Value of sustainability reporting
Sustainability reporting has emerged as a common practice of 21st-century business. Where once sustainability disclosure was the province of a few unusually green or community-oriented companies, today it is a best practice employed by companies worldwide.
A focus on sustainability helps organizations manage their social and environmental impacts and improve operating efficiency and natural resource stewardship, and it remains a vital component of shareholder, employee, and stakeholder relations.
A full 95% of the Global 250 issue sustainability reports. Firms continuously seek new ways to improve performance, protect reputational assets, and win shareholder and stakeholder trust.
Sustainability disclosure can serve as a differentiator in competitive industries and foster investor confidence, trust and employee loyalty. Analysts often consider a company’s sustainability disclosures in their assessment of management quality and efficiency, and reporting may provide firms better access to capital.
The benefits of reporting include:
- Better reputation
A 2011 survey on corporate reputation found that expanding transparency and reporting positive deeds were the two most important ways to build public trust in business. The 2013 Boston College Center for Corporate Citizenship and EY survey revealed that more than 50% of respondents issuing sustainability reports reported that those reports helped improve firm reputation.
- Meeting the expectations of employees
A 2011 survey conducted by EY and GreenBiz found that employees were a vital audience for sustainability reporting, with 18% of reporters citing employees as a report’s primary audience. More than 30% of reporters in the 2013 Boston College Center for Corporate Citizenship and EY survey saw increased employee loyalty as a result of issuing a report.
- Improved access to capital
Recent research found that reporting firms ranked highly for sustainability have Kaplan-Zingales Index scores that are 0.6 lower than the scores for low-sustainability companies. A lower score signifies fewer capital constraints.
- Increased efficiency and waste reduction
In a 2012 global survey of sustainability reporters, 88% indicated that reporting helped make their organizations’ decision-making processes more efficient.
Sustainability reporting requires companies to gather information about processes and impacts that they may not have measured before. This new data, in addition to creating greater transparency about firm performance, can provide firms with knowledge necessary to reduce their use of natural resources, increase efficiency and improve their operational performance.
In addition, sustainability reporting can prepare firms to avoid or mitigate environmental and social risks that might have material financial impacts on their business while delivering better business, social, environmental and financial value — creating a virtuous circle.
For reporting to be as useful as possible for managers, executives, analysts, shareholders and stakeholders, a unified standard that allows reports to be quickly assessed, fairly judged and simply compared is a critical asset. As firms worldwide have embraced sustainability reporting, the most widely adopted framework has been the Global Reporting Initiative (GRI) Sustainability Reporting Framework.
For more details about GRI and the study by Ernst & Young LLP and the Boston College Center for Corporate Citizenship, please view the full document.