As global temperatures rise and regulators around the world drag their feet, it’s becoming increasingly important for businesses (both large and small) to start taking sustainability seriously.
Sustainability reporting is an effective way of doing this.
If this is your first time hearing about sustainability reporting—don’t worry! In this article, Sandpaper will be defining the concept and discussing the many benefits of sustainability reporting—for businesses, stakeholders, and the environment.
Let’s dive right in!
What Is Sustainability Reporting?
Before we get to the benefits, let’s quickly get some definitions out of the way.
Sustainability reporting is the practice of measuring, disclosing, and generally being accountable for an organization’s environmental, social, and governance (ESG) performance. The purpose of sustainability reporting as a corporate exercise is to be transparent about an organization’s impact on the planet and its stakeholders. The goal is to improve over time.
At the end result of a sustainability reporting cycle, the organization will create a sustainability report—no surprises there! A sustainability report is a document (either physical or digital) that contains all the relevant data and information related to an organization’s sustainability performance. Underlying a sustainability report, there is usually a reporting framework which provides the report’s structure and the standards it’s measuring up against.
Once completed, the sustainability report is distributed through various channels (e.g., the organization’s website, social media, annual report, etc.) to various stakeholders (e.g., investors, employees, consumers, etc.).
Now that we have a basic understanding of what sustainability reporting is, let’s look at some benefits!
6 Impactful Benefits of Sustainability Reporting
Ideally, each of the benefits we cover below would get an entire article dedicated to it—but since we only have so much space, we’ll just give a brief overview of each.
Here are a few of the many sustainability reporting benefits:
- Enhanced reputation and brand image.
- Increased profit margins.
- Increased access to capital.
- Improved decision-making.
- Improved risk management.
- Improved employee engagement and retention.
Now, let’s look at each of these sustainability reporting benefits in a bit more depth!
1. Enhanced reputation and brand image.
By being transparent about their ESG performance, companies can improve their reputation and brand image. Customers, investors, and other stakeholders are increasingly interested in supporting companies that are working to make a positive impact on the planet.
According to a study by Simon-Kucher & Partners, an impressive 85% of global consumers are actively trying to adopt more sustainable purchasing practices. When businesses market themselves as sustainable through robust reporting, they open themselves up to reputation-based business.
2. Increased profit margins.
This one might seem a bit counter-intuitive, but sustainability reporting can actually help increase an organization’s profit margins.
How? By improving the efficiency of operations and reducing the company’s exposure to environmental and social risks. For example, a company that reduces its water usage will not only save on utility bills—it will also reduce the risk of being fined for breaking local water regulations.
Additionally, consumers are willing to pay more for sustainable products and services. The study by Simon-Kucher & Partners also found that sustainability was ranked in the top-five when consumers were asked what characteristics added value to a company. This goes a long way towards explaining why 34% of consumers are willing to pay premium prices for sustainable goods and services.
3. Increased access to capital.
As sustainability reporting becomes more mainstream, companies that are able to provide transparency about their ESG performance will have an advantage when it comes to accessing capital. This is because investors and other financial institutions are increasingly interested in supporting companies that are focused on sustainable growth.
According to a study by EY, 90% of institutional investors believe that companies focused on sustainability will outperform those that are not in the long term. And this belief is well-founded—according to research from S&P Global, ESG funds significantly outperformed the market over the 1st year of the COVID-19 pandemic.
According to Bloomberg, global ESG investments are set to top $53 trillion by 2025—that’s a massive market that is only available to companies that are able to empirically demonstrate their sustainability.
4. Improved decision-making.
Sustainability reporting provides organizations with a structured way to track and measure their progress on ESG issues. This information can be used to make informed decisions about where the company should focus its efforts in order to create the most positive impact.
A study in the Journal of Competitiveness clearly shows that companies that adhere to the guidelines set by the Global Reporting Initiative (a sustainability reporting framework) see much better outcomes than those that don’t. These positive outcomes are holistic, too—spanning economic performance, public perception, and environmental impact.
5. Improved risk management.
ESG risks can have a significant impact on a company’s bottom line. By tracking and measuring these risks, companies can be better prepared to manage them. This can ultimately lead to cost savings and improved financial performance.
A study by Boston Consulting Group found that companies that proactively manage ESG risks can improve their operating margins by 2-3%. While that might not sound like much, it’s usually more than enough to justify the relatively limited expense of a sustainability report.
6. Improved employee engagement and retention.
Employees are increasingly interested in working for companies that have a positive impact on society and the environment. In fact, according to a report by PLAY, 75% of employees would like to work for a company that is socially and environmentally responsible.
Sustainability reporting can help organizations attract and retain these employees by providing transparency about their ESG performance. Distributing sustainability reports allows companies to differentiate themselves in the labour market and attract high-quality talent.
Start Moving Forward With Sustainability Reporting
Sustainability reporting is no longer a nice-to-have—it’s a necessity for any company that wants to stay competitive in today’s marketplace.
If you’re not already doing it, now is the time to get started. The benefits are clear, and the costs are relatively low. All you need is a commitment to transparency and a willingness to track and measure your progress.
Whether you’re looking for a consultant to advise on your sustainability strategy or create your sustainability report, Sandpaper is here. We’ve helped companies from the UAE and around the world create beautiful, informative reports that share your vision with stakeholders.
Contact us today to learn more about how Sandpaper can help!
About the Author
At Sandpaper We have been around long enough to realize the importance of good report writing, research, and design. A thoroughly planned and executed report builds loyalty and trust among stakeholders.
In the 10 years of service, Sandpaper has managed a stay ahead of its competition; by developing and adapting to changes in both the global and local corporate landscape in the United Arab Emirates.