Sustainability reporting has since progressed from the traditional corporate social responsibility (CSR) model to integrate environmental, social and governance (“ESG”) practices in business operations and strategy. This progression matches the rising demands from customers and shareholders that financial returns are achieved with integrity, supported with environmental and social considerations.
WHY SUSTAINABILITY REPORTING IS GROWING MORE IMPORTANT FOR COMPANIES TODAY?
Sustainability has evolved to become a critical success factor for companies. Studies have shown that companies that successfully manage sustainability risks and opportunities tend to have stronger cash flows, lower borrowing costs and higher valuations over time.
There are now new financial products emerging in response to a growing demand for sustainability lending which links loan pricing to corporate ESG performance. Discounts are offered when a company outperforms its sustainable goals or even a premium when they under perform.
These loans have the potential to enhance not only environmental and social sustainability, but also financial success for both investors and businesses. ESG-linked loans rewards business that are committed to building a more sustainable future.
There are other tangible benefits companies are realising from communicating their sustainability efforts:
- Consumers are more likely to buy products or express support for brands perceived as operating in a manner that benefits society.
- Companies that make a commitment to sustainable business operations enjoy lower borrowing costs, better employee performance and an ability for the corporate reputation to better withstand a crisis.
WHAT ARE THE BEST PRACTICES IN SUSTAINABILITY REPORTING
The following are some of the best practices in improving sustainability reporting:
1. Use of data analytics for effective sustainability reporting
To promote effective sustainability reporting, companies can utilise analytics in their sustainability report to communicate their sustainability initiatives in a way that is clearly understood and builds trust with their stakeholders.
2. Engage your stakeholders in their preferred channels and format
To further enhance the reach and engagement of stakeholders, sustainability reporting communications need to be disseminated through the right channels and formats ranging from video to social media platforms to traditional news reports.
3. Share frequent updates on your sustainability initiatives
According to research, the most credible format for a company to communicate sustainability initiatives is through regular updates on official corporate websites. It is also one of the most effective channels for damage control necessitated by publicity crises.
Sustainability reporting is a recognised best practice that generates tangible benefits to the bottom line and reputation of a company only when it’s done effectively and transparently. Only those that do it well will have a competitive advantage over those that do not.
WHAT ARE THE SUSTAINABILITY TRENDS OF 2019 AND BEYOND THAT MAY SEE INCREASED FOCUS ON REPORTING?
In 2019, we expect to see increased focus in reporting of efforts in mitigating against global warming by reducing greenhouse gas emissions and increasing the resilience of infrastructure. Companies are also expected to address issues such as single use plastics and gender equity to retain customer loyalties by showing that they are delivering social and environmental value to society. Companies will need to reassess the environment and social impact of their core product and services and change their business models toward generating long term value for society. As global awareness about plastic pollution and its impact on our ecosystems continues to grow, there will continue to be increased focus in reporting the initiatives and efforts by companies in reducing plastic waste.
For enquires on how to more effectively report and leverage off sustainability reporting, please reach out to your Moore Stephens LLP representative, or contact the author at the email address below.
alvinsoh@moorestephens.com.sg