Sustainability Reporting: The What and Why
For more than a decade now, many leading global organizations have produced some form of sustainability reporting. Sometimes these documents manifest in reports sent directly to stakeholders, and in other cases they adhere to specific guidelines defined by external reporting or sometimes regulatory bodies.
It’s not easy to produce these reports. Sustainability reporting takes a lot of internal information gathering, then corresponding collected data to the key requirements of reporting bodies like the Global Reporting Initiative (GRI), for example, and then developing actual reports—not to mention the task of finding out how to derive value from the very process of producing sustainability reports.
Sometimes organizations get so swept up in feeling they need to engage in sustainability reporting that they forget why they produce these reports in the first place. In many cases it comes down to the matter of “everyone else is doing it, so why don’t we?” But in the face of this question, internal sponsors and critics of reporting initiatives tend to wonder, quite understandably, where the actual value in sustainability reporting lies.
There are Different Conceptions of ‘Sustainability Reports’
Let’s be clear: There is a difference between simply producing sustainability reports to stakeholders and producing sustainability reports that align with key guidelines set out by official third-party reporting bodies. Whether reports are internally guided or more aligned with established external frameworks like GRI or, in some cases, regulatory requirements, there’s an under-acknowledged gulf when it comes to how we conceive of the kinds of reporting we produce.
Sometimes an organization might produce a glossy report describing its sustainability accomplishments on its own terms. Sometimes it may produce a similar report that meets GRI or equivalent “certification” or other third-party guidelines. But in general these reports tend to describe one organization’s account of its own supposed sustainability successes, as opposed to delineating, from a metrics-based perspective, how it is actually achieving progress from a sustainability standpoint.
In the first case, some organizations claim to produce sustainability reports without actually adhering to any standard. These reports often take the form of marketing-driven documents submitted to stakeholders and the public at large, and communicate self-professed progress and initiatives achieved by the reporting organization.
Criticisms leveled at such an approach have, quite reasonably, called out the fact that the reporting company is simply providing its own narrative of its own supposed progress. When that’s the case, clearly there’s a problem and it seems like a futile enterprise, except for the supposed (and intangible) gains in sentiment and brand perception achieved from stakeholders and the public.
However, this form of reporting should not undermine the ultimate spirit of reporting, nor should it diminish what organizations can do through reporting, especially in terms of a benchmarking and continuous-improvement perspective.
So, Why Do We Produce these Reports?
Some of the most commonly cited reasons behind producing sustainability reports include:
- Accountability/transparency to stakeholders
- Improving public perception and brand image
- Improving processes, culture and sustainability technology
- Achieving competitive advantage
- Staying abreast of best practices and benchmarking in sustainability performance
Two of these motivations are the most relevant in terms of how a business works towards an Operational Excellence strategy that supports holistic sustainability. While boosting accountability, improving perception, and staying competitive are sound objectives, improving sustainability-related processes, culture, and technology as well as benchmarking against competitors are arguably more important goals in terms of achieving Operational Excellence and holistic sustainability.
Let’s dive more into the motivation behind reporting and look at why we actually do it, what the key benefits of process are, and how we can derive value from reporting.
Be Selfish with Reporting
Some organizations simply report to third parties because they feel they have to, or because they think “everyone else is doing it, so why don’t we?” If you are in the stratosphere where all your key global competitors report to official reporting bodies, it’s natural that you should feel the need to report yourself.
However, knowing that reporting is not an end unto itself, we must find the value we can derive from reporting. As indicated, sometimes a report can take the form of a marketing-oriented narrative to stakeholders and in other cases it is a metrics-based submission to a global reporting body that provides sustainability key performance indicators (KPIs), assesses progress, and delineates achievements accordingly.
Since this information—and that of our competitors—is typically publicly disclosed, we’re presented with a great opportunity to benchmark progress against competitors, and to figure out how we can improve in the near and long term. In other words, never report for the sake of reporting. Yes, we feel these pressures to report alongside our peers as market-leading, global manufacturers. But if we can’t derive clear value from reporting, then why report in the first place?
Use Reporting to Improve
This builds on the previous point, but sustainability reporting represents a great opportunity to actually factor your own results as well as third-party evaluations and competitive benchmarking into your own continuous improvement model.
If you are reporting or plan to report, devise a strategy on how your performance and progress can loop back into continuous EHS, CSR, and sustainability performance. Some reporting bodies have certain continuous improvements elements embedded into their frameworks, but in general the onus is on the reporting organization to discover improvement opportunities within reporting results and feed it back into sustainability initiatives.
Leverage Technology to Report
It is a tremendous task to simply gather all of the data required by external reporting frameworks. Guidelines set out by GRI or others, such as the Carbon Disclosure Project (CDP), the Coalition for Environmentally Responsible Economies (CERES), the World Business Council for Sustainable Development (WBCSD), the Prince’s Accounting for Sustainability (A4S), and the International Integrated Reporting Committee (IIRC), are highly prescriptive and typically call for the submission of an array of metrics as well as contextual information.
Some EHS and sustainability management solutions on the market are maturing to the point where they can output these metrics according to widely adopted reporting standards frameworks, but in general we are not seeing a one-to-one mapping yet. However, using technological solutions to improve the collection and visibility of the metrics that need to be submitted to these reporting bodies will make the process of information gathering and reporting much more effortless.
Once you have identified the metrics that are essential to the sustainability reports you generate, use enterprise software to track and report these metrics on an ongoing basis to reduce the burden when the time comes to report.
Sustainability Reporting Is Not Going Away
While we have emphasized that we ought to derive value for our own organizations through sustainability reporting and not be pressured to report on the basis of the fact that our competitors report, from a business standpoint it is worth considering the fact that sustainability reporting is not going away and has only gained traction in recent years. More than 90% of the world’s highest earning companies produce official sustainability reports.
Additionally, GRI and CDP submissions have only increased in the past 10 years and are on a trajectory to continue to grow. So if revenue and profit leaders across industry are reporting and actually succeeding as well, it is worth asking whether you ought to report too. However, most importantly, if you are considering reporting or even if you do report, it is essential to determine how reporting can be factored back into your own continuous improvement model to ensure you derive value from reporting and actually improve overall sustainability performance.
Paul Leavoy is a research analyst with LNS Research.
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