Whether you are a JSE-listed company, government department, NGO, or a small family run business, a common expectation placed on business is that stakeholders want to know about your sustainability performance. It could be a customer wanting to know that they are buying a truly sustainable product, a shareholder wanting to understand how a company has reduced their emissions footprint, or a potential funder wanting to understand what impact will be created through a grant.
Sustainability reporting is the most valuable tool for communicating this impact. It is often the number one resource for stakeholders to dig up information to inform whether they want to align with a business or not. This is why it is important to get it right.
For sustainability reporting, there is no one-size-fits-all template. There are multiple sustainability reporting frameworks, making it quite overwhelming in understanding where to start.
At SUSCO, we have worked on many sustainability reporting projects, with each one being remarkably different to the other. While no two sustainability reports are alike, there are some common threads and fundamental components that should be included. Let’s take a look.
Aligning with Sustainability Frameworks
There are a lot of sustainability reporting standards and regulations. There is no need to comply with them all. In fact, it’s impossible.
To give you an idea, the main recognised frameworks include the Global Reporting Initiative (GRI), the Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accounting Standards Boards (SASB), United Nations Global Compact (UNGC) and the United Nations Sustainable Development Goals (SDGs), Science Based Targets initiative (SBTi), Carbon Disclosure Project (CDP), and the IFRS Accounting and Sustainability Disclosure Standards.
Without going into detail on each one, let’s point out the most referred to sustainability ‘blueprint’ of them all – the United Nations Sustainable Development Goals. The SDGs should be your main reference point. When looking at the different areas of your business and operations, ask yourself, where are we making a measurable material impact under these SDGs?
For example, a company may have reduce its hazardous waste generation by 30% between financial years. This is a meaningful and measurable result that is aligned to SDG 12, ‘Ensure sustainable consumption and production patterns.’
While measurable impact like this can be directly aligned to an SDG, it can also be linked to other sustainability reporting standards, like the GRI, SASB, and IFRS. Our recommendation it to not over commit by aiming to comply with all. Take some time to do research into each and decide which is the most relevant to your business, operations and geographical footprint.
Need a starting point? Here is a high-level guide:
For South African JSE-listed entities: SDGs, SASB, SBTi, and IFRS
For companies with cross border supply chains: SDGs, GRI, TCFD, and IFRS
For companies with an international footprint: SDGs, GRI, TCFD, CDP and IFRS
For producers with a with a large carbon footprint: SDGs, GRI, TCFD, CDP and IFRS
For the non-profit sector: SDGs only
For small to medium size enterprises looking to get started: We recommend only starting with the SDGs for your first report, then building on this with feedback from your stakeholders.
It is important to note that this may differ depending on the nature of your operations and environmental impacts. This is where it is a useful exercise to engage with a sustainability consultant to point you in the right direction. A bit of due diligence goes a long way.
Three pillars of good sustainability reporting
Now that you have a better understanding of the different sustainability frameworks, let’s get down to the content and structure of your sustainability report. What should be included?
There are usually three common pillars, with the third pillar is interchangeable. These are:
- Environmental
- Social
- Economic / Governance (the interchangeable pillar)
‘Environmental, Social and Economic’ is referred to as the Tripple Botton Line (TBL) – which can also be referred to and ‘People, Planet and Profit’.
‘Environmental, Social and Governance’ is referred to as an ‘ESG’ framework.
Let’s look at the content that should be included under each:
Environmental: This pillar accounts for all the environmental impacts, progress and mitigation plans. It looks at the measurable progress for waste management, emissions management, water management, biodiversity management, energy management and general resource (raw and repurposed) efficiency. All of this can and should be measured.
Social / People: The Social and People pillar covers how the company looks after the people associated with the business. This does not only include employees but also the communities surrounding, or in proximity. Therefore, the social pillar has an internal and external element. The internal element can look at employee development programmes, compensation, wellness, and career development opportunities available to the workforce. The external element looks at community social development projects and enterprise development.
Economic / Profit: This pillar can sometimes be seen as controversial as many believe that there is a trade-off between sustainability and profitability. Whether this is true or not, what matters under this pillar is showing how the company’s financial planning is integrated with the sustainability strategy. In other words, has consideration been given to climate related risks and the potential impact on revenue? Has the company considered the rising costs of landfill? These environmental factors have a bearing on the company’s financial performance and it’s important to show that the company has considered this.
Governance: This pillar should provide information on who oversees the sustainability performance of the company. Is there a dedicated sustainability committee? Who sits on the committee? If there is no committee, how is this oversight of the sustainability strategy absorbed among staff?
Beyond this, this pillar also looks at how ethics, transparency and accountability is practiced and measured throughout the company, from and executive level, to operational staff.
Report on progress, not future plans
A big trap that we have observed is that companies will often focus on future plans, rather than tangible progress. It’s easy to get excited about a sustainability project, whether it’s a solar PV installation, or new large scale composting plant, but these projects have not made any material impact yet. Mention future sustainability plans, but don’t make it the focus of your sustainability report.
What stakeholders really want to see are the measurable results under the different pillars mentioned above. Importantly, stakeholders want to see how your performance measures up compared to previous years. Have you made progress with or are you stalling.
Remember, you may have not made progress under a pillar, due to an increase in production requiring more water and generating more waste, for example. What’s important is transparency.
Getting started
If you are looking to draft your first sustainability report, or if you are looking on improving the report quality from the previous year, there are a few simple steps to get you started.
Look at what is easily measurable: By taking a birds-eye view of your company’s operations, you can often find quick and easy ways to measure impact. For example, a recent client figured that they could use the factory’s weigh bridge to measure outgoing organic waste. Another client, reached out to a coal supplier to get the carbon emission factor of the coal they were using. Often, you’ll find the resources on-site that you can used to measure and track different aspects of your sustainability.
Reach out to your partners: If you cannot measure something on-site, the next avenue is to reach out to your partners or suppliers. Often, they will have the data you are looking for. If not, it is fair to give them notice that this is a sustainability requirement and that the data is required. This is commonplace in the food production and retail sectors.
Don’t go at it alone: It can be overwhelming to get started. We do recommend getting in contact with a sustainability consultant. Sometimes being really close to the business operations can hinder your ability to zoom out and identify priority areas. An external consultant will come in with an objective view and will ask the right questions to build a good reporting framework. Remember, this is not an environmental audit, it’s the start of your sustainability communication journey.