Sustainability reporting is mainstream. Its growth across Europe, the Americas, Asia and the rest of the world has been marked. Yet it is still seen by some as an exercise in compliance and a cost rather than an opportunity. Others see value in the exercise, but remain unconvinced that current practice is realising its full potential. Users of reported information, particularly investors, often feel it is falling short of meeting their information needs and not empowering them to make informed decisions related to a company’s track record and future prospects.
Given the time and resource investment that goes into reporting, this is a big missed opportunity for businesses. Corporate Citizenship began 2019 by reflecting on what companies are getting wrong today, and asking how they can realise more from their reporting on sustainability. In other words, how can we report smarter and not just harder? Through our work with clients and speaking to experts both within and outside companies, we have identified three important trends that are changing sustainability reporting for the better.
- Moving to multichannel and audience-led reporting
The users of sustainability information are not homogeneous. This poses a serious problem for report preparers. Whose definition of what is material to report on do you use? Investors? Customers? NGOs?
The predominant format for a sustainability report has been a standalone PDF, which tries to meet the needs of all key stakeholders, but far too often does not fully meet the needs of anyone.
It is 2019, and corporate sustainability reporting practice has yet to catch up with the suite of digital formats that enable a more dynamic conversation and targeted approach to engaging audiences with relevant information.
Multichannel reporting, particularly digital, allows a company to provide detailed content for high-information readers, which can be explored to the level needed, while providing low-information readers with access to overviews and summaries of a company’s sustainability narrative and performance.
For a company with 400 brands in more than 190 countries, a single PDF report produced on an annual basis is simply insufficient to meet the needs of Unilever’s many different stakeholders.
Moving away from a single PDF document of reference to a multichannel approach to reporting, with the company’s website being the primary source of sustainability information, didn’t happen overnight. However, the company has gone from a 56-page PDF report in 2012 to a single-page infographic.
In the guest article in this month’s Corporate Citizenship Briefing, Jonny McCaig, Global Reporting Director explains that Unilever’s website offers “a visually rich content hub to help people make decisions – whether that’s to apply for a job, to buy one of our products or simply to put their trust us”.
- Telling your unique story
Naturally, reports are complex documents, touching on numerous topics which are often technical in nature. This is inevitable to an extent. Indeed, with the ever-growing expertise and sophistication of stakeholders, in order to be authentic and credible, your story needs to be underpinned by robust and relevant detail.
However, they do not need to be dull, boilerplate documents focused more on meeting the requirements of reporting standards and frameworks than telling a story. Sustainability reports should tell a company’s unique story in a way that is engaging for readers and differentiating for the company.
In practice, this means developing a clear and compelling narrative that explains what sustainability means to the company, and makes clear to stakeholders how sustainability is linked to the business strategy and the processes for creating and sustaining value.
Example: Olam International
Olam International (Olam) has defined its purpose as being to Re-imagine Global Agriculture & Food Systems. This bold ambition cuts to the heart of some of the most difficult sustainability challenges facing its business and industry sector. As a core narrative, it is very relevant to the company’s strategy and long-term performance.
Looking at Olam’s Annual Report 2017, this narrative is clearly woven into the messages throughout the report, and demonstrates the level of integrated and holistic thinking at the company.
This level of ambition can be daunting to some, and it is important that Olam follows through on its commitments and remains honest about the challenges it faces. However, the forward-looking ambition set out by its purpose, puts the company right at the heart of the debate about sustainable agriculture and in a position where it is clearly showing leadership. Rather than following the pack, Olam is differentiating itself from its peers.
- Using reporting as a lever to drive performance
Despite all the emphasis on the final product, sustainability reporting isn’t just an annual exercise in disclosure. The process itself is valuable to driving performance improvement within a company.
To realise this, companies must integrate the reporting process into the way the business is managed – ie reporting should work as a cog in the system that drives performance, in between strategy and management.
Example: Sembcorp Industries
Sembcorp Industries (Sembcorp) has been producing a sustainability report since 2009. While the company is relatively early on in its journey, sustainability reporting has been a key tool in helping Sembcorp to engage management, establishing and enhancing management systems, and improve sustainability performance. Sembcorp also uses the LBG Framework to inform its approach to accounting for, and reporting on, its community contributions.
Ng Lay San, SVP, Group Strategic Communications and Sustainability has been with the company for over 20 years and has a nuanced view of how sustainability reporting has shaped, and is still shaping, the company’s management practice and performance. “Our sustainability journey has been predicated on many things. However, a priority for leadership since we adopted the GRI framework, has been to ensure we take a rigorous approach to measurement, monitoring and reporting our performance.” She adds, “The discipline of producing an annual sustainability report has been essential to our progress. It holds us accountable, forcing us to assess our progress regularly and work towards continuous improvement. Ultimately, this helps our ongoing journey to embed sustainability into our organisation.”
We recognise that every company will have a different set of factors that inform its approach to sustainability reporting. Chief among these is to understand who your stakeholders are, what issues matter to them, and what kind of information will support them to make informed decisions.
We also recognise that there are other trends shaping the sustainability reporting landscape, such as convergence among the main sustainability reporting standards/frameworks, that will hopefully reduce the reporting burden on companies. Perhaps more importantly, this convergence might also provide a more meaningful set of standardised metrics and disclosures that reporters can reference, which promote comparability and consistency, and improve the overall usefulness of sustainability reporting.
However, we believe that the three trends we have focused on (moving to multichannel and audience-led reporting, telling your unique story and using reporting as a lever to drive performance) offer companies – regardless of where they are on their reporting journey – a practical set of points on which to reflect, asking questions that will help them realise greater value from their sustainability reporting, today and tomorrow.