Introduction to Sustainability Reporting
Sustainability reporting is a form of value reporting where an organization publicly communicates their economic, environmental, and social performance.
Reporting on sustainability performance is an important way for organizations to manage their impact on sustainable development. The challenges of sustainable development are many, and it is widely accepted that organizations have not only a responsibility but also a great ability to exert positive change on the state of the world’s economy, and environmental and social conditions.
Reporting leads to improved sustainable development outcomes because it allows organizations to measure, track, and improve their performance on specific issues. Organizations are much more likely to effectively manage an issue that they can measure. By taking a proactive role to collect, analyze, and report those steps taken by the organization to reduce potential business risk, companies can remain in control of the message they want delivered to its shareholders. Public pressure has proven to be a successful method for promoting Transparency (behavior) and disclosure of greenhouse gas emissions and social responsibilities.
As well as helping organizations manage their impacts, sustainability reporting promotes transparency and accountability. This is because an organization discloses information in the public domain. In doing so, stakeholders (people affected by or interested in an organization’s operations) can track an organization’s performance on broad themes – such as environmental performance – or a particular issue – such as labor conditions in factories. Performance can be monitored year on year, or can be compared to other similar organizations.
Sustainability reporting is generating considerable interest around the world and is becoming one of the basic criteria for judging the social responsibility of organizations. Business leaders are starting to realize that comprehensive reporting helps support company strategy and shows commitment to sustainable development. The corporate benefits of sustainable performance are also markedly reduced when key stakeholders do not know what you are doing. Thus companies are issuing Sustainability Reports to enlarge the scope of conventional corporate financial reporting. The report helps them ensure transparent communication and engagement with their stakeholders in respect to the company’s sustainability performance. It has become imperative for the companies to have stakeholder engagement due to the growing awareness of the stakeholder because of the easy and speedy access to information. The stakeholders like government agencies, employees, investors, financial institutions, community, NGOs, consumers, etc. have become more demanding and ask the company to disclose information on its social, environmental and economic impacts.
The companies are also under peer pressure from their competitors to perform well their social responsibilities and report them to gain a competitive advantage to be recognized as a socially responsible company.
The rationale for sustainability has been articulated in a number of ways. In essence it is about
building sustainable businesses, which need healthy economies, markets and communities.
The key drivers are:
1. Enlightened self-interest – creating a synergy of ethics, a cohesive society and a
sustainable global economy where markets, labour and communities are able to
function well together.
2. Social investment – contributing to physical infrastructure and social capital is
increasingly seen as a necessary part of doing business.
3. Transparency and trust – business has low ratings of trust in public perception.
There is increasing expectation that companies will be more open, more accountable
and be prepared to report publicly on their performance in social and environmental
arenas.
4. Increased public expectations of business – globally companies are expected to
do more than merely provide jobs and contribute to the economy through taxes and
employment.
Sustainability Reporting is also of benefit to the company internally by helping it identify and address business risks and opportunities.
Benefits of Sustainability Reporting:
Focused attention – structured approach
Motivating continual improvement & better data management
Helps in becoming market leader
Influencing policy makers
Improves trust & enhances image / Investor confidence
Marketing tool – demonstration effect
Will assist in stakeholder dialogue
Builds ownership and commitment
Helps in thinking ahead – vision
It has also been internationally established that sustainability reporting leads to improved business performance through communication of information with stakeholder groups like customers, suppliers, employees, financial institutions, regulators and communities on a company’s economic, environmental and social management and performance. Sustainability reporting addresses how societal trends are affecting the company, and how the company’s presence and operations are affecting society. As such, sustainability reporting can demonstrate a company’s motivation and willingness to position itself in a broader context.
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