Sustainability reporting is becoming increasingly common, particularly among companies that have reached a certain size or market valuation. Anyone familiar with the reports that are currently being published will see there is great disparity between them.
To align your company with where the market is headed it is not enough to disclose the bare minimum – even if that disclosure is well-intentioned. A veneer of sustainability will eventually be revealed for what it is even if the intentions behind it are pure. Not all benchmarks are equal and not all sustainability reports are beneficial.
Ultimately, your company’s reputation is safer in the hands of a specialist. Here’s why.
- There is increasing pressure to disclose better data
There is growing expectation among investors that more sustainability-related data should be visible. Additionally this is now further becoming enshrined within government law.
Nowhere can this trend be seen so sharply as in the US. Following an executive order from President Biden, the Securities and Exchange Commission is making strides towards enforcing a fuller disclosure of ESG-related information – a rule proposal may be issued by October.
In the UK, TCFD (Task Force on Climate-Related Financial Disclosures) reporting is due to be made compulsory for listed companies from 2022. These rules may well be stack up with implications for large private companies. The UK government’s roadmap for the next five years of sustainability-related disclosure gives businesses a reasonable lead time to prepare for what’s ahead.
Meanwhile, in the EU, the Sustainable Finance Disclosure Regulation has already come into effect. Asset managers are required to make ESG plans visible to prevent greenwashing.
Even for companies that do not reside in these territories, such regulation has an impact on the global market. If companies in MENA want to attract foreign investment, for example, they will need to invest in sustainability reporting. Multinationals meanwhile will soon expect to do business with companies that have adhered to these regulations, regardless of their location.
Without the right expertise, it’s easy to misjudge exactly what companies, investors and governments will be looking for – from your data collection process to your involvement of stakeholders.
But an external specialist can help you to present them with data that is reliable and objective.
- There are business advantages to taking reporting seriously
Sustainability combined with transparency – this is where the market is heading. Trust is becoming ever more precious to both shareholders and consumers. Their scrutiny ever more informed. A study by Michelle K. Lee of the University of Washington highlights how the cost of CSR-related unrest can be great for CEOs, arguably even greater than wealth orientated unrest.
Approaching your sustainability report as a marketing document risks foresight of long-term reputational risks. Sometimes PR-motivation can be a reasonable starting point. To begin aligning your company with ESG-goals that are going to remain relevant in five years, your sustainability report needs to dig beneath surface-level statistics.
Likewise, your report’s case studies need to speak to where benchmarks will be, not only where they are at present. This is where a specialist can bring sector and region-specific insight you need.
As reported by Patrick Temple-West at the Financial Times, companies are already beginning to disclose far more than was previously considered acceptable. Some are linking to supplier codes of conduct while others through contractual provisions are requiring their suppliers to disclose key information.
A significant example is Microsoft, who now require suppliers to disclose their greenhouse gas emissions. This is part of Microsoft’s move to become carbon negative by 2030 and they recognise the business opportunity it is. As Microsoft’s President Brad Smith writes, “The world is not just ready but anxious to create this new market.”
Sustainability reporting is ineffective when approached as a CSR stunt. However, as with Microsoft, it can be highly effective as part of a commitment to transparency. It can also be a core part of driving your business forward to meet non-financial KPIs, which will in time inevitably contribute to meeting financial targets.
Integrating an external specialist’s understanding of the market with the needs of your business can help guide you towards these desirable outcomes.
- Your ESG framework needs to be tailored to your business
A specialist will bring region and sector-specific insight into which ESG framework is most suitable for your organisation. There are now more than 360 ESG accounting standards and it is not necessarily a matter of choosing from the most popular frameworks.
In September 2020 The World Economic Forum (WEF) laid out a set of 21 core metrics and 34 expanded metrics, which represent more advanced or nuanced ways of reporting. The WEF recommends that organisations report against as many of the core and expanded metrics as they find material and as appropriate.
For instance, you may choose to focus primarily on benchmarking against Global Reporting Initiative (GRI) metrics, but you might also align your climate risk disclosure with TCFD. Your impact data may also benefit from matching against IRIS+ or the IMP criteria.
It is vital your company chooses the right frameworks for your business. The decision you make here can affect your company’s ability to attract investment and reduce risk in your sector, region and market. A reporting specialist who integrates an understanding of all three can ensure you don’t miss anything.
Whether you already know the exact type of consultant you need, or if you simply know you need a good sustainability report, Mashora can help. We help you find specialists who understand your context, who can select the best frameworks for your business, and who can help align your organisation with a sustainable future.
So no matter what sector you are in, or how nuanced your company’s developmental impact, we will locate the right experts who can provide you with the thorough sustainability reports you need.
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