Sustainability Reporting

In the business world, sustainability is defined as a focus on the “triple bottom line”—managing environmental, social, and economic risks and opportunities. They are often referred to as the “3Ps”: people, planet, and profit. Striking the right balance between these three aspects is the main challenge of enterprise sustainability and the main focus of sustainability reporting efforts.

Over the past decade, sustainability reporting has evolved from being driven by idealism—or considerations of favorable PR outcomes—to standing on its own merits as an opportunity to share and drive enterprise strategy. Regardless of political and personal beliefs, many companies have been adopting sustainable practices, partially because of their advantages in the areas of cost-cutting and risk mitigation. As a result of increased adoption, more substantive “material” data is coming in from multiple sources, primarily through the “next generation” sustainability reporting, which the Global Reporting Initiative defines as conveying “sustainability-related information in a way that is comparable to financial reporting.”

Key Points

  • More and more data are being generated due to increased corporate sustainability practices and reporting. In 2013, about 72% of companies in the S&P index published sustainability reports, a large jump from 20% in 2011. The sustainability disclosure rate grew even faster for smaller companies
  • There is an attempt to enhance the quality and reliability of sustainability reporting through report verification and assurance. The percentage of companies issuing sustainability reports that include third-party verification and assurance rose slightly for both the S&P Global 1200 and S&P 500 companies. Increases were from 25% in 2013 to 30% in 2014 among S&P Global 1200 companies and 8% to 12% among S&P 500 companies

Implications

  • The proliferation of data coming out of sustainability efforts means that companies need to be even more rigorous about the credibility and validity of their data sources
  • The practice of verification and assurance of non-financial reporting is a fairly new development but signals the next logical step for companies to take in their sustainability reporting
  • As more companies start “walking the walk” of sustainability, reporting efforts will continue shifting the focus toward meaningful indicators that are fully integrated with the overall enterprise strategy

More Information

Contributing Author: Freedom David
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