More than ever, organisations are under constant scrutiny in respect to their sustainability practices and their impact on the natural environment and communities.
Sustainability reporting is not simply writing down a list of required information and describing activities, even if an organisation is following better practice guidelines such as ISO 14001: 2015 Environmental Management System Research Reporting.
Sustainability reporting, requires investigating, analysing, understanding, and potentially, rethinking an organization’s functioning, management, strategy and vision, identifying and taking into account its broad impacts on stakeholders and on the environment, and the intended and untended changes it generates. It requires the disclosure and communication of environmental, social, and governance (ESG) goals to key stakeholders —as well as a company’s progress towards them.
Besides the important impact on the environment, the value of sustainability reporting is that it ensures organisations consider their impacts on sustainability issues, and enables them to be transparent about the risks and opportunities they face. There are many other significant benefits to adopting sustainability practices and sustainability reporting:
- Reducing operating costs in the long run
- Improving competitive advantage
- Reducing the social, environmental and financial risks
- Improving innovation as organisations seek opportunities to excel in key areas
- Enhancing access to financial capital and at lower cost
- Enhancing reputation through greater transparency
- Improving regulatory compliance
- Enhancing brand value
Environmental and Sustainability Reporting
To manage an organisation’s risks of, and to, the environment, it should have a 360° understanding the full impacts of its operations on the environment and other sustainability criteria, and the financial risks to the organisation from environmental challenges. Understanding and acting to manage these risks provides many positive benefits and opportunities.
It is becoming more common for companies to report their environmental and/or sustainability information in their annual and/or financial reports. A growing number of organisations also publish a stand-alone sustainability report.
Although there are no legal requirements in Australia for sustainability reporting per se, corporations are required to report financial and non-financial information relevant to the environment and sustainability to comply, for example, with Australian Accounting Standards Board (“AASB”), Corporations Act, and various ASX requirements. It is becoming good corporate practice to do so, as evidenced by the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations.
Attributes of Good Reporting
To be of benefit to users relying on these reports, reports should:
- Be credible, consistent, widely adopted and accessible.
- Give an accurate picture of the sustainability performance of the business.
- Be consistent and comparable between years and between reporting organisations.
Terminology and metrics should be consistent, transparent, appropriate to inform the relevant user and based on verifiable data and metrics. With large numbers of organisations consistently reporting their sustainability performance the end users of the reports are better able to compare sustainability performance and make sound decisions.
Unfortunately there are a number of frameworks being proposed, and in Australia, there is no uniform policy or guidelines to support government or non-government agencies.
By comparison, New Zealand has enacted the Environmental Reporting Act 2015 and has developed a Carbon Neutral Government Programme requiring the public sector to set credible gross emissions targets and plans and report against them and has made climate-related disclosures mandatory for publicly listed companies and large financial institutions.
Extrinsic Sustainability Reporting Challenges
Organisations can face a number of extrinsic and intrinsic challenges to environmental and sustainability reporting. Extrinsic challenges, for example, can arise from:
- The number of reporting standards and frameworks available
- The variety of purposes of the reports and audience requirements
- Presenting inaccurate or misleading data (“greenwashing”)
One of the difficulties organisations experience in reporting their performance and risks is the lack of standardisation of reporting frameworks. Many frameworks are being developed by organisations including Global Reporting Initiative (“GRI”), Taskforce in Climate-Related Financial Disclosures (“TCFD”), Taskforce on Nature-Related Disclosures (“TNFD”). The GRI framework is frequently used by corporations in their sustainability reporting, although in Australia the percentage of organisations using the GRI framework falls behind the global rate. Additionally, organisations can be guided by ISO 14001: 2015 Environmental Management System Reporting to provide guidance on environmental reporting.
The growth in the number of standards and frameworks being developed and adopted make it difficult to develop a process to gather meaningful data and report it in an effective way, thereby undermining the comparability of reports and their value to users. Poor use of metrics and transparent data can lead to greenwashing and lack of credibility of the company and its reports.
Intrinsic Sustainability Reporting Challenges
Intrinsic challenges can arise from:
- A lack of commitment from organisational leaders and managers to environment and sustainability arising from their limited understanding of the issues, the risks and opportunities to the organisation
- Poor integration of sustainability and environmental issues into organisational strategies
- The large amount of data that organisations collect
- The variety of internal and external reports written for different audiences and by different authors
- Uncertainty around the best metrics to use to suit the purposes of the report
- Inconsistent terminology
- Compliance costs
The number of standards and frameworks available along with range of metrics, data, terminology and reporting criteria can also cause uncertainty for report preparers as to what approach is most appropriate. The uncertainty caused by the various reporting standards and frameworks can add to the costs of preparing meaningful reports.
Furthermore, organisations often struggle to report across all the elements of sustainability and to understand the breadth of sustainability disclosure topics, concentrating on issues directly related to key popular policies, such as renewable energy, forgetting about social aspects such as risks of modern slavery.
How We Can Help
There are four ways that we can help you with your environmental and sustainability reporting:
- Interpreting applicable standards and frameworks and advising you on their benefits and application.
- Environmental/sustainability performance reporting obligation compliance.
- Understanding the best metrics and data to record and report.
- Generating your reports.
How far do you want to take your environmental and sustainability reporting your business? Be an environmental worrier, be more resilient and contact us to discuss your needs.