Currently, too much time is needed for reporting and rating activities and too little time is available for generating considerable impact. Sustainability leadership is only achieved by getting strategy into action and peers aligned. Quoting Unilever's Paul Polman, “If we achieve our sustainability targets and no one else follows, we will have failed.”
Systematic materiality analysis and industry-level standardization of sustainability issues have rendered non-financial reporting more professional, but also more complex. While an accountant’s lens with a ‘checking boxes’ risk mitigation perspective typically ensures that sustainability information is being collected in a methodical manner, it contains the risk of falling into the reporting trap, where publication of the sustainability report itself becomes the final objective.
In contrast, there is the investor’s lens. Investors such as BlackRock and Apax are increasingly looking for frontrunner companies that report transparently on material risks, but also on how these companies leverage opportunities in order to ensure and enhance long-term economic returns. For these frontrunners, sustainability is an integral part of the strategic focus and helps drive long term value creation by addressing unmet needs for instance through ‘greener’ product design, improved social impact or by turning waste streams into valuable resources.
This kind of innovation often starts with the design and implementation of new business models that require strong capabilities for value chain collaboration and strategic partnering. Next to a value creation focus on material issues, jumping the reporting trap requires supplementary skills – particularly in the area of innovation and partner development.
By analyzing Dow Jones Sustainability Index 2014 data from industry leaders in the four sample sectors (chemicals, pharmaceuticals, food and telecommunications), different approaches for effective execution have been identified:
The growing burden of engaging in sustainability reporting and benchmarks increasingly makes sense when companies look beyond the risk mitigation of material issues – avoiding the reporting trap. Interested to read the report? Download a free full PDF copy of "Avoiding the Reporting Trap" study at the top of this web page.
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