All company directors and leaders juggle many plates, all spinning simultaneously.
One of the most challenging plates is labelled “Sustainability” and is about ways of affecting all company activities. It is also about achieving corporate ethical respectability.
But what does sustainability mean in practice? How do leaders and managers know they’re running a truly sustainable organisation?
Like so much associated with ethics, sustainability starts with intention. It demands clear thinking about what it implies for the company—likely benefits, a set of criteria and assumptions on which to base actions.
Many in the business world though view sustainability efforts, let alone reporting on them, as purely a cost, with little or no positive return on investment.
Yet such doubts are increasingly being overtaken by events. Sustainability reporting is now a world-wide norm.
For many organisations, sustainability is therefore now a fact of life. There’s no longer a debate about “should we pursue sustainable practices”, but rather:
“How do make this happen in our particular firm?”
Even small companies find it’s sensible to aim for sustainability. Not just for their own benefit. Their largest customers have their own requirements and increasingly want assurance their supplies are also doing what’s right, what’s sustainable.
Pressure to include a sustainable approach in company operations is not simply good practice. If things go wrong, as happened with the BP failure in the Gulf, the environmental and social impact on a company’s activities can prove extremely costly.
“Put simply, if companies don’t start managing these issues they won’t have a license to operate in the globalized 21st century world.
KPMG report on Corporate Responsibility Reporting 2013
This kind of reporting often extends to being available to to internal and external stakeholders—that is, moving to an increased level of transparency.
Any report on progress must therefore show whether the company is moving towards or away from its chosen goals of sustainable development.
It must reveal the impact the organisation is currently having on critical aspects of the environment, society and the economy.
Such results now play a considerable part in affecting stakeholder relations, investment decisions, and other market connections.
The financial effects show up later in the share price, in the ease of access to capital and even on the costs of recruiting and retention.
So far, there’s no universally accepted definition of sustainability nor how to report it. Producing reports can be frustrating, time consuming and as mentioned earlier, may be seem as an unprofitable activity.
Creating these progress documents can test even the most dedicated report-orientated manager.
Rather than adopting a one-size fits-all approach, there may need to be separate reporting aspects for different stakeholder groups.This kind of reporting is also increasingly merging into company compliance requirements. That is, stakeholders, government agencies and lobby groups all want to know the company is being a good citizen.
The Global Reporting Initiative (GRI) approach is one attempt to create a coherent and consistent process in which
…”sustainability is integral to every organization’s decision making process.”
Started in Boston USA in the early 1990s, GRI uses standards developed by many different networks of experts. Together these standards have evolved into an impressive, world-wide shared framework of what to measure about sustainability and how. It includes:
- Standardizing sustainability reporting and guidance on current reporting
- Creating awareness through training and outreach
- Reporting policy
- Promoting the development of integrated reporting
Seventy eight percent of companies worldwide that report on sustainability for example, refer to the GRI reporting guidelines in their company reports. This is a rise of nearly 10% since 2011.
While maintaining consistent language, and metrics the GRI approach is constantly evolving. Among its many features is the requirement to report on governance, ethics and integrity, the supply chain, anti-corruption and greenhouse gas emissions.
The latest standard of GRI reporting (G4) also has a stronger focus on stakeholder engagement and something called “materiality”—see also below.
Moving to this latest standard has been gradual, taking nearly two years. By the end of 2015 all firms using it must use this latest G4 standard.
One of the attractions of this system is the clear route it offers for ensuring the quality of sustainability reporting. For example data must offer offer balance, clarity, accuracy, timeliness, and so on.
Over 90% of the world’s largest 250 companies now publicly report on aspects of their sustainability performance.
Sustainability though, has wide-ranging operational implications. For example, how far back down the supply chain should the company go to ensure sustainable practices?
The GRI approach for instance, demands 15 performance indicators to monitor supply chain issues.
What to aim for, what to disclose and how to measure it can seem a daunting prospect, particularly for a large, diversified organisation.
For example, one study of metrics measuring performance in green and sustainable supply chains, identified some 2555 unique metrics, including 76 for water alone. It is therefore hardly surprising a study by KPMG concluded
“Supply chain reporting needs more focus”.
There are three basic areas for a company to consider in developing its approach to sustainability and reporting:
- Strategy and Profile:
This gives an overall context for understanding the company’s performance, such as its strategy, profile, and governance.
- Management Approach:
This covers how an organization tackles its chosen areas. It’s a context for understanding performance in a specific area of activity.
- Management Approach:
- Performance Indicators:
These are the nuts and bolts of the reporting approach, They provide comparable information about the economic, environmental, and social performance of the organization
You may think this is pure jargon–and you’d be right! Even report-hardened executives may quail at the prospect of interpreting what materiality means to the company.
Reduced to its essentials it’s about
“Making sure we only record things of real relevance to our company and its impact on society”
The GRI system provides a way to decide which areas of sustainability are worth investing in. These come down to a mix of business and societal values.
Making sure what the company measures is ‘material’ to its performance, is causing headaches for many working in this area. Numerous seminars and support services offer help with the issue.
In the end though, deciding what is material to the company relies on sound judgement to identify what’s important for the sustainability agenda.
TECHNOLOGY TO THE RESCUE?
This can potentially identify opportunities for improvement, increase performance and prevent or mitigate risks.
In theory at least, such systems allow the company to feed all its sustainability metrics such as energy consumption, water consumption, waste production, emissions, and more into a single database.
Once centralised it’s supposedly easily analysed, trended, reported and shared.
That’s the theory. In practice, such a system will usually prove to be more demanding than the software providers would have you believe.
SUSTAINABILITY IN PERSPECTIVE
Some firms regard this aspect of ethical performance as important. Others go through the motions, with reporting that misses the essential ethicality of actual actions—as for example with Shell drilling for oil in the arctic.
Even the best companies need to keep their eye on the plate spinning labelled sustainability.
Just about everyone’s efforts in this area are essentially work in progress–see for example, Coca Cola’s recent annual report on sustainability.