It’s that time of year when financial reporting is front of mind for many organisations, but what about reporting on environmental, social, and economic impacts? Whether we call it a sustainability, impact, non-financial, or ESG report, these can play a pivotal role in communicating organisation performance, impact, and strategy with stakeholders.
Sustainability reporting is becoming commonplace with large global companies taking the lead. KPMG reports that the rate of sustainability reporting has seen steady growth over that last decade, with 96% of G250 (that’s the world’s 250 largest companies by revenue based on the 2021 Fortune 500 ranking) having reported in 2022, and 79% of the N100 (a worldwide sample of the top 100 companies by revenue in 58 countries, territories and jurisdictions). And while the rates of sustainability reporting for smaller organisations is not as explicitly measured, the interest we are seeing from organisations wanting to measure and report on sustainability metrics indicates an upward trend in formal reporting.
There are many reasons why an organisation may choose to report on their sustainability impact and performance, including:
- To understand impacts and set targets
- To formally share progress with data and insights
- To tell an organisation’s story in full
- To demonstrate transparency and accountability
- To engage and learn from stakeholders, including employees
- To identify and manage risks and opportunities
- To build trust and reputation
In a recent webinar held by Go Well Consulting, attendees were asked what their main motivations were for producing a sustainability report. The most common reason was that it provides a way to communicate their sustainability journey (83%), while 58% said it offers a structured way of managing sustainability, and 50% said it was to measure impact. The least common reasons for producing a report were that it was a requirement, and that their stakeholders were asking for it, a trend that we are likely to see shift in coming years as the impacts of mandatory reporting filter down to smaller, private organisations, and as the needs and values of stakeholders change.
The challenges of reporting
Producing an impact report is no small feat. Large organisations may have whole teams dedicated to it, so it is no surprise that many smaller organisations may find it an overwhelming and even unrealistic task.
In a second poll run during our webinar, we asked attendees what they perceived as the biggest barriers or challenges to producing a sustainability report. 69% said it was the availability and quality of data, followed by time and resources (54%), and understanding reporting frameworks or standards (46%).
The collection of information and data, including identifying data sources and ensuring accuracy, can take time. It generally requires input from various functions within the organisation and may even need engagement with external stakeholders, such as suppliers. For some organisations, the information that is asked of them in reporting disclosures may not be something that they are currently documenting or tracking and so the effort to gather the relevant information is high.
Linked to this is the time and resources required in producing a sustainability report. Smaller organisations typically will not have a dedicated full time resource for the work, so it becomes a task in addition to an employee’s ‘day job’, and requires time from others across the business. One of the key learnings Mike from Kōkako shared from his experience is to allow more time than you’d expect!
Mike also highlighted the importance of reporting being led by someone in a leadership position in the organisation and seeking interest from others within the organisation to assist. This will support buy-in across the organisation and promote leadership’s commitment to the process.
Another challenge experienced by organisations looking to report is around understanding the reporting frameworks and standards available and identifying the right one to use. We are trained in GRI and so have an obvious bias, but we do believe it is the best sustainability reporting framework, and we are not alone, KMPG reporting that GRI remains the most commonly used reporting standard globally with increased adoption across both the N100 and G250. There are a myriad of frameworks available and each serves a different purpose and we plan to dive into these in a future blog.
The benefits of reporting
There are countless benefits of reporting on sustainability, including enhancing the attraction and retention of talent to your organisation, with an organisation’s approach to sustainability playing an ever increasing role in perspective and current employees’ decisions to join or stay. Mike at Kōkako shared with us how they include their sustainability report as part of new employee onboarding, and he also sees it as a valuable resource for prospective employees, to understand who Kōkako are and what they are about.
Engaging in sustainability reporting can also drive the establishment of good record keeping and data management practices. While the effort required at the outset may be a deterrent, by establishing these practices organisations will be better prepared for future reporting requirements. In addition, the collection and analysis of data and disclosure as part of the reporting process can help organisations identify opportunities for improvement and efficiencies.
A sustainability report can also act as a valuable marketing tool and an asset in enhancing an organisation’s brand. Consumers are increasingly wanting to make sustainable changes to the way they live and this is influencing their buying decisions. A report can also demonstrate to stakeholders an organisations commitment to understanding their impact and looking at ways to improve their contribution to sustainable development.
The process of identifying impacts both of an organisation and its sector provides the opportunity for strengthening industry relationships, as you tackle these big issues and their solutions together. Mike described how leading the way by producing a sustainability report helped to identify key issues in the coffee sector, highlighting to peers what is important to be thinking about and can drive momentum around accountability.
As sustainability and ESG impact becomes ever more important, the standards and frameworks for reporting continue to evolve, and can seem complex and overwhelming.
The Global Reporting Initiative (GRI) are the only standards for addressing impacts on the economy, environment, and people, which meet the needs of multiple stakeholders and which are able to be adopted by an organisation of any size and operating in any sector. It is also the most widely recognised and used framework by organisations both globally and here in Aotearoa.
For some organisations there may be other frameworks they choose to report against, whether they be specific to their sector or a requirement of investors or government.
Some of these are:
- CDP – focuses on environmental performance data related to GHG emissions, water, forests, and supply chains
- Taskforce on Climate-Related Financial disclosures (TCFD) and Taskforce on Nature-Related Financial disclosures (TNFD) – as indicated in the name, these focus on climate related and nature related risk disclosure respectively
- Integrated Reporting – IR – combines both the financial and non-financial disclosures and data in a single report
In addition, GRI works with some of the other reporting standards organisations to ensure alignment in disclosures, and have also produced guidance on linkage to the UN SDGs to help organisations understand their contribution to the goals.
The above is by no means an exhaustive list of reporting frameworks and standards, keep an eye out for our future blog diving deeper into the sustainability reporting ecosystem and aiming to demystify disclosure.
If you’re interested in producing an impact report for your organisation but unsure where to start, get in touch.
Written by Emma Brockie, Sustainability Consultant at Go Well Consulting.