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5 benefits of sustainability reporting
5 benefits of sustainability reporting Why starting now will benefit your organization
Sustainability reporting with it`s environmental & social impacts, risks also has potential benefits, and opportunities for your organization
Competitive advantage
Customers are increasingly looking for environmentally and socially responsible products,
services and organizations. Organizations that can meet those expectations can enhance
their brand value, increase sales and are more likely to succeed in the long term.
Many organizations seek to reduce their impacts by selecting more sustainable suppliers for the
products, services and resources they acquire. This means that organizations will engage with
their suppliers, and request more information and data. Being transparent about your
sustainability practices and impacts can give you a competitive advantage in tenders and
other procurement processes.
The upcoming mandatory reporting requirements for larger organizations have a cascading effect on smaller organizations through a need for more and higher-quality data, and an increased focus on the entire value chains. This means that these large companies will need to give much more attention to their suppliers to gather data and ask for specific sustainability commitments. Practically, we already see this happening. For example, companies who cannot provide emission data for specific products, don’t have company-wide carbon transition plans, and don’t publish annual sustainability reports will be replaced by those who can.
The upcoming mandatory reporting requirements for larger organizations have a cascading effect on smaller organizations through a need for more and higher-quality data, and an increased focus on the entire value chains. This means that these large companies will need to give much more attention to their suppliers to gather data and ask for specific sustainability commitments. Practically, we already see this happening. For example, companies who cannot provide emission data for specific products, don’t have company-wide carbon transition plans, and don’t publish annual sustainability reports will be replaced by those who can.
Transparency and trust
By voluntarily reporting on sustainability practices, companies can demonstrate their
commitment to sustainability and to transparency and accountability. These are core
principles of good corporate governance. Stakeholders are given greater insights into
performance and impacts that go beyond the bottom line. This helps to build trust with
stakeholders, customers, investors and regulators. Furthermore, organizations are usually
very proud of their ambitious projects, policies and results, and want to share this with the rest
of the world.
Talent attraction and retention
Employees are increasingly looking for purpose and meaning in their work, and they want to work for companies that align with their values¹. Younger generations are often more environmentally conscious and socially aware than previous generations, and more likely to seek out employers who share their values. Thus younger generations are also twice as likely to stay at an organization for more than five years if they believe that their company is making a positive impact on society and the environment². Reporting on your organization’s sustainability efforts and impacts can help to attract and retain and retain young talent.
Risk management
Reporting functions as an instrument to help identify sustainability-related risks by providing
a structured and comprehensive approach to identify, assess and mitigate these risks. Companies are able to better articulate the potential impact of these risks on their operations and society, and demonstrate how they are managing and mitigating these risks³. For example: a company that reports on its water usage and discharge of wastewater may identify that it sources water from areas that are likely to experience droughts, or that they are contributing to pollution. Next to the negative effects for the environment, this also poses reputational risks.
Investor demand & access to capital
There has been a huge increase in demand for responsible investing, and ESG factors are gaining more weight in investment decisions⁴. Sustainability reporting, thus, is a key piece of information for a company’s valuation and risk profile. Furthermore, global trends indicate that finance has a role to play in our societal transition. This takes place through
regulation such as the SFDR or EU Taxonomy, but also through sector initiatives focusing on ‘green finance’. In practice, companies who perform demonstrably better on sustainability aspects, often have lower cost-of-capital. The opposite rings true for companies with weaker sustainability perfor-mance.
¹ https://www.glassdoor.com/employers/blog/corporate-social-responsibility-why-employees-expect-you-to-give-back/
² https://www2.deloitte.com/content/dam/Deloitte/at/Documents/human-capital/at-gen-z-millennial-survey-2022.pdf
³ https://www3.weforum.org/docs/WEF_Global_Risks_Report_2023.pdf?_gl=1*1nzwyye*_up*MQ..
⁴ https://www.morganstanley.com/ideas/sustainable-investing-trends-outlook-2023