It's clear that sustainability has become a true protector today against increased costs, damage to brand and reputation, as well as existing and future environmental legal regulations. According to a recent Accenture study, 93 percent of CEOs believe that sustainability practices will be either "important" or "very important" when it comes to the future success of their business. However, how can companies effectively and efficiently measure and monitor their sustainability performance to improve their organization's overall business and ensure a sustainable future? Let's shed some light on the question and dissect sustainability reporting from the top.
The rise of reporting
In 2008, 74 of the top 100 U.S. companies published corporate responsibility information either independently, or as part of an annual financial report, with the majority of these reports utilizing the Global Reporting Initiative (GRI) G3 reporting framework. Of these U.S. reporters, 70 percent stated that ethical considerations were a primary motivator for disclosing sustainability information, while over 50 percent cited economic concerns. Increasingly, corporate sustainability reporting (CSR) is linked to regulatory initiatives. Europe, Sweden, Denmark, and the Netherlands have led the way by enacting some version of mandatory CSR, and many other nations worldwide have developed voluntary reporting standards. While the motivating factors behind a corporate sustainability report will naturally vary from one organization to another, ultimately the report reflects the diversity of the reporters themselves; however, one thing is for certain, and that is the undeniable benefit of corporate sustainability reporting on the bottom line, and beyond.
Reaping significant benefits
When considering the bottom-line benefits of CSR, internal employees often focus on the potential savings associated with reduced operating costs and efficiencies. The oft-repeated tenet behind these savings is Peter Drucker’s quote, “what gets measured, gets managed.” Measurement, monitoring, and tracking procedures implemented, during the reporting process, are often responsible for the most direct and visible changes on the bottom line because of their association with quantifiable entities. Reduced consumption of energy, water, or raw materials can be easily measured for their economic impact. Additionally, improved logistics and supply chain modifications provide easily identifiable benefits with regard to fuel usage and increased efficiency of delivery.
Companies with few opportunities for streamlining and improving operational efficiency may think: Why should we pursue this intensive reporting process? Quite often, sustainability is viewed one-dimensionally in this manner, with the perspective that sustainability must correlate to efficiency in some way. Managers and executives capable of shedding this tunnel vision will provide themselves with the opportunity to truly benefit from sustainability reporting.
Many countries are developing regulations that are pushing organizations toward the reporting process, and those companies comprising the “early-adopter” community will be better positioned to adopt new regulations and adapt to overall changes in the underlining socioeconomic environment. Furthermore, organizations developing corporate sustainability reports will generally benefit from a higher sense of self-awareness than those that do not report. This self-awareness often allows companies to mitigate risks by achieving higher levels of regulatory compliance, and by reducing exposure to situations which could entail potential litigation. Secondary savings experienced by avoiding fines, violations, litigation, and legal fees can also have a significant impact on the bottom line, while also helping the company avoid negative press coverage and tarnished reputation.
Improving your reputation and brand
Corporate sustainability reporting can aid an organization beyond the avoidance of negative public perception, by also providing positive recognition of the brand. Producing a sustainability report can be used as a tool to show leadership within a specific industry, by displaying publicly to stakeholders that the organization holds itself to a higher standard that goes beyond the applicable regulations. Increasing availability of information through various media outlets has created consumers that are better educated regarding the role of businesses on our social and global environments. Consumers are now inundated with varying reports regarding business activity through the internet and other sources, and it is essential that organizations present truthful information in a recognized format to assist the consumer in differentiating fact from fiction. As such, a well-balanced and even-handed sustainability report that displays all successful and failed business goals and strategies will serve to increase transparency, build consumer confidence and develop a strong public reputation as an honest member of the global community.
A reputation for conducting business responsibly can act as a competitive advantage for businesses, particularly those attempting to establish themselves abroad and exposing themselves to a diverse variety of communities and expectations. In this regard, running a business in a manner that serves the general welfare of the community can be seen as a cost of doing business, and may be viewed as a required license to operate in some localities. Whether operating internationally or locally, businesses will consume community resources in some way, and should be prepared to give back to those they affect most, through donating goods, community services, or by charitable projects; all of which are reportable indicators within the GRI reporting framework.
Boosting employee productivity
Organizations like Timberland Company maintain well-structured and established social responsibility and volunteer programs experience higher levels of employee productivity and satisfaction than those that do not. These programs do not harm shareholder interests, but instead produce higher levels of profit as shown by indices such as the Human Impact + Profit (HIP) index, which shows that companies that act responsibly are more profitable than those that do not.
The motivation for sustainability reporting will vary from group to group, based upon the goals, vision, and mission of the individual organization, but it is clear that there are significant financial and social benefits to be reaped as a result, regardless of motivation. Moreover, corporate sustainability reporting requires an open-minded and transparent discussion of an organization’s behavior.
In the end, this tool allows organizations to help establish a leadership role, transforming them into an ultra-successful business entity.
John Hovsepian is the vice president of the Environmental, Health, and Safety Group at EBI Consulting (www.ebiconsulting.com), a national environmental and sustainability consulting company. He can be reached at jhovsepian@ebiconsulting.com.
