Sustainability reporting is an important part of a company's overall sustainability strategy and is now being used as a management tool to drive better decision-making.
TORONTO—Sustainability reporting is an important part of a company’s overall sustainability strategy and is now being used as a management tool to drive better decision-making, says Toronto-based tax and transaction advisor Ernst & Young.
“Research shows that more than 3,000 companies worldwide, including two-thirds of the Fortune Global 500, issue sustainability reports,” says Cathy Cobey, Ernst & Young’s Canadian Sustainability Assurance and Advisory Services Leader. And even though it started mostly with consumer-based businesses and resource-intensive industries such as energy, utilities and mining with larger environmental footprints, industries like financial services, telecommunications and logistics are catching on.”
Canadian businesses that produce quantifiable and data-rich sustainability reports can establish a reputation for transparency and build stakeholder trust. The practice is also expanding to areas such as supply chain and risk reduction.
Are you looking to whip your sustainability efforts into shape? Ernst & Young offers up 10 sustainability reporting tips:
Use a recognized framework to structure the report and add credibility—Although no universal reporting standards exist, some widely used voluntary guidelines prescribe the kind of information companies should disclose. Several frameworks developed by non-governmental organizations are in widespread use, including the Global Reporting Initiative Reporting Framework and the AccountAbility standards.
State your company’s vision and commitments—Stakeholders want to know that your company’s sustainability initiatives are driven by a long-term vision that aligns with your corporate strategy. There should be a unified vision between the company’s annual financial and sustainability reports.
Set and report on targets by establishing non-financial key performance indicators—Reports should provide a balance between qualitative and quantitative targets that address your stakeholders’ concerns and material issues. Setting targets in the form of KPIs also creates accountability for your company to meet publicly stated goals, leading to better measurement and tracking.
Include stakeholder engagement—Companies that include stakeholder engagement in the reporting process can better understand and respond to the material concerns of those stakeholders. This adds credibility to your report.
Identify opportunities for strategic innovation and market building—Stakeholders want to see their companies identify and tap into new business opportunities. In undertaking sustainability innovation, companies are driving growth by creating demand, opportunities and new markets.
Show performance trends—Reports should provide historical data whenever possible and provide feedback on why performance has changed over time.
Talk frankly about difficult issues and shortcomings—Remember, investors hate surprises, so if there are any sustainability risks that your organization faces, acknowledge them in the report and highlight any short- and long-term initiatives you are developing to mitigate such risks. Also, be forthcoming with your readers if you miss a target. Stakeholders understand that this is a journey and want to understand what corrective actions you are taking.
Develop a corporate governance structure with clear reporting lines—Sustainability reporting is a mandate that requires backing from senior leadership and accountability at the operating level in order to be successful. What’s more, companies should consider creating robust systems and processes that help collect, store and analyze sustainability information.
Obtain third-party assurance—While sustainability reports don’t need to be audited just yet, they are being more closely monitored than before. As this trend continues, users of sustainability information will come to expect that the information has been validated by a reliable third party.
Consider creating a specialist advisory board—This advisory board could include academics, lawyers, non-governmental organization representatives and industry experts who can provide an independent assessment of your report, and challenge management as to whether they’ve included sufficient information on issues important to your stakeholders. Remember to acknowledge them in the final external report.