Nov 10, 2021
8 Benefits of sustainability reporting
They say ignorance is bliss, but when it comes to sustainability, we say just because you don’t know what you don’t know doesn’t mean it’s not coming for you. The best way to go from "blissfully" unaware to conscious of your company's impacts is through sustainability reporting. Starting to produce sustainability reports is a big undertaking, and your company may be asking itself whether doing so is worth it.
We certainly think it is. Here are eight benefits of sustainability reporting that we hope will convince your to take the leap and start creating sustainability reports:
Keep an overview so you know what to focus on
Ensure regulation compliance
Become more attractive to customers
Attract talent
Build employee pride and loyalty
Become more attractive to investors
Upgrade the status of sustainability in your company’s agenda
Increase transparency, credibility, and accountability
What is sustainability reporting?
But first, let’s talk about what sustainability reporting even means.
Sustainability reporting or "non-financial reporting" is when a company creates a report detailing its environmental, social, governance, and economic goals, as well as its progress towards achieving them. Companies typically describe their strategic goals, sustainability activities, and a status report of the benefits and costs of those activities. Reporting is often driven by guidelines set by sustainability standards such as the Global Reporting Initiative (GRI).
Benefit 1. Keep an overview so you know what to focus on
Achieving sustainability may seem like an elusive goal, and it certainly comes with a ton of moving parts. One benefit of sustainability reporting is that it helps you maintain an overview amongst all the chaos. The process of creating the sustainability report allows you to reflect on the past reporting period. In what areas have you made progress? In what areas are you lagging behind? Were your goals too ambitious or do you just need to do more to reach them?
Armed with real data and insights, you are better equipped to reach your goals and set up stronger plans going forward.
Benefit 2. Ensure regulation compliance
Governments everywhere are under increasing pressure to pass laws to mitigate the effects of climate change. Whether it's limiting the amount of carbon emissions a company can produce, or banning single-use plastics, new regulations almost invariably have an impact on companies. Non-compliance can result in fines and penalties, not to mention damage to your company’s reputation among consumers.
The best way to ensure that you are staying compliant with the ever-shifting pool of rules and regulations is through sustainability reporting. You can set goals based on whether you want to meet minimum compliance requirements, or shoot for more ambitious targets and become a sustainability leader. Then collect and monitor your data over time to make sure you actually reach them.
Benefit 3. Become more attractive to customers
It’s no secret that consumer tastes are shifting strongly in favor of sustainability. But in case you need convincing, a study by Nielsen found that a whopping 81% of global respondents "feel strongly that companies should help improve the environment." Furthermore, 66% of global consumers are willing to pay more for sustainable goods. In short, consumers increasingly choose to support companies with a strong social or environmental mission.
Not only do more and more consumers consider the environment when making purchase decisions, they’re also getting smarter, especially when it comes to greenwashing and SDG washing. Take, for instance, the fashion industry. The Compare Ethics Industry Report found that less than 20% of shoppers trust information on sustainability provided directly by clothing companies. In order to win consumers’ trust, don’t just talk the talk. Make sure you have the data to back it up.
One of the benefits of sustainability reporting is that it's the best way to make sure you're not washed away in the tide of changing consumer preferences. Transparency turns your company from a faceless corporation into a company consumers feel they can trust and develop a bond with, boosting customer loyalty.
Benefit 4. Attract talent
It’s not just on the consumer-side that people prefer sustainable businesses. Reuters found that climate change, human rights, and social equity are issues of growing importance for employees, especially millennials. In fact, 65% of survey respondents said they were more likely to work for a company with strong environmental policies.
By publishing sustainability reports and building your credibility as a socially and environmentally responsible company, you make your company an attractive workplace for potential job applicants.
Your sustainability agenda may even make the difference between a potential recruit choosing to work for you or a different company. Fast Company reports that a 2016 survey found that 64% of millennials said they wouldn’t take a job at a company that wasn’t socially responsible and 75% said they would even accept a lower salary if it meant working at a company that was more aligned with their values.
Benefit 5. Build employee pride and loyalty
Becoming a more transparent, sustainability-reporting company may also give your current employees an extra reason to be proud of where they work. You can rally your employees behind the cause and boost morale and engagement.
As a result, you may be able to increase employee loyalty and retain talent. The same Fast Company survey found that nearly 70% of respondents said if a company they worked for had a strong sustainability plan, it would affect their decision to stay with the company long term. Thirty percent even said they have left a job in the past because the company lacked a sustainability plan. The evidence is pretty clear: your company can benefit from sustainability reporting by retaining your top talent longer and giving them an extra incentive to help your company succeed.
Benefit 6. Become more attractive to investors
Investors are increasingly demanding sustainability reporting. Harvard Business Review states that the perception among business leaders that ESG hasn’t gone mainstream in the investment community is outdated and found that "70 senior executives at 43 global institutional investing firms expressed that ESG was almost universally top of mind for them."
Investment leaders are stepping up and requiring the companies they invest in to do the same. For instance, BlackRock, the world’s largest asset manager, has stated it will require companies to disclose in line with the Task Force on Climate-Related Financial Disclosures and the Sustainability Accounting Standards Board (SASB).
Sustainability reporting can help you win stakeholder’s trust, and this is particularly true of investors. Investing in your sustainability shows that you are looking to manage long term risks to the company, which makes you a more attractive company for investors.
Benefit 7. Upgrade the status of sustainability in your company’s agenda
Financial reporting is factored into nearly every decision of any company looking to stay in business. Sustainability reporting is arguably just as important when it comes to the long term vitality of your company. In this day and age, companies can no longer afford to just "wing it" when it comes to sustainability: it’s time to recognize the importance of sustainability in decision making.
Sustainability reporting, especially on a frequent basis, elevates the status of your company’s sustainability agenda from merely a nice-to-have up to an important factor for key business decisions. The way things are looking, sooner or later, your company probably won’t have much of a choice but to start factoring sustainability into decisions just as you do with financial data. Hopping on the bandwagon now ensures that you stay ahead of the curve and capture the benefits of sustainability reporting.
Benefit 8. Increase transparency, credibility, and accountability
Transparency is increasingly being valued among company stakeholders, from consumers to investors to employees. To be transparent, your company should report the full extent of its impacts, such as greenhouse gas emissions and water usage, and the impacts of your products throughout their life cycles.
A benefit of sustainability reporting, is that you are declaring your intention to improve your company in various ways, and in subsequent reports, you detail your progress towards those goals. In doing so you eliminate room for empty promises. Now you have the public holding you accountable, which can serve as a great motivator.
Are there any disadvantages to sustainability reporting?
Good question. While there are numerous benefits of sustainability reporting, the current process by which companies create them has its downsides. For one, the process of data collection is often a tedious, manual task with lots of room for error. As a result, many companies only go through the process of creating a sustainability report once per year. Such infrequent reporting makes it impossible to factor sustainability into everyday business decisions. The result is a lack of qualitative, up-to-date decision-material, weak follow-up of sustainability targets, and ultimately an inefficient execution of the sustainability strategy.
That’s why we’ve built a Sustainability Management Software to make the process easy for you. SustainLab's platform allows you to upload data in any format and easily process the data to create visualizations that help you track your progress against your KPIs. We’ll take care of your data-handling so you can focus on taking action!
Contact us to learn more about how SustainLab can help you harness the benefits of sustainability reporting!
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