Sustainability Reporting: Benefits and Considerations

• Leading organizations have broadened their focus beyond Corporate Social Responsibility (CSR) in the last 50 years
• The focus has shifted to new management models that integrate sustainability

Understanding ESG Risks

• Stakeholders show increasing interest in organizational management of Environmental, Social, and Governance (ESG) risks and opportunities
• Organizations are embedding sustainability considerations due to increasing impacts from sustainability-related risks and legislative requirements.

Gaining Competitive Advantage

• Early adopters are likely to secure a competitive edge by innovating in response to sustainability risks
• Integrating ESG alongside financial considerations will provide a solid business model, ensuring business continuity and competitiveness long term

Transparency and Public Reporting

• Transparent, public reporting has emerged as a common practice among large companies
• ESG reports address risk convergence, government and market regulation, and growing stakeholder
• Investors want to be informed on the management of risks like climate change, human rights, and resource scarcity
• Stock exchanges and dozens of governments now mandate reporting for companies

Benefits of Sustainability Reporting

• Aids companies in categorizing and evaluating ESG topics identifying gaps
• Provides a common language for internal audiences
• Helps include sustainable development in mainstream business

Evolution of Sustainability Reporting

• Primarily confined to large, publicly traded companies, but now extends to smaller companies and privately held entities
• Reporting will vary depending on organization type, sector, size, location, and its intended audiences
• Broadly implies a path of sustainable development for organizations

Defining Sustainability and Sustainable Development

• Rooted in the wider concept of sustainable development, numerous attempts have been made to define what is meant by sustainability and sustainable development

The Brundtland Commission Definition (1987)

• The most widely used definition of Sustainability, was first developed in 1987 by the World Commission on Environment and Development
• Also known as the Brundtland Commission in an UN-sponsored study entitled "Our Common Future"
• It's used by many governments and organizations

2 Main Concepts of Sustainability

• Meeting the needs of the present without compromising future generations' ability to meet their needs
• The concept of needs and the essential needs of the world's poor be given overriding priority
• The idea of limitation imposed by the state of technology and social organization on the environment's ability to meet present and future needs

Immediate Action and Imperatives

• Called for immediate action to avoid irreversible ecological damage
• A process of change, not a fixed state of harmony, exploitation of resources, the direction of investments, the orientation of technological development, and institutional change that are consistent with future as well as present needs

Global Aspiration and Widespread Consensus

• Regarded as a global aspiration
• Signals a widespread consensus on the central role organizations have in ensuring future needs can be met

Consideration of Consequences

• Requires organizations to consider wider and longer-term consequences of decisions, which is the route to achieving long-term sustainable value for investors and stakeholders

3 Pillars of Sustainable Development

• The World Business Council's 3 pillar model includes economic growth, ecological balance, and social progress
• This reinforces long-term maximized shareholder value will be intertwined with environmental, social and economic performance

ESG Terminology Extension

• The term ESG, used extensively by the investment community, reflects the view that managing environmental and social topics is a governance issue for organizations

Explanation of Terms

• Environmental: encompasses how a company is exposed to and manages the risks and Opportunities related climate, natural resource, scarcity, pollution, waste, and other environmental factors
• Social: company values and business relationships including labor and supply-chain standards, products quality and safety, diversity and inclusion, policy and efforts
• Governance: incorporates information about a company's corporate governance including information on the structure and diversity of the board of directors; executive compensation, critical event responsiveness, and corporate resilience

Sustainability Reporting

• Describes practices where organizations provide information in accordance with globally accepted standards
• Reporting allows organizations to measure, understand, and communicate their ESG performance and then set goals

Voluntary Practice with Setting Targets

• Relates to the reporting to stakeholders of an organization's strategies, priorities, policies and how sustainability impacts operations
• Involves discussing how an organization is dependent upon and manages risks and opportunities
• Is a widespread practice with diverse practices that remain voluntary

Sustainability Reporting in Practice

• Organizations choose whether they will publish a sustainability report, how they prepare it, and what information they will include
• Is different from traditional financial reporting, which is based on strictly and largely mandatory frameworks and enforcement mechanism for non-compliance
• Began with companies preparing environmental reports, and has developed into a standard practice today attracting interests from NGOs to investment bankers

Reporting is Becoming More Common

• Due to becoming widespread there has emerged regulatory initiatives in different regions with different expectations from reports
• Strongly shaped by organizations seeking to prepare reports to create a more standardized practice Sustainability reporting is not just a "non-financial reporting" but is also a way to avoid conventional financial reporting practices that would imply an annual report should suffice.

Different terms for sustainability Reporting

• Environmental, social or EHS-reports
• ESG reports
• Triple bottom line reports
• Corporate citizenship reports
• Corporate responsibility reports
• Accountability reports
• Responsible business report
• Creating shared value report
• Environmental reports
• Corporate social responsibility reports

Sustainability Reporting in Various Forms

• The traditional standalone sustainability report which continues a more common form in many organizations
• Others are producing integrated reports in which social, environmental, economic information is presented alongside the financial
• Social media provides possibility to different stakeholders

Impact of Sustainability reporting

• Communication with a wide range of stakeholders either for external parties or internal decision making process

Information and Credibility

• Includes both financial and non-financial information like tons of greenhouse gas or qualitative

Reporting Difficulties and Strategies

• Requires performance indicators for it to be connected to ensure strategy, and avoid too much focus is put on the indicators chosen in reference

History of Sustainability

• In 1980, the voluntary reports were published and companies with environmentally sensitive operations started developing the sustainability reports
• The first voluntary environmental reports were published and some that criticize the criticism and power

Environmental Management Tools

• Eco-auditing led to the development for the environment and standards like standards such as ISO14000

CSR

• From 1990s, companies with socially sensitive operations started to develop CSR reporting, and one of the drivers was concerns about labor conditions

TBL

• With different developments, Triple Bottom Line Reporting was founded for the 3 dimensions: social, economic and environmental
• Many global organizations has supported reporting sustainability and one of them is the Global Reporting Initiative (GRI), which voluntary sustainability reporting framework

More about different factors of sustainability:

• United nations global compact
• OECD Guidelines for Multinational Enterprise
• ISO26000 for social responsibility The growing concern about climate change has made carbon reporting more popular

Types of Reports

• Sustainability reports were mostly single-issue reports focused on environmental performance
• There is difficulty to grasp the multidimensional concept of sustainability
• The number of holistic sustainability reports has increased and in many ways is eco-efficiency focused

Driving Forces Behind Sustainability

• Demand for sustainability reporting
• Variety of concepts, frameworks and actors causes some confusion about actors Sustainability reporting has played a very important role and influenced what is reported, elevated its importance, and references from ESG

Demand for Sustainability Reporting

• Many people have set forth the many entities with commitments for many organization
• Leading commitment through financial institutions commit to managing the Environmental Principles

Structure and Regulations for Sustainability

• The carbon Disclosure Project is an independent body that develops annual information requests on behalf approximately purchasing organizations
• Sustainability is material and related finances successful reporting the standards of sustainability Globally, two frameworks are used for disclosures in mainstream financial reports

Different Sustainability Rankings

• The Disi
• The Global 100 Most Sustainable Companies Green Ranking
• CDP leadership index
• Ethisphere World's most ethical companies

ESG's research and background

• Some other tools provide support and research support.

Main tools used for support and research

• SAM supporting down Jones Sustainability Index)
• MSCI (with series of IS own ESG indexes, - Sustainalytics

Who uses sustainability reporting?

• Reports about a company's social and economic and relevant impact

Corporate Customers

• The need for suppliers to provide the company
• Walmart and many other companies like IBM issues several surveys from suppliers

Investors and stakeholders

• Are used by investors
• Originated as a source for negative divestment
• In short, it will be a useful tool to use from investors and stakeholders

Employees

• Sustainability is now a rising trend among the newer generation of employees
• It is a useful tool to engage and recruit new employees

Commmunities

• The significant presence of sustainable living can have the foundation for many discussions to operate
• It is relevant because they make can make a multiplier
• The report can inform their management approach and environmental topics they care MOST

Regulations and Agencies

• Have the opportunity to provide the sustainable environment and the organization can have experienced

Peers and Competitors

• It will be the best way that their peers and organization will be aware that it will highlight the industry

Internal and External

• Internal and internal stakeholders and society will be aware of the social environment in which it can be helpful

Benefits

• Improve performance, can cost savings, save resources, will use resources because it will impact their business which creates great value

Best Risk Management

• Better understand sustainability and opportunities and ESG can give insights as risks A Sustainable Vision is meant to assess performance Goals and a Motivated workforce is needed to make concerted efforts Know hard work needs to be done

External reasons to follow this plan

• There is high transparency
• there is a great opportunity to show sustainability values to different customers
• stakeholder engagement is available with great opportunities It leads to increase confidence and trust

Business Approval

• There are often implicit concerns of business where they do not engage with transparency
• Organization link business success to operators

Benefits

• Manage potential local legal issues and local co-management

Sustainability Today

Challenges of proper strategies and value for creating stakeholders Considering tradeoffs in a stakeholders and relative importance

Sustainability

Strategic imperative that includes increasing attention and culture in a business Dynamic equipment in the process of what a firm and the environment depend Manage effectively the financial aspects and organizations help Business sustainable organizations that help humans and the society and the business to be successful

Guidelines of business

• Create sustainable environment society and environment.
• Business need to integrate their social economic mission with great value

ESG Dimensions

Show interrelated in a model Shareholder and Agency theory Relationship of management to great interest and management

Agency

• Short term earnings which doesn't involve shareholders
• Non financial activities

Stakeholder Theories

• Social responsibility meets with organization
• Resources may need to allocated for stakeholders
• Direct interest and bear risk There is a lot to know about stakeholders with regards to social theory

Theories based in societal pressures

• Legitimacy = all stakeholders must pressure firm sustainability.
• Signaling: disclosure theory, firms signal "good news".

Stewardship

• How management is to be perceived to to others.

Sustainability Theories

• Used to what main action.

Combining the 6 Sustainability Theories

• What is the most effect way in improving organization?

Embedded Sustainability in Organizations

• What is it mean to embedded?
• Reduce risk + reduce business success.

Sustainability Governance

• Sustainability governance
• Best positioning will have organization to manage and risks will align

No Standard approach

• Consider all standards related to sustainability

Key towards embedding sustainability towards companies

• Tone from the top
• Clear statement and commitment from board
• Review goals by Board and annual financial report

Extent of ESG's impact on Sustainability

• Financial success and sustainability
• Apply internally to organization's
• Have the flexibility to be applied Assess both internal and external Stakeholder's View

Applying Value Chain

• All parts and products from the originations are encouraged
• Involve management in its ESG
• Important for stakeholders for better informed decisions

There must objective to the materials needed

• Start with this

Scope

• Set the scope depending on if and where it will be implemented

Sustainability

• External and internal help sustainability efforts for organizations to improve. Stakeholder commitment, assess and identify stakeholders to allow org to be successful