What do you do when a company’s sustainability report lands on your desk or announces itself on your desktop? Do you take it seriously and read every page with avid interest? Possibly you, like many, view their reporting of environmental, social and governance activities (ESG) as a vehicle for the company’s PR department rather than as a tool for communicating clearly with stakeholders. An increasing number of companies are voluntarily publishing these reports to supplement their required financial statements. However, many present their ESG activities primarily as “good deeds.” They don’t link these actions to core business strategies or financial performance. Sometimes they don’t even describe the outcomes of the activities!
Then again, over the past few years, a number of companies have adopted a more holistic system. They have integrated their approach to environmental, social and governance issues into their core business strategies in order to attain consistently strong performance for the long-haul. Some of these companies also have taken steps to combine their annual ESG reporting with their financials. These reports – generally referred to as integrated reports – provide interested parties with a cohesive view of short-term business performance, and longer- term opportunities and risks. Integrated reports make it easier for all the groups affected by a company’s acts and outcomes to evaluate how the company is faring. When done well, the reports clarify how companies are approaching the sometimes necessary trade-offs between financial performance and social and environmental costs and benefits.
Vancity, located in British Columbia, has just published its first integrated report. Vancity is a member-owned, community-based, financial institution with fifty-nine branches. While they have been committed to sustainability for many years, the drive to produce this recently released integrated report came from a new vision for their business. A few years ago, they set out to engage their company in a collective conversation concerning how their sustainability commitments connected to their business strategy. They ended up with a new vision which they describe as “redefining wealth.” Their definition of wealth now includes not only profit but also social justice, environmental sustainability, and community well-being. Now, rather than ‘making a profit to benefit the community’ they are ‘benefitting the community in a profitable way’. Consequently, they are redefining what they offerings. They have become advocates for socially responsible investing. And they pursue community investments with high social or environmental impacts.
An example of a recent community investment is 60 West Cordova in downtown Vancouver – a prototype for affordable home ownership in a city known for its high housing prices. In 2012, it will open with 108 affordable homes. Based on principles of inclusivity and doing more with less, the project is being developed by Westbank, in collaboration with Vancity, Portland Hotel Society and Habitat for Humanity. Because all buyers must have a connection to the community (they must all work, volunteer or currently live in the area) the new development will contribute to a community of residents who care about their neighbourhood. With homes priced as much as $150,000 lower than nearby properties, and realistic mortgage choices with preferred rates and cash-back options from Vancity, more people will be able to own a downtown home. “We want to make sure everything we do promotes the sustainable wellbeing of our members and communities including their financial, environmental and social well-being. Extending credit to projects that benefit people, the community and the environment is the best way a credit union can make an impact in the communities it serves. Over time, we believe growth will enhance impact and impact will enhance growth, ultimately helping us to achieve our vision.” Tamara Vrooman, CEO.
Integrated reporting makes sense for Vancity because their business model clearly joins their commitments to environmental and social issues with their financial success. Before publishing this integrated report, two separate groups within their organization produced reports – one on ESG activities and another on financial performance. The challenge was to combine the two beyond merely fastening them together under one cover. Instead, they wanted to depict how ESG and financial data interconnect. They tackled this difficult task by integrating both their structure and process for producing the report. To increase their insight into their own vision of wealth, they pulled together into the financial department all of the people responsible for data comprising the report. Working side by side, the financial and the ESG people learned to speak the same language, no small feat! “At first, I was unsure about moving the ESG accountability reporting team to finance. I was worried the sustainability component of the integrated report would be watered down. But I now realize it was a key success factor. The move solidified what our common objectives were—an integrated report that truly reflects the way we make decisions and run our business—and built trust between the two teams. We wouldn’t have achieved so much, so fast working out of two separate divisions, ” says Joanne Westwood, Manager Accountability Reporting.
Vancity also sharpened their accountabilities for producing the report. In past years, the entire executive leadership team shared responsibility. Now accountability lies squarely with the chief financial officer (CFO), Ron Malli. “Sole accountability for the integrated report allows me to set clear expectations on what I need from the executive leadership team to support the preparation of the report, and identify opportunities to align with planning. It also sends a strong message that sustainability and financial goals go hand-in-hand at Vancity.”
While they are pleased with the results of their first integrated report, they want to produce an even stronger one next year. They will examine how the actions they take to embed sustainability into decision-making will affect their long-term financial success. Westwood states, “Our vision is a fully aligned reporting and planning process (one process, one report) that engages stakeholders, clearly articulates our business model, and moves us in the direction of our vision of redefining wealth for the communities and the members we serve.”
Dr. Kathleen Miller Perkins is a psychologist and is the CEO and owner of Miller Consultants , a firm specializing in organizational development, executive coaching and change management founded in 1980. In addition to managing the company, she continues to remain active in assisting client organizations in assessing and addressing the organizational culture and leadership requirements for executing sustainability strategy. She has delivered services to over 100 public and private sector companies. Dr. Miller’s client list includes organizations such as IBM, Toyota, BC Hydro, Brown -Forman, General Electric, Ashland Chemical, Ernst and Young, Bristol Myers Squibb and Kindred Health Care.
Kathi Irvine (MA) is the Director of Canadian Operations for Miller Consultants, overseeing the development and delivery of their services in Canada. She has over 20 years of corporate leadership experience with extensive background in organizational change, leadership development and performance management. She is a highly skilled organizational development practioner, business coach and workshop facilitator. She has proven expertise in collaborating with clients to design and deliver initiatives with the focus on business sustainability and leadership development.