Sustainability reports check more boxes but miss big picture

Companies must tell us what impact they are making on global sustainability issues - including through their collaborative efforts, says Todd Cort, CEO of Two Tomorrows North America and director of the new Tomorrow's Value Research

Sustainability reports are simultaneously getting better and worse. Companies today are increasingly aware of sustainability issues and opportunities and actively integrate sustainability into core business strategies and decision-making. In one sense, companies are opening up and describing the intimate details around how they define material issues, engage stakeholders, and join multi-stakeholder initiatives. On the flip side, however, as companies become more responsive to the Global Reporting Initiative (GRI) guidelines and other reporting frameworks in an effort to drive comparability, they are beginning to lose sight of the why.

In 2000, sustainability to came dangerously close to ‘greenwashing’. Reporting standards, investors and other stakeholders have successfully motivated reporting companies to disclose management approaches and strategic priorities rather than feel-good case studies. The pendulum has now swung too far and in 2012, sustainability reporting has become an almost obligatory exercise of checking off the variety of boxes demanded by diverse stakeholders. In our work on the Tomorrow’s Value Research 2012, we have come across many such examples:

• Incorporating non-financial risk into your enterprise risk management system? Page 43.
• Keeping sustainability in mind while innovating? There's a lifecycle analysis process at each R&D lab, page 58.
• Inclusive stakeholder engagement? Our process empowers people, page 7.
• Materiality process? See the matrix on the inside front cover.

It shouldn’t be this way. Sustainability reporting shouldn’t be looked at as an obligation, but as an opportunity to drive continuous improvement toward the ‘big challenges’ that we, as a company and as a society, face. After all, reporting affords companies the opportunity to collect data and see the impacts they are having on the planet. They get a chance to streamline their processes as the report brings together initiatives and programs from various business units. They get to set targets, learn through case studies, and find opportunities and risks by just going through the process of putting together this (now) massive report.

If the why is missing, it may be our (the sustainability industry’s) fault. Sustainability reports read like we asked them to: companies show us their key performance indicators, whether they've hit five year goals, and how many women they've hired in the last year. And yet, the reports are lacking. While we appreciate the progress these companies have made so far, there is greater value to be achieved.

Context is missing

The missing piece, and the future of sustainability reporting, is the context around how a company’s reporting fits into global performance. It's great to know that a company has joined the Carbon Disclosure Project or cut GHG emissions by 10%. It’s much better to know whether this is really helping put a dent in global emissions, or whether 10% reduction fits into a strategy that will have an impact. While it’s great to see a company has added 1,000 new jobs, it’s better to see what this meant to the employment rate and the economic well being in the communities where the hires were made. The planet's big issues, carbon, water, and poverty, show little signs of improvement, and yet when looking at sustainability reports, one gets the sense that serious progress has been made.

One of the key trends noted in this year’s Tomorrow’s Value Research has been the evolution of indicators and targets. First, most companies continue to expand the number of indicators against which they report. And while targets continue to lag, we have seen an increase in the number of companies that are committing to sustainability targets.

The second trend is that indicators and targets are evolving toward the principles of integrated reporting – i.e. that companies are moving to measure and control sustainability issues that have an impact on their business. While this is a positive trend in that it provides incentive for companies to pursue aggressive sustainability strategies, it has the undesirable side effect that companies are losing focus on whether these targets and metrics will effectively address the challenges we face.

The next wave in sustainability

While each company is responsible for themselves, the collaborative effort is what is going to create a sustainable planet. Therefore, sustainable companies are those that measure the success of their collaborations and set targets for the impact of those collaborations. In 2012, examples are rare. However, we believe this is the next wave of evolution in sustainability and that it will be driven by frustrated stakeholders trying to reconcile the exceptional progress companies have made with the continuing issues that society faces.

Collectively, we have pushed companies to report better, and they have. Now, we're asking them to go further and show us how they fit into global performance. We’re excited to see the progress that contributes to real change, and to see how effective collaboration will help us actually meet global challenges.

More about the Tomorrow's Value Research 2012

This article first appeared on GreenBiz.com