Sustainability reports check more boxes but miss big picture

Sustainability reports check more boxes but miss big picture

Corporate sustainability reports are simultaneously getting better and worse, according to our research at DNV Two Tomorrows, a sustainability consulting firm.

Our study -- 2012 Tomorrow’s Value Research -- shows that companies today are increasingly aware of sustainability issues and opportunities and actively integrate sustainability into core business strategies and decision-making. But as companies become more responsive to the Global Reporting Initiative (GRI) guidelines and other reporting frameworks in an effort to drive comparability, they are beginning to lose sight of the why.

In 2000, sustainability came dangerously close to "greenwashing." Reporting standards, investors and other stakeholders since have persuaded reporting companies to disclose management approaches, but the pendulum has now swung too far. In 2012, sustainability reporting has become an almost obligatory box-ticking exercise demanded by stakeholders.

It shouldn’t be this way. Sustainability reporting shouldn’t be looked at as an obligation, but as an opportunity to drive continuous improvement toward the "big challenges" that we, as a company and as a society, face. After all, reporting affords companies the opportunity to collect data and see the impacts they are having on the planet. They get a chance to streamline their processes as the report brings together initiatives and programs from various business units. They get to set targets, learn through case studies, and find opportunities and risks by just going through the process of putting together this (now) massive report.

If the why is missing, it may be our (the sustainability industry’s) fault. Sustainability reports read like we asked them to: Companies show us their key performance indicators, whether they've hit five-year goals and how many women they've hired in the last year. And yet, the reports are lacking. While we appreciate the progress these companies have made so far, there is greater value to be achieved.

The missing piece, and the future of sustainability reporting, is the context around how a company’s reporting fits into global performance. It's great to know that a company has joined the Carbon Disclosure Project or cut GHG emissions by 10 percent. It’s much better to know whether this is really helping put a dent in global emissions, or whether a 10 percent reduction fits into a strategy that will have an impact.

While it’s great to see a company has added 1,000 new jobs, it’s better to see what this meant to the employment rate and the economic well being in the communities where the hires were made. The planet's big issues -- carbon, water and poverty -- show little signs of improvement, and yet when looking at sustainability reports, one gets the sense that serious progress has been made.

Image of corporate report by Daniilantiq via Shutterstock.

One of the key trends noted in this year’s Tomorrow’s Value Research has been the evolution of indicators and targets. First, most companies continue to expand the number of indicators against which they report. And while targets continue to lag, we have seen an increase in the number of companies that are committing to sustainability targets.

The second trend is that indicators and targets are evolving toward the principles of integrated reporting. That means companies are moving to measure and control sustainability issues that have an impact on their business. While this is a positive trend in that it provides incentive for companies to pursue aggressive sustainability strategies, it has the undesirable side effect that companies are losing focus on whether these targets and metrics will effectively address the challenges we face.

While each company is responsible for itself, the collaborative effort is what is going to create a sustainable planet. Therefore, "sustainable companies" are those that are (or will be) measuring the success of their collaborations and setting targets for the impact of those collaborations. In 2012, these examples are rare. However, we believe this is the next wave of evolution in sustainability reporting and that it will be driven by frustrated stakeholders that are trying to reconcile the exceptional progress companies have made with the continuing issues that society face.

Here's some examples of companies doing a great job in their sustainability reporting:

  • HP -- Leads the way in innovation on the strength of HP Labs and leading-edge life-cycle analysis for products that pulls in broad stakeholder feedback and addresses both environmental and social impacts/benefits of products from sourcing to end-of-life.
  • Panasonic -- Demonstrates one of the strongest management approaches to sustainability including strategic target setting in most areas, robust controls to manage performance against material issues and clear mechanisms for stakeholders to feed into the management processes.
  • Siemens -- Discloses a highly inclusive governance system for sustainability issues.  Siemens describes mechanisms to identify stakeholders, gather feedback and weigh that feedback against business priorities in a systematic manner at each level of the company.
  • Stockland -- An overall strong performer, this DJSI super-sector leader goes out of its way to describe the mechanisms by which stakeholders can engage with the company, influence decisions and drive product improvements.
  • Westpac Banking -- Shows one of the more integrated business and sustainability strategies included integrated metrics and wide range of business products with environmental and social credentials.

Collectively, we have pushed companies to report better, and they have. Now, we're asking them to go further and show us how they fit into global performance. We’re excited to see the progress that contributes to real change, and see how effective collaboration will help us actually meet global challenges.