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By Nikos Avionas — How do investors and other stakeholders verify corporate claims of environmental impact, their social responsibility and governance (ESG) related risks? Look to the company’s sustainability report!
More than marketing, sustainability reports indicate company intent and follow-through and are complementary to annual financial reports. Analysis of reports in aggregate indicates industry movement. The research presented in Sustainability Reporting Trends in North America 2017 focuses on the United States and Canada. The report is based on annual research from the Centre for Sustainability and Excellence (CSE)whose 2016 research shed light on sustainability trends in Silicon Valley.
A common corporate myth is that embarking on a sustainability strategy increases costs. Beyond myth, CSE sought actual corporate strengths and weaknesses as demonstrated through reporting. Their research shows instead that increased attention to sustainability strategy with comprehensive sustainability reporting positively influences profitability.
The most significant finding is that about two thirds of companies with sustainability reporting and the highest rankings on sustainability ratings such as CSRHub had better financial performance than companies with lower rankings and no reports as indicated by revenue during the period 2014-2016.
The research identified important correlations between enablers, tools and outcomes contributing to financial success and CSE had created a checklist based on these correlations that every company could use in order to maximize the benefits from sustainability reporting. Enablers include a culture of transparency and comprehensive strategic goals that respond to stakeholders’ expectations. Transparency refers not only to putting out a GRI-based sustainability report, but to including material metrics of externally assured performance data. The resulting outcomes are high sustainability ratings and positive stakeholder perception as shareholders and clients see more opportunities and have more trust in these companies.
Some characteristics of companies with successful sustainability reporting include the use of specific guidelines. Reporting using internationally accepted standards is growing, adding value, integrity, transparency, and credibility to companies publishing sustainability reports. According to the research, 65% of companies use the Global Reporting Initiative (GRI).
Carbon footprint reduction has become a priority of the companies that have the highest sustainability rankings. And, all the top companies have well-stated and measured goals and targets found in their reports and websites.
Reporting in North America falls short in that most reports have not sought external assurance. In the US and Canada, the number of externally assured reports is low compared to the EU. External assurance confirms the quality of information provided (both quantitative and qualitative). It provides transparency and credibility, increases reliability and trust.
The growth of sustainability reports is good news for investors and other shareholders. An overview of company sustainability reports takes 15 -20 minutes. Stakeholder focus groups have demonstrated surprise when leading FT 500 companies’ reports are missing key elements. Factors to look for include: use of internationally recognized guidelines such as GRI and CDP; metrics showing previous and present performance and future goals; active stakeholder engagement (without which the materiality and credibility of the report comes into question). Finally, has any external assurance been done for all or specific elements of the report?
Nikos Avlonas, best-selling author and president of CSE, comments ‘’No report will be perfect or cover every possible aspect of sustainability. But, stakeholders or investors can and should expect an honest and transparent effort with well-stated goals which touch upon on environmental, social and governance criteria. Sustainability reporting becomes one of the best tools for better understanding the financial sustainability and related risks of any company today and in 15 minutes you may have a good overview of its future’’
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The Centre for Sustainability and Excellence (CSE) specializes in global sustainability consulting, training and research. CSE has trained over 5,000 professionals, many from the Fortune Global 500, and started the Sustainability Academy, offering affordable, online education in corporate responsibility. Accredited by CMI (Chartered Management Institute), CSE is a GRI-certified training provider. CSE was founded by Nikos Avlonas, best-selling author and a PR Newswire CSR Professional of the Year.
