Sustainability reporting is no longer just a passing trend. It is increasingly becoming a strategic imperative for organisations and businesses of all sizes. In the past, sustainability reporting was often seen as a voluntary exercise, something that organisations did to show that they were good corporate citizens. However, time has changed. Stakeholders are now demanding more information about the social and environmental impact of the organisations they engage with.
Given this growing demand for transparency and accountability from stakeholders, organisations that fail to report on their sustainability performance are at a competitive disadvantage. According to Businesswire, a recent study found that more than a third of global consumers are willing to pay more for sustainability as demand grows for environmentally friendly alternatives. What this means is that businesses and organizations that undertake sustainability reporting are better positioned to capture a significant share of the market.
What is Sustainability Reporting?
Sustainability reporting is like an organisation’s report card on its impact on the environment, society, and governance (ESG). It’s a comprehensive way of measuring and communicating the non-financial performance of an organisation including its progress toward its identified sustainability goals. Sustainability reporting is more than just a corporate governance tool or a box-ticking exercise. It’s a strategic cornerstone that can help organisations effectively confront and counter emerging challenges, and build long-term resilience.
Think of it this way: sustainability reporting is like a window into your organisation’s soul. It reveals your values, goals, and progress on a range of ESG issues, such as climate change, human rights, and corporate governance.
Purpose of Sustainability Reporting
The purpose of sustainability reporting goes beyond just fulfilling regulatory requirements. It’s about being accountable, transparent, and committed to making a positive impact. Here are the key objectives:
- Transparency: Sustainability reporting provides stakeholders with a clear view of the organisation’s sustainability efforts and progress. When you do sustainability reporting well, you’re not just being transparent with your stakeholders; you’re also showing them that you’re committed to building a sustainable business
- Accountability: it shows that the organisation is taking responsibility for its environmental and social impact. By providing a dashboard, it enables itself and its stakeholders to access and track its commitment and progress. That’s something that investors, customers, employees, and other stakeholders are looking for.
3. Trust Building: Build trust with customers, investors, employees, and the wider community.
4. Continuous Improvement: Use the data to identify areas for improvement and set more ambitious sustainability goals.
5. Competitive Advantage: Stand out as a company that’s not just about profits but also about making the world a better place.
Organisations that aren’t focused on sustainability are at a growing risk. Emerging challenges like climate change, social inequality, and economic instability are all interconnected and can have a significant impact on different industries. Sustainability reporting can help them to identify and manage risks. It can also help them to identify opportunities to innovate and create new sustainable products and services. It promotes transparency by allowing organisations to disclose their environmental, social, and governance (ESG) practices. This transparency encourages them to be honest and accountable about their sustainability efforts and their impact on the environment and society
What Should a Sustainability Report Contain?
A sustainability report should be comprehensive and transparent, encompassing various crucial elements. It typically includes information about environmental impact, detailing efforts to reduce environmental harm, such as carbon emissions, energy use, water consumption, and waste management. Additionally, your sustainability report should include information about social impact projects, highlighting social initiatives and practices, including diversity and inclusion, employee well-being, and community engagement.
It should also provide thorough insight into the governance structures of the organisation, focusing on board composition, executive compensation, and ethical behaviour within the organisation. The report should also address goals and progress, presenting clear targets and an honest assessment of the organisation achievements. Importantly, when implementing an ESG and sustainable development strategy, the report incorporates the use of key performance indicators (KPIs) to track progress and refine the project. These KPIs should be benchmarked against other organisations in the same industry and stakeholders should receive regular reports on the progress of the strategy.
How to Use Sustainability Reporting to Build Trust:
- Engage Stakeholders: Sustainability reporting is not linear or one-way communication. It’s a dialogue with your stakeholders. It encourages feedback, listens to their concerns, and demonstrates your commitment to addressing them. This engagement builds trust and shows that you value their input. Furthermore, it allows for a deeper understanding of the diverse perspectives and expectations of your stakeholders, enabling your organisation to better adapt and align its sustainability efforts. In this ongoing dialogue, the mutual exchange of ideas, concerns, and solutions solidifies the bond between you and the stakeholders, reinforcing the shared commitment to a sustainable future.
2. Set Ambitious Goals: A comprehensive sustainability report goes beyond showcasing past accomplishments. It should be a roadmap for the future, emphasising your organisation’s commitment to continuous improvement. By setting ambitious goals and openly sharing your progress, you send a clear message to stakeholders that your dedication to sustainability is unwavering. This forward-looking approach not only inspires confidence but also signals your intent to create a lasting and meaningful impact. It demonstrates your proactive stance to address environmental and social challenges, fostering trust, and aligning your organisation with the global pursuit of a more sustainable and responsible future.
3. Share Success Stories: Integrating case studies and real-world examples into your sustainability report is essential for bringing your commitment to life. These stories serve as tangible proof of your dedication to sustainability. Whether it’s a community project that enriched local lives, an innovative environmental initiative that reduced carbon emissions, or a diversity and inclusion program that promoted equity and inclusion, these case studies paint a vivid picture of your impact. They provide context, illustrate your values in action, and reveal how you’ve made a positive difference. Such narratives engage, inspire, and resonate with stakeholders, reinforcing their belief in your dedication to building a more sustainable and inclusive future.
Be Transparent About Failures: Trust is a delicate balance that isn’t solely rooted in successes. How an organisation handles its failures is arguably more important than its successes. When sustainability goals are unmet, honesty and transparency are paramount. This openness shows the organisation’s understanding that sustainability is a journey and not a destination. Openly acknowledge your shortcomings, and articulate the lessons learned, while emphasising the corrective actions. This vulnerability not only demonstrates a commitment to improvement but also builds trust.
5. Align with Stakeholder Interests: Effective sustainability reporting should prioritise alignment with stakeholder interests. By identifying and addressing the issues that matter most to your stakeholders, you demonstrate attentiveness and responsiveness to their concerns. This tailored approach not only showcases your commitment to listening but also plays a pivotal role in nurturing trust. It illustrates that you are genuinely attuned to the specific matters they care about, reinforcing the notion that sustainability efforts are driven by a shared understanding and collaboration.
The New Sustainability Disclosure Standards
It’s also worth mentioning that the Nigerian Exchange Group (NGX) has officially announced the adoption of the International Financial Reporting Standards (IFRS) 1 & 2 Sustainability Disclosure Standards by Nigeria. This means that all publicly listed companies in Nigeria will be required to make full disclosures on their sustainability practices in their annual reports using the IFRS 1 & 2 Standards.
Requirements for Early Adopters
An early adopter is a reporting entity that has elected to adopt the IFRS S1 and S2 for the accounting period ending on or before December 31, 2023, which is before the effective date of the standards. The reporting entity must:
- Have published reasonable sustainability reports over the past two years
- Be willing to be part of the “early adopter category” phase of the adoption process.
The implication of this is that, as the world becomes more interested in sustainability and Nigeria aims to be one of the first countries to adopt the IFRS Sustainability Disclosure Standards, organisations that currently report on sustainability should take the opportunity to become early adopters of this comprehensive global framework.
Conclusion
Sustainability reporting is no longer just a nice-to-have. It’s a must-have for any organisation that wants to build trust with stakeholders and stay ahead of the curve. By being transparent, accountable, and committed to continuous improvement, organisations can demonstrate their dedication to sustainability and earn the trust of their customers, investors, employees, as well as the wider community.