in sustainability reporting are stakeholder engagement and strategy formulation – not compliance or pushing the corporation’s point of view, according to a survey by consultancy Corporate Citizenship.

The consultancy said the results stand in contrast to popular opinion, which often holds that companies report because they have to, or as a way of greenwashing.

In the survey of 153 practitioners – mostly based in Europe and North America – respondents ranked internal audiences as the most important readers for their sustainability reporting, at 40 percent, followed by analysts and financial stakeholders at 37 percent, and customers at 30 percent. Then came opinion formers at 20 percent, consumers at 15 percent and communities at 10 percent.

These results show that reporting is becoming a more precise tool for stimulating change within the company, the report said.

The survey found that while 64 percent of respondents use social media and video to communicate their sustainability programs, only 18 percent ranked these means as highly effective. A further 60 percent said social media is effective, and 65 percent said the same for video.

Before conducting the survey, the researchers formulated a model predicting four waves in the development of sustainability reporting. The first wave is often compliance-driven, with communications sometimes poorly integrated into other business systems. In the second wave, companies more carefully consider audience engagement and shift their reporting focus to key, material issues.

In the third wave reporting is further embedded into business practice and communications are more tailored to different audiences. At this stage companies begin to understand that reporting can actually drive performance, not just the other way round.

In the fourth stage the companies interact with their stakeholders via social media. Communications begin to approach “real time” frequency, well beyond the annual reporting of early-wave companies.

Corporate Citizenship said the survey confirmed its hypothesis that second-wave companies publish stand-alone printed reports and “mega websites” running to hundreds of pages, while today’s sustainability leaders are spearheading a fourth wave of tailored communications.

In the survey, 16 percent of respondents said they are already using integrated reporting, which combines financial and sustainability reporting. Another 42 percent said they expect to produce their first integrated report within the next three years, but 20 percent said they do not expect to produce one for at least five years, or until such reporting is required.

But overall the percentages above represent a significant shift to integrated reporting, which will benefit financial stakeholders, the report said.

Last month, UK deputy prime minister Nick Clegg revealed a proposed government mandate that will force companies listed on the London Stock Exchange’s main market to publish the full details of their greenhouse gas emissions. His announcement came on the heels of NASDAQ’s plan to join forces with four other stock exchanges – Cairo, Istanbul, Johannesburg and Sao Paulo – to encourage companies to list more of their environmental, social and governance risks.

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