More than 90 percent of the world's most profitable organizations engage in some form of sustainability reporting. It's not so much a chicken-or-the-egg question to ask whether organizations that have achieved sustainability successes are profitable as a result of reporting or reporting organizations do so simply because they have achieved market-leading financial performance and feel they ought to report because they are in that prestigious sphere.
Nevertheless, it's clear successful global manufacturers do report on sustainability performance. But what steps are needed for successful reporting in the first place?
1. Focus on Metrics and Accomplishments
One key criticism that has been leveled against many sustainability reports - and, indeed, the criteria presented by the reporting organizations they adhere to - is that they are simply providing their own narrative of supposed successes. Sometimes this is true, but it also depends on how they are reporting. Organizations may report for regulatory reasons, they might provide sustainability reports that don't meet any sort of external framework, or, in many cases, they may build datasets based on external guidelines (like Global Reporting Initiative or CDP) and then provide to stakeholders that are "certified" - for lack of a better word - by third-party sustainability reporting organizations.
What's often lost in all of these pursuits is a focus on metrics and accountable accomplishments. It's one thing to say you've engaged in "X" initiative to reduce carbon emissions, with a lot of marketing gloss. It is quite another thing to state what kind of emissions reduction targets your organization has met and to back up those accomplishments with provable metrics.
While there's nothing wrong with adding color and context to our achievements, we always have to fall back on hard data, sourcing not only the numbers but also the methodology that went into determining those numbers.
2. Appoint an Executive Owner of Reporting and Report Consistently
Many organizations willy-nilly commit to the "idea" of sustainability reporting without establishing a clear internal champion of the effort involved in that commitment.
Whether we're aligning reporting with regulatory bodies, reporting frameworks like GRI, or even providing ad hoc reports to stakeholders on our own terms, there's a lot of legwork and time involved in generating reports.
This cannot be left to one individual in one department, as the effort requires cross-functional participation. Executive-level sponsorship of a companywide endeavor to seriously engage in sustainability reporting will go a long way in streamlining information gathering.
With that, it is important to appoint an owner of the process. If you have a chief sustainability officer, he or she would be the obvious go-to for an internal champion of such an initiative. If not, consider electing someone else that can own the sustainability reporting process. Also, the owner of this process can ensure reporting is consistent, on at least an annual basis. Often organizations that claim to report have documents on their websites that are two years old or more. If you invest in reporting, report on a consistent basis.
3. Map Your Report Structure to Reporting Requirements
I remember helping sales teams at other organizations write responses to requests for proposals. When aiding them, my first question was: "Did you read the RFP?" Often, the answer was an uncertain sigh or an outright "no."
And yet the situation is no different with successful sustainability reporting. The organizations that define reporting requirements actually define reporting requirements quite explicitly. In many ways, you do not have to reinvent the wheel when coming up with your strategy on how to report sustainability performance progress. Take what's out there and start with that.
Whether looking at GRI, CDP, IIRC, A4S, or any other reporting framework that is widely adopted, you find a set of standards that is very clear in terms of what kinds of sustainability metrics an organization ought to provide and what kind of information ought to be submitted.
This goes back to the "Did you read the RFP?" question. We have a lot to do internally to collect information supporting the quantitative metrics and qualitative behaviors that inform these reports, but our burden can be eased significantly when we simply look at the key requirements of the reporting framework we are aligning to and develop a set of metrics accordingly.
4. Embrace your Deficiencies
Sounds crazy, right? Bring your weaknesses right up front? But this process will serve you well in the long term, and it also bridges a significant cleft that reporting bodies and auditors hone into when they look at sustainability reports. If you are glossing over a significant weakness in your sustainability progress and don't acknowledge it directly, that will only become fodder for criticism of your overall sustainability strategy.
Instead, discover where you are weak - be it on emissions, safety performance, training, etc - and clearly acknowledge where, why, and how you plan to strategically recover from this weakness. This will go a lot further than simply ignoring a problem that astute evaluators will identify in the gaps within your sustainability performance metrics and narratives. It will also help you continually improve as an organization.
5. Remember Reporting Is for Clients, Prospects, and the World at Large
In business we frequently submit to a narrative where all of our actions are ultimately executed in the name of profitability. That's fair to some extent; businesses need to make money. But the question sustainability reporting brings us to, in essence, is "how well are we doing at sustaining our business, our human capital, the environment around us, and the world at large?"
This notion might sound like a moral imperative, but it speaks to the absolute heart of why we're invited to produce sustainability reports in the first place. It can be beneficial from a business perspective to generate these reports, account for our impacts, and continually improve. But it is also important to ask how we ultimately add value to the world and to the human enterprise.
This speaks to the narrative component of the sustainability reports we generate: Sustainability metrics, accomplishments, progress, and achievements are all important, but when developing the narrative for your sustainability reports, it's also important to consider the "why?" This will go a long way in making your reports more meaningful to stakeholders.
Paul Leavoy is a research analyst for LNS Research, which provides unbiased benchmark research, data, and analysis to improve business performance. Based in Cambridge, Mass., LNS Research focuses on providing insights into the metrics, leadership, business processes, and technology capabilities needed for achieving operational excellence. Download the research report Driving Financial Performance with Operational Risk Management to read more about the connection between performance and risk management. The report provides benchmark data around operational challenges and objectives, as well as details on constructing an operational risk management framework to drive financial and operational benefits.
Credit: Stuart Miles at FreeDigitalPhotos.net