Does your sustainability work and reporting provide value?
Does your sustainability reporting provide value
Sustainability reporting has entered a new era as the business impact of sustainability is more apparent and stakeholder expectations drive legislation, reporting frameworks and practices.
Many clients say: “We have a sustainable business but have been bad at reporting about all the great things we do!”. I respond: “We have to do something about that, because if you do not tell your stakeholders what you do, how could they value your efforts?”
Sustainability reporting has entered a new era as the business impact of sustainability is more apparent and stakeholder expectations drive legislation, reporting frameworks and practices. If you already contribute to sustainability reporting – congratulations!
I believe that those who are starting their sustainability reporting journey with the sole target to be compliant with the EU Non-Financial Reporting Directive (NFRD), will find more business case in it than they thought.
Most companies are working on making their reporting governance, processes and practices more efficient, less error prone and easier to control and audit. Reporting is not only driven by demand but also by active supply, as it is crucial to equip stakeholders with relevant and credible information.
What should you consider in your supply of sustainability actions and reporting?
- Do you work with material topics? A materiality analysis guides what to include in reporting and supports business in focusing sustainability efforts on what matters the most for business and stakeholders.
- Do you analyze changes in your company’s operative environment and how you contribute to change? Consider how your company is contributing to the UN’s SDGs and the Paris climate agreement.
- What value does your company create for society? You can measure and monetize the societal value of sustainable business, investment, programs, partnerships or products using credible methodologies. This enables you to communicate a more comprehensive value creation story to investors.
- Is sustainability integrated in your company’s business strategy process and other key business processes? Show how sustainability drivers are considered in shaping your future business and how sustainability is in-tegrated on a strategic and operative level.
Be active, relevant and creative. The ways of reporting and providing value to stakeholders are countless!
What do the stakeholders expect?
During the past couple of years, there has been much discussion about the form, context and contents of corporate sustainability reporting. This discussion is flavored by three important developments.
- Information on key ESG topics. Investors are increasingly interested in ESG-related investment relevant information for their decision-making. Investors have e.g. realized that the impact of climate change and the Paris climate agreement on risk and return in their investment portfolio is significant. Simultaneously responsible investment practices have become more mature.
- Compliance with both legislation and sound guidance-based schemes. The demand for sustainability re-porting has led to the launch of a multitude of mandatory and voluntary reporting schemes and in particular the implementation of the Non-Financial Reporting Directive (2014/95/EU), which has made reporting manda-tory for thousands of European companies which have not reported on corporate sustainability before from 1 January 2018. In Sweden the NFRD is transposed to national legislation through the Annual Accounts Act (Års-redovisningslagen).
- Enhanced integrated reporting. The Secretariat of the Global Reporting Initiative launched the GRI Stand-ards in 2016. The International Integrated Reporting Council launched its reporting framework which responds to the demand for integrating reporting of financial and non-financial information. Guidelines such as the Financial Stability Board’s Task Force recommendations on climate-related financial risk disclosures adds to these.
Results from the KPMG Reporting Survey reveal that reporting on sustainability is increasingly an integral part of annual financial reporting. Nordic companies have room for improvement as concerns climate disclosures, supply chain management, approach on human rights and reporting on value creation. I am, however, pleased to note that Swedish (number 1!) and Finnish companies are among the world’s top in reporting on how they contribute to the SDGs.
Whether you are a new entrant on the market for sustainability reporting or an experienced master of disclosures, know that you have an important job. Use your influence wisely!