It is no secret that globally organisations are grappling with the notion of sustainability. Yes it is an environmental problem, but it is also one that will have far reaching financial implications. As a result, organisations are slowly beginning to establish protocols for evaluating sustainability performance.
But for businesses to gain the traction they need to meet these goals, they need to look at the sustainability of their own operations, investments and business partners. What are the trends impacting the areas of financial and sustainable convergence, and what is their impact on the marketplace?
“The first step is that business needs to adopt a vision for integrated reporting that combines financial and non-financial information,” says Francois Beyleveld, principle consultant at SAS.
“A reporting framework needs to be built that takes into account an organisation’s strategic objectives, its governance and business model, and both material financial and non-financial information, something the International Integrated Reporting Committee (IIRC) itself is trying to drive.”
This is all good and well, but globally there seems to be a lot of talk and not enough action.
At the recent World Economic Forum, a session was dedicated to discussing the question: “considering the growing interest in the environmental, social and ethical risks associated with global business, how should corporate financial reporting be redesigned to integrate critical information on these risks under a common framework?”.
“Perhaps an even bigger trend is the shift in focus from just carbon to broader sustainability management,” states Beyleveld.
“At this stage, regulation will force the hand of energy intensive industries, such as industrial manufacturing, metals, and mining. But within the broader business community, there is a definite shift with less talk about carbon, and more talk about waste streams, water, energy efficiency and responsible lifecycle management.”
There needs to be a desire and need to confirm, and according to Beyleveld this is where the need for investor and consumer interest comes into play.
In addition, this is driving the need for funds within business that focus on “sustainable, social and responsible investments”. Even locally banks are betting their future growth on “green” product lines. However, the major challenge is how to match a product’s qualifications to the current consumer perception of sustainability.
“There is also a very important need to consider the influence on governance, risk and compliance within a broader sustainability framework,” he warns. “All factors of sustainability need to be taken under consideration within overall risk assessments. It is not just about the environment, it is about corporate reporting and transparency too.”
An area where the most impact can be made is the latest trend of procurement reform. Here standards need to be adopted that include sustainability measurement in product and services evaluation, and it needs to be done by governments and business alike. There are early adopters in this sphere, but more can still be done.
“But trends aside, there are still challenges to true sustainability, and some of these come in the form of fragmentation, calculation, and organisational boundaries. In so far as fragmentation, there is still no cohesive way in which people report on their sustainability and there is no single data repository governing it.
“In addition, there is no formal way to calculate the risks or the actions of bodies and businesses continue to demonstrate an organisational risk by only disclosing certain parts of their efforts in their calculations and risk assessments.
“So while technologies exist that can help organisations increase reliability and transparency of environmental and social performance. Until these challenges are resolved to the desired liking of the financial officer, full adoption of integrated reporting and increased consumer trust will remain impeded,” concludes Beyleveld.