Companies are increasingly being held accountable for their actions to local communities, the environment, and other societal stakeholders. To fulfill this responsibility, companies need to effectively communicate their performance and activities with all their stakeholders.
Reporting on sustainability performance is one of the primary ways by which a company can assess and manage its impact on sustainable development. Corporate sustainability reporting communicates information that is relevant for understanding a company’s long-term economic value, and its contribution towards a sustainable global economy by taking account of the company’s economic, environmental, social and governance performance and impacts.
Reporting allows a company to measure, track, improve and communicate their sustainability performance. Companies produce sustainability reports in response to the increasing demand to publicly communicate their non-financial information and practices. This is done for a variety of reasons – to comply with mandatory reporting requirements, to respond to stakeholder demands, to improve transparency, and track their progress against their commitments to sustainability.
The Growth of Sustainability ReportingAs of 2011, 95% of the 250 biggest companies in the world issue sustainability reports in order to seek new ways to improve performance, protect reputational assets, and win shareholder and stakeholder trust.
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At present, sustainability reporting is voluntary in nature. The value presented (see tabs below) by reporting have compelled some companies to undertake and voluntarily report on their performance. Government regulations account for the largest proportion of sustainability reporting requirements worldwide. In many countries, early efforts by companies to measure and report on their corporate sustainability performance were accompanied by government recommended disclosure requirements. For example, in OECD countries, new reporting requirements such as the Companies Acts, accounting regulations, and instruments introduced to address specific themes such as corporate governance or environmental pollutants led to an increase in enhanced sustainability disclosures.
In Singapore’s, regulation has been introduced to ensure sustainability reporting via a “comply or explain” format, which became mandatory for all publicly listed companies listed on the SGX as of January 2018.
Drivers and Benefits of Sustainability ReportingDrivers of Sustainability reporting
Benefits of Sustainability Reporting
Internal Benefits
Companies can set direction by placing their purpose, vision, and strategy into the context of global sustainability. The sustainability reporting process helps to make this clear to all stakeholders.
Sustainability management and reporting requires good management systems, which improve data quality. Reporting on sustainability improves that ability of companies to track their actions. Tracking data highlights opportunities for improvement, efficiency and cost savings
Sustainability reporting can assist with the detection of emerging issues of concern. Early warnings of emerging issues can help management seize opportunities or evaluate potentially damaging developments early, before they can evolve as unwelcome surprises to the business.
Sustainability reporting assists with the communication of the importance of sustainability to rally the workforce towards a common beneficial cause. Engaging the workforce in sustainability efforts reduces absenteeism, attracts new talent and expertise, and increases productivity through a motivated workforce. It also function as a way to upscale efforts External Benefits
Proactive and transparent communication about sustainability performance and efforts builds goodwill and reduces reputation risks. It also improves product image, brand name and reputation.
Reducing risk through sustainability management and communication through reporting can help signal quality and good management. This provides an incentive for new sources of investor capital, and lower costs.
Sustainability reporting encourages on-going learning from the outside in. It allows stakeholders to keep up to date on the regulatory requirements of the company, while learning more about the efforts undertaken by the company to address sustainability. Sustainability reporting therefore functions as a powerful tool to build and restore trust amongst and between stakeholders.
Customers are looking for suppliers that minimize environmental harm and social risk within their business operations. By engaging in sustainability reporting, companies can increase customer satisfaction and loyalty leading to greater appeal. It also improves access to their supply chains to improve performance. |
Supplementary Resources
TODAYonline (2016) “Sustainability reporting for all listed companies mandatory from FY2017”
ACCA (2013) “The Business Benefits of Sustainability Reporting in Singapore”
UNEP (2013) “Frequently Asked Questions on Corporate Sustainability Reporting”