As the business and investment community become more aware of the risks and consequences of non-sustainable business practices, more attention has been focused on what companies are doing to mitigate their environmental footprint, carbon and otherwise, as well as their impacts on society and internal governance.
As a result, sustainability reporting practices have grown rapidly globally, and are beginning to receive more attention in Asia.
Yet while more recognition is being given to best practices, and stock exchanges are mandating new requirements, there remains some scepticism as to the efficacy of and return on sustainability reporting.
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That isn’t too surprising, given the news headlines of the malfeasance of a few firms that do provide sustainability reports, and the costs that firms incur to be transparent. To address this question, here are a few nuggets to consider:
1. Substantive CSR is no longer a tagline or marketing brochure.
Glossy brochures that tout the positives and lack balance and objectivity are on their way out. Listing requirements and norms of practice are increasingly requiring substantive sustainability reporting, externally assured to recognised standards, the most popular of which is the Global Reporting Initiative (GRI). This method of reporting provides opportunities to identify real cost-savings, streamline operations and increase employee engagement; many companies are turning them into smart business initiatives with sizable returns – yet they aren’t making the headlines.
2. Parallels with Enron, World Com and Waste Management?
These three organizations committed significant financial fraud in the early 2000’s, not only wiping out the investments of shareholders and creditors, but also impacting the lives of employees and other stakeholders. The response by the U.S. Congress, The Sarbanes-Oxley Act, imposed more stringent reporting and assurance rules to protect stakeholders from such malfeasance.
Similarly, the recent sustainability fraud by Volkswagen, and firms conducting illegal and unsustainable “slash and burn” palm oil practices, should be responded to by requiring greater levels of transparency and objective, reliable reporting, not by questioning the viability of CSR reports in general.
3. Are the costs of Financial Reporting worth it?
Questioning the cost-benefit of sustainability reporting should be similar to questioning that of audited financial reporting. While sustainability reporting standards are in their infancy, at some point so were financial reporting standards. The evolution we now face is to re-prioritize from a narrow focus on shareholders (“shareholder primacy”) to a more inclusive approach that addresses the needs of those that have stakes that are just as relevant to ongoing business success.
Each company must now see beyond the next quarter, must see the consequences of its decisions beyond short-term profits and management bonuses.
4. Building a culture of sustainability is a work-in-progress – reporting is a part of that.
As reporting standards evolve, so too are organizations as they develop the why, how and what to report. This requires not only an objectivity that needs guidance and levels of assurance, but also a developing awareness of corporate values, decision making, systems thinking and levels of accountability. Shifting towards more sustainable cultures may often require changes to the governance structures and procedures that influence behavior. Reporting practices are both a result of and an important factor in effecting these changes.
5. It takes a village to raise a responsible company.
A network of accountability within the entire business ecosystem is required to sustain these shifts and ensure that stakeholders are effectively considered and communicated with. They include shareholders, creditors, suppliers, employees, customers, vendors, civil society organisations, governments, media and advocacy groups, offering checks and balances to increase the relevance, meaning and potency of responsible practices. Responsibility and ownership remain with the leaders of the company, but the involvement of responsible and active stakeholders provide both structure and cause.
6. It’s not about media-driven scandals or solitary acts of corporate heroism.
Each company must now see beyond the next quarter, must see the consequences of its decisions beyond short-term profits and management bonuses. The challenge is no longer about addressing a single example of malfeasance, but how to address the collective impacts of years of negligence and irresponsibility that threaten our survival as a civilization. Businesses have the greatest opportunity to guide our collective direction, in a consistent and purposeful fashion, and it is the questions of “why” and “how” that must be asked at the highest levels of our consciousness, right now – not in 50 or even 5 years time. The question then is whether we are human enough to see the opportunity, commit to it and deliver on it for the long-term.
As Robert Swan, the first person to have walked to both the North and South poles said, “The greatest threat to our planet is the belief that someone else will save it.”
Garrett Weiner is the MD of Alignment Coaching & Consulting, based in Singapore and serving the ASEAN business community across sustainable business, organizational culture, governance and leadership. This post is republished from Corporate Citizenship’s blog.