The big question: do sustainability reporting requirements place too much emphasis on transparency rather than action?
Peter Paul van de Wijs
Chief communications officer, GRI
“Transparently disclosed sustainability data exposes companies’ actions to the public”
Transparency and action are two different touchpoints on the same continuum, with transparency being the starting point. Public disclosure of policies, management systems and performance informs decision-making.
Today, companies are facing demands for transparency and accountability. Investors, NGOs, customers and consumers want more data, and are not afraid to demand that businesses change their behaviour. Instead of blindly pursuing quarterly wins, businesses are expected to make a positive contribution. Transparently disclosed sustainability data exposes companies’ actions to the public, informing external decision-making. This can lead to an investment fund pulling out, or a customer choosing another supplier, which can have a negative impact on performance.
Furthermore, reporting can be an important tool for organisations’ decision-making, leading to improved conditions and the identification of opportunities. The data in a sustainability report can uncover trends that pose risks to the business, helping decision-makers to set the ship back on course. Sustainability reporting should be adopted as an integral tool for building a long-term business strategy, leading to meaningful action.
Policy and external affairs manager, Climate Disclosure Standards Board
“The focus of reporting is shifting towards a strategic approach”
Disclosure for disclosure’s sake is in nobody’s interest. Organisations providing good reporting of information related to climate change are doing so to understand the impacts of their activities and put measures in place to improve.
Since the development of the Task Force on Climate-related Financial Disclosures, businesses have heard the same message: disclosure of climate information needs to be embedded in financial reporting, to ensure rigorous governance over these matters and allow investors to make informed actions to support sustainable capital markets.
Companies and investors are realising that environmental matters have an impact on a business and its ability to create value. The reporting process will become more holistic, involving more than the sustainability department and allowing companies to establish stronger relationships with investors.
The focus of reporting is shifting towards a strategic and integrated approach that helps organisations understand and manage their exposure to long-term risks. Eventually, this will help investors fund and benefit from the transition to a low-carbon economy, providing better returns to savers and allowing companies to be fully equipped for the change.
CEO, Sustainable Business Consulting
“The shift in emphasis towards actions and results is long overdue”
Transparency or action? For years, the focus was on transparency – we wanted companies to disclose what they were doing well and where they needed to improve, so that they couldn’t greenwash. However, companies’ efforts stagnated once they realised they could get away without committing to making progress, because they were only being scored on transparency.
This is why it is so important to focus on action. One thing I’ve learned is that nothing motivates a CEO more than a low grade. Whenever I’d start working with an organisation on a CSR report or CDP response, the CEO would say: “I want to get an A.” These high achievers never got a low grade at school, and they aren’t about to let their company get that score, either.
The CDP (formerly Carbon Disclosure Project) got it right by putting the emphasis equally on action and progress. Companies that had been scoring in the A to B range, based on transparency scoring only, began to receive Cs or Ds when the CDP shifted the emphasis towards action. This proved to be a major stimulus for companies to put teeth into their CSR programs.
CSR needs to be pursued with intention and urgency. The shift in emphasis towards actions and results is long overdue.
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