Posts Tagged ‘Sustainability Edition’

The State of Sustainability Reporting: Key Insights for Businesses

Written by Len on September 19, 2024. Posted in Sustainability, Sustainability Reporting

Change is never easy. It disrupts patterns, habits, and expectations. But while it brings about a sense of discomfort, it also invites one to explore new perspectives, practices, and values. Whether at the personal, societal, or organizational level, change is an essential element of progress.

The complexity of change is no exception to sustainability reporting, which requires companies to measure and disclose their social, environmental, and economic impacts. Companies make significant changes in their operations, culture, and stakeholder relationships. When done right, sustainability reporting is crucial to achieving long-term viability, competitive advantage, and social impact.

The sustainability report, as Global Reporting Initiative (GRI) CEO Eelco van der Enden puts it, “is the end of a long journey of transactions and actions that define the company’s approach to sustainability.” With over 30 years of experience in financial and sustainability senior management roles, Van der Enden assumed the position in 2022, coinciding with the 25th anniversary of the GRI. Before becoming CEO, he was senior partner at PwC leading the ESG platform for tax, legal, people & organization, served on the GRI Board, and was chairman of the Tax Policy Group of Accountancy Europe.

In an interview with Cristina Mihailoaie, business unit manager of The KPI Institute’s Research Division, Van der Enden emphasized the growing recognition of the GRI brand among the users of the standards, from accountants to regulators. He also noted the widespread acceptance and rapid evolution of sustainability reporting in conjunction with the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG).

Why Sustainability Matters

According to KPMG’s survey in 2022, 96% of G250 companies (the world’s 250 largest companies by revenue based on the 2021 Fortune 500 ranking) and 79% of N100 (a worldwide sample of the top 100 companies by revenue in 58 countries, territories, and jurisdictions) report on sustainability or environmental, social, and corporate governance (ESG) matters. Of the top 250, 78% use the GRI standards.

Among the surveyed companies, 75% in the Americas, 68% in Asia-Pacific and Europe, and 62% in the Middle East and Africa use the GRI’s reporting standards. However, Van der Enden stressed that there is still an uneven adoption of sustainability practices across different regions. He cited Europe as an example, with the Netherlands having a low rate of 20.25%, while Italy and Turkey boast a 90% rate.

The rising popularity of sustainability reporting is driven by various factors, including capital markets and investors. Van der Enden explained that institutional investors are concerned about sustainability and managing sustainability risks and risks related to socioeconomic factors, such as workplace safety and climate issues. In addition, companies face reputational risks from society, employees, suppliers, and clients. He said that to mitigate these risks, companies must reassess their supply and value chains and adopt more sustainable business practices, especially with the current reorientation to new suppliers.

Competitive Advantage

By demonstrating its commitment to sustainability, a company can establish trust and credibility among stakeholders. Other advantages include attracting and retaining talent, strengthening brand identity, and enhancing reputation. Being a pioneer in an industry will bear risks but also high rewards. When an organization engages in sustainability reporting while its competitors do not, this represents a significant competitive advantage, according to Van der Enden.

Reporting on sustainability is more than just meeting compliance standards. It can drive changes in the organizational culture. Furthermore, Van der Enden supports mandatory sustainability reporting and legal regulations because, in his experience, it can drive systemic change. “The best way is to regulate it in. If possible, establish a global comprehensive baseline constraint, and then enact it into national law to change the mindset and behavior of companies.”

Image Source: Freepik

Sustainability Reporting Is Important Regardless of Organizational Size

Although larger companies may have more resources to invest in sustainability reporting, small and medium-sized enterprises (SMEs) cannot afford to overlook it. Van der Enden explained that SMEs are integral parts of the supply chain. With this, sustainability reporting is not only essential for demonstrating their own commitment to responsible practices but also for meeting the demands of larger companies and consumers for sustainable practices.

“This trickle-down effect highlights the importance of education and training for understanding the entire supply chain, especially for smaller enterprises that provide necessary goods, tools, and services to larger organizations,” he said.

According to Van der Enden, SMEs need to prioritize sustainability reporting to remain competitive in the global market, as manufacturers receive requests from clients in Europe and the US to provide information on their sustainability practices and report on their social and environmental impact. “If you cannot provide this information to your clients, you will lose the contract to those competitors that can.”

Challenges in Sustainability Disclosure

When asked about the challenges companies face regarding sustainability reporting, Van der Enden highlighted the selection of key performance indicators and data gathering. He emphasized the importance of having a data extraction system to easily obtain relevant information.

To ensure best practices in sustainability reporting, the CEO provided three recommendations. First, he suggested speaking with colleagues from other organizations who have already undergone the reporting process and used the GRI. Second, he recommended exploring the GRI Academy’s training programs. Lastly, he urged organizations not to be afraid of sustainability reporting, as it is becoming increasingly common and necessary.

“If you decide to report, do it well,” he advised. “Misrepresenting impacts is as bad as misrepresenting financial data, and we all know that misrepresenting financial data is usually seen as financial or bookkeeping fraud. Sustainability reporting is an investment, and it will prepare you for what is to come.”

Sustainability Awareness and Education Level

Collecting and reporting is just one part of the equation, as organizations need to learn how to use data for performance improvement. Van der Enden’s point of view on education is that there is still a significant gap to close, although the topic is not necessarily recent.

“I think that the interesting part is that people who work in compliance and administration still regard sustainability as something extra, on top of what they have to do, and they do see it as a holistic model, as part of everything else they do,” said Van der Enden. This outlines the need for more education among professionals to change their mindset first and then their practices. He stated, “You need to have a good understanding of your supply chain, your manufacturing processes so that one can truly grasp the depth and ramifications of sustainability for your business.”

**********

Editor’s Note: This article was originally published in Performance Magazine Issue No. 25, 2023 – Sustainability Edition.

Ask Our Experts: The Key Drivers of Sustainability in Organizations

Written by Kimberly Tilar on August 6, 2024. Posted in Consultants, Interviews, Organisational performance

Q: What are the key drivers of sustainability in organizations, and what role does the performance management system play in creating a sustainable organization?

A: Sustainability is getting more importance after the United Nations Sustainable Development Goals 2015-2030 (17 SDGs, 169 targets), agreed upon by almost all nations. The main aim is to sustain resources for current and future generations with the most efficient and effective resource utilization, minimum environmental harm, best economic rates of return, and the most involvement and empowerment of societies.

The circular economy is one of the drivers for sustainability. It aligns directly with SDG 12 and indirectly with all other SDGs. Moreover, it focuses on transitioning from the current linear economy to a more sustainable closed-loop circular economy, where resources are minimized and products are recycled as the final stage. The closed-loop approach prioritizes reuse, refurbishing, and remanufacturing before recycling.

The European Foundation for Quality Management (EFQM) Model 2020 defines organizational excellence as the structured management of three pillars: Direction, Execution, and Results. The goal is to use integrated and agile methodologies to support lean execution and achieve sustainable results that meet or exceed stakeholders’ expectations.

Aligning sustainability, circular economy direction, and organizational excellence would support continuous positive impact and collaborative efforts among stakeholders.

About the expert:

Malek Ghazo

Management Consultant,

Trainer, Advisor

The KPI Institute

An engineering and management professional with 13+ years of rich experience
Certified trainer and training delivery in strategy planning and execution, KPIs, OKRs, BSC, customer service, employee performance management, innovation, excellence, sustainability, and quality management
Experience in R&D in AI, conditional monitoring, and sensor fusion with experience in the HPC computing industry in the UK
Masters of Science Engineering and Management | University of Exeter, UK
PhD Business & Management (Circular Economy and Excellence), University of Pecs, Hungary (2021-2025)

**********

This feature was first published in the Ask Our Experts section of Performance Magazine Issue No. 25, 2023—Sustainability Edition. To download the free digital copy, visit the TKI Marketplace. You can also purchase an additional printed copy via Amazon.

Ask Our Experts: Principles on Creating Meaningful Sustainability Reports

Written by Cristina Mihăiloaie on July 8, 2024. Posted in Consultants, Interviews, Strategy

Q: How can an organization create meaningful sustainability reports?

I will reply with a question: meaningful for who?

My point was to bring to your attention the importance of knowing your audience and the information they expect or need to receive. To identify what your sustainability report focuses on, one must identify the needs of the audience, and as you can assume, there will be one approach to report internally to the top management on the latest progress and a completely different perspective if the annual sustainability report must be released for external stakeholders. Moreover, there are compliance issues that must be considered since regulators, depending on your location, will require certain aspects to be captured in the reporting.

Putting aside the specific context of each organization and the local compliance issues, I find the following principles valuable for producing a quality sustainability report:

Identify the materiality issues – Identify what is the most relevant issue for your organization and consider the informational needs of the report’s users.
Ensure data accuracy – Misinterpretation of results or simple error calculation can lead to serious legal consequences, reputation damage, and loss of stakeholders or shareholders’ trust.
Focus on impact – Use specific KPIs or metrics to measure the achievements of objectives, avoid presenting only what the organization is doing, and include more data about the performance achieved and the impact created.
Provide regularity – Information should be reported on a predefined schedule (e.g., quarterly, annually).
Communicate with clarity – Use simple language, include essential information (not all data available), and use visuals that convey the data’s meaning effectively.

Cristina Mihailoaie

Managing Director MENA and Executive Manager

Center for Government Performance, The KPI Institute

Business Unit Manager of Research Programs at The KPI Institute.
Her professional experience embeds research skills with performance management consulting and practical strategy development and execution for the Research division.
In the last 10 years, Cristina contributed to the development of best practices and standards in how to use and leverage KPIs that are taught in the premium certifications of The KPI Institute worldwide and assisted large organizations in industries like oil and gas, financial sector, telecommunications, manufacturing, and utilities.
She conducts maturity assessments for performance management systems and has trained over 500 professionals over the last years getting first-hand experience with the most stringent issues organizations face.
Get in touch on LinkedIn.

**********

This feature was first published in the Ask Our Experts section of Performance Magazine Issue No. 25, 2023—Sustainability Edition. It offers deep dives and practical insights into the sustainability strategy and performance management. To download the free digital copy, visit the TKI Marketplace. You can also purchase an additional printed copy via Amazon.