Sustainability reporting can be a valuable tool for managing performance.
Maya FischhoffGarima Sharma
April 18, 2017
Publishing a formal sustainability report is now standard business practice. More than 90 per cent of the Global Fortune 250 produce an annual report.
Firms can see real benefits from these reports. For example, companies that communicate strong sustainability performance experience lower regulatory risk and less employee turnover.
Yet firms could achieve much more through their sustainability communications.
Firms face two common pitfalls in their sustainability communications.
First, report content often doesn’t clearly link sustainability to organizational performance. Companies may see sustainability communications as an exercise to meet stakeholder expectations, with little real connection to the core operations of the business. Additionally, sustainability and communications staff usually compose reports, sometimes with little input from other parts of the organization.
Dr. Jodi York, co-author of NBS’s reporting research, describes the missed potential: “[Sustainability reporting is] not about producing reports, it’s about managing performance. Sustainability is a key window into that. Failing to see that is missing a huge opportunity.”
Second, the annual sustainability report is frequently the primary or only way that a firm communicates its sustainability performance. But that long, dense report may not be suitable for many stakeholders. And, a report release once a year doesn’t allow for adequate engagement or evaluation.
Report production can look a limited, linear process.
Is there a better way?
When companies view reporting as an ongoing process (“reporting” rather than “report”), it becomes more powerful. Reporting can become a virtuous circle where actions are followed by evaluation and new efforts. Organizations can also shift from informing stakeholders to engaging them: the result is better relationships and insights.
Making sustainability reporting a cross-functional effort can tightly integrate sustainability with strategy, influencing organizational performance. Sustainability reporting becomes a powerful management tool, tightly linked to strategy.
Organizations need not abandon the annual report. But, they can view it as part of a larger platform for understanding and communicating organizational performance, rather than an end in itself.
A Framework for Action
NBS’s framework shows the process of effective sustainability reporting. Building the report is tightly connected to stakeholder engagement, and followed by an evaluation process that informs the next cycle. Each stage considers connections to broader firm performance.
“For us, the sustainability report is a learning tool that requires the organization to gather its ideas and learning across the departments. You get the complete picture and by doing the exercise you can plan for the future.”
This summer, NBS will release a report and playbook based on research conducted by Drs. Brad Potter, Chris Dembek, and Jodi York of the University of Melbourne, Australia, and Wesley Gee of Works Design, Canada. The researchers reviewed international and Canadian best practices in sustainability reporting and interviewed stakeholders involved in preparing and/or using sustainability reports. In developing their insights, the researchers were advised by a guidance committee that included managers from leading Canadian companies.
These resources show how to use the framework for action to make reporting an ongoing, strategy-relevant process. They take you beyond the common model of an annual report, providing easy-to-follow steps for companies to enhance the effectiveness of their sustainability reporting.
The playbook will help you assess the challenges in your current reporting process, and create action plans for overcoming those challenges. It also provides insights and case studies from sustainability reporting teams and internal and external stakeholders.
Who Should Participate
These resources are intended for companies at any stage of development of their sustainability reporting.
Sustainability manager wanting to begin or improve upon your company’s sustainability reporting process and outcomes. Use the reporting process to place sustainability on your company’s strategic agenda
Business leader interested in understanding how sustainability reporting is relevant to implementing strategy and improving business practices and processes
Public Relations/Communication manager looking to leverage the annual sustainability report to enhance your company’s brand and reputation
Human Resources/Recruitment manager aiming to attract and retain the best talent
Investor interested in better understanding the process of reporting used by companies, and evaluating a company’s resilience in the face of environmental and societal risks
Different organizational functions can contribute too.
Accountants care about organizational performance. Increasingly, they see how sustainability reporting can contribute, and are becoming involved in identifying indicators and validating information.
Communications & marketing departments can find innovative ways to share information that meet diverse stakeholder needs. Starbucks, Mango, and McDonald’s Canada are just a few of companies who are leading by example.
ESG factors, trust, and social capital are increasingly important in reporting.
The following resources address the increasing focus on environmental, social, and governance (ESG) information, the importance of trust, and how the relatively new concept of social capital relates to reporting – particularly integrated reporting.