Why Sustainability Reporting is Important

July 21, 2021

Why Sustainability Reporting is Important

Many investors are now appreciating that sustainability is an important long-term goal that will be helpful in defining business models for success. According to a report from the United Nations Global Compact (UNGO), about 80% of the top-level executives believe that sustainability is crucial to gaining a competitive advantage in the market today. Therefore, sustainability reporting data is a stepping stone and a force for propelling organizations to the next level.

Despite the long list of benefits that come with sustainability, the adoption of sustainability reporting in line with guiding principles has been low. Your organization might have an elaborate program for corporate social responsibility, but you need to take it to the next level - sustainability reporting. This post digs further into the concept to establish why sustainability reporting is important for your organization.

Sustainability Reporting: A Closer Look

To demonstrate why sustainability reporting is important, we need to go back to the beginning. Sustainability as a concept can be traced back to 1992 in Rio de Janeiro when the first UN Conference on Environment and Development was held. The outcome of the meeting correctly found that it is impossible to talk about advances in development without the environment. However, it would take another 20 years for the concept of sustainability reporting to be “officially” reborn when it was expressly captured in paragraph 47 of the famous publication, The Future We Want.

So, what exactly is sustainability reporting? This is the disclosure of information about the significant social, economic, environmental, and governance impacts of an organization. Here, we must indicate that sustainability reporting is not just about the report but goes deep into the organization's operation and buttresses into the community. It combines longer profitability with a growing desire to make the globe a better place for all.

See – you have a role to play, everyone has a role to play, and the benefit/s is sustainable growth, where the globe will address the challenges facing it. Why intensify the production process but increase wastes and pollution. It is like tossing the globe into an abyss of destruction. The time to face the challenges is now!

Why Sustainability Reporting is Important for Your Organization

As a manager, you sit at the top of the pyramid, implying that you get a “bird’s” view of the organization, and it is your role to look far, draw clear goals, and plan how to achieve them. Sure, you must have other models of doing this, and now, sustainability reporting is another cog to help take your organization to the next level. So, here are seven main reasons why sustainability reporting is important to your organization:

1.     Holistic Review of Opportunities and Risks

The first step in sustainability reporting is a comprehensive review of your organization with the intention of understanding the current status. This implies you get the opportunity to check the challenges and bottlenecks that stand on your path to faster growth and success. Here are some of the areas that you might want to check:

·      Source of raw materials.

·      Production.

·      The efficiency of your machinery.

·      Staff motivation.

·      Waste production.

·      Marketing strategies.

·      Supply chain channels.

The review sets the stage for changes which should culminate in the generation of the sustainability report. As we will see in the subsequent points, the review, which also brings on-board different stakeholders, serves as an eye-opener by defining the path you need to follow for success. If poor waste management, labor practices, or product development made the targeted market disinterested, sustainability reporting offers you the opportunity to remedy that. Why get content with average performance when you can race past competitors?

2.     A Change to Link Financial and Non-Financial Performance

The market has become so competitive that it is easy for crucial things to slip between the fingers when they should be adding value. Think of a company that has invested heavily in green energy to help cut the cost of energy and reduce emissions. Well, some people might think that by simply slashing the energy bill down, everything is done. Not at all!

Such an action is an important lever in wrestling some of the most challenging ills of the society, such as global warming, rising sea levels, and loss of biodiversity. The efforts should be rewarded and the company used as a role model. Why am I saying this? That effort from your company, such as treating waste from the factory, adopting green energy, supporting education initiatives, or others, should be well captured in a sustainability report.

As we indicated earlier, stakeholders, especially clients and investors, are on the lookout. So, make sure that the effort for sustainability, including the non-financial ones, is well defined, goals set, and actions linked to their achievement. Then, you will be surprised at how fast the company sales will grow.

3.     Success is More than Profits

Ask any entrepreneur about the main purpose for his/her investment, and one of the likely answers is optimizing profitability. Sure, it is a risk, and takers need to be rewarded, but what if you can get more from your effort? That is what sustainability reporting is all about.

From the definition, you can see that sustainability reporting seeks to capture and report information about environmental, social, and economic impacts. Therefore, you are extending reach such that the business stops being a stand-alone unit and transforms into a community, a regional and global unit that all can be proud of. To put it differently, sustainability reporting is a win-win concept for your organization and other parties.

Internally, your employees will be able to associate with the organization more, putting additional effort to increase productivity, increase profitability, and catapult the organization to the next level. New and more efficient equipment will cut down production-related costs while increasing the overall firm’s productivity. Other parties who can benefit from your company’s efforts on sustainability include:

- Vulnerable persons through support for empowerment programs.

Endangered species via promotion of habitat restoration.

- Supporting programs for social justice.

- Cutting down emissions.

4.     Better Reputation

Another reason why sustainability reporting is important is that it provides your firm with an opportunity to improve brand reputation. Today, unlike in the past, most clients and other stakeholders want to be associated with reputable organizations. This is why they always dig back before buying products from a company to determine that it does not harm the environment or engage in malpractices, such as using child labor. By demonstrating your efforts in promoting sustainability, you are simply saying, “look here, we follow the best practices and will go to any length to make the globe a better place.

In a survey done in 2013 by Boston College Center for Corporate Citizenship and EY, over 50% of respondents indicated that issuing sustainability reports helped to build their reputation. So, you, too, should not be left behind.

When your sustainability report is finally ready, you can pitch on it to further grow the reputation of your organization by basing the discussion on it. Well, it was your effort, so ride on it to reap maximum benefits. For example, if you put a lot of effort into green energy, commence a discussion and base your marketing strategy on it, especially on social media, to indicate the importance of conservation. You will be surprised how many “foot soldiers” will be willing to join the ship, become part of your community, and sell the brand.

These considerations of why sustainability reporting is important are only a few. The list can be a lot longer. Other benefits that you should expect for adopting sustainability reporting include:

·      Reduced waste production.

·      Higher efficiency.

·      Better influence on long-term strategizing and business plans.

·      Offers a good point for comparison with other organizations.

·      Helping external stakeholders to appreciate the value of your company.

Sustainability Reporting: The Procedure

When managers, entrepreneurs, supervisors, and leaders understand why sustainability reporting is important, the next question that comes into mind is, "How can my company do it?” One thing that you need to appreciate is that sustainability reporting is a process and requires good planning and allocation of resources. So, here are the main steps for sustainability reporting in your facility:

·      Identify the main requirements, especially where legislation applies to the targeted content, and make sure your organization is compliant.

·      Engage your internal and external stakeholders to help define the objectives of sustainability in the organization.

·      Select a good reporting cycle and determine the type of data that will go into your sustainability reports. It will be a good idea to consider a cycle that rhymes with your financial cycle.

·      Select the preferred strategy, reflect on it, and start gathering data. For example, if one of the actions is cutting down emissions, the activities related to that, such as equipment maintenance and staff training, should be captured. If you have a team to spearhead the initiative, include the efforts used to recruit it, possible training, and resources allocated to it.

·      If you want to use sustainability reporting software for data collection, it will be a good idea to ensure it is correctly installed in your system for data gathering.

·      Review the progress of sustainability reporting regularly to establish whether everything is on course. Is everything going on according to schedule? If you selected external activities, such as supporting vulnerable groups or conservation initiatives, make follow-up and capture related-info.

·      Generate your report on sustainability and have it reviewed by the organization's management. This will be a good point to confirm why sustainability reporting is important to your employees, shareholders, and top management. Then, publish it for all to see and define the targets for the next cycle.

Sustainability reporting has created a new roadmap that allows everyone to participate in the search for a lasting solution to the global challenges facing us. So, if you were wondering why sustainability reporting is important, now you know. Use it to your advantage and catapult your organization to greatness!

 

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