Why Sustainability Reporting Matters For Your Business

The world has evolved over the last few decades, and so have people’s expectations. So how does that affect why sustainability reporting matters to your business?
Today, consumers are not only looking for a good price but also want to know how their purchase affects society and the environment. Why does sustainability reporting matter at all? Well, it is an effective way to tell your customers about your company’s environmental impact and its social responsibility practices. In addition, it can help you make better decisions about where to focus your efforts moving forward in order to improve sustainability performance.

Keep reading to learn more about why sustainability reporting matters for your business!

What is sustainability reporting?

What does “sustainable” really mean? There are many definitions of this word, but one that we find helpful is: “meeting today’s needs without compromising our ability to meet future needs.” This means considering the short-term impacts of our actions on communities and the environment, as well as the long-term impacts.

Sustainability reporting is measuring, disclosing, and managing a company’s environmental and social impacts. It provides a way for businesses to communicate their sustainability performance to interested parties, including customers, employees, shareholders, and the public.

Why is sustainability reporting important for your business?

Sustainability reporting can help your business in seven key ways:

1. Identifying ESG impacts
2. Directing resources efficiently
3. Understanding stakeholders
4. Building brand loyalty
5. Attaining regulatory compliance
6. Managing Risk
7. Attracting Investors
8. Motivating Employees

Keep reading to learn about these benefits in greater detail!

1) Identifying ESG affects

When looking at environmental, social, and governance (ESG) impacts, businesses can identify areas where they may impact people or the environment. Sustainability reporting can help a business understand these impacts and reduce them.

For example, a company that manufactures clothing may realize that the dyes it uses are polluting the water supply. In this case, the company could switch to a more environmentally friendly dye that has less of a negative impact on the people, plants, and animals around its factories.

2) Directing Resources Efficiently
Sustainability reporting can also help businesses direct their resources more efficiently by highlighting the operational weaknesses and strengths that govern performance.

For example, let’s say a company is looking to reduce its greenhouse gas emissions. By conducting a sustainability report, it may find that the biggest source of emissions comes from the way it transports goods. The company could then focus on reducing transportation-related emissions and see a significant decrease in its carbon footprint.

3) Understanding Stakeholders
A business cannot be truly sustainable without understanding who its stakeholders are and what they expect from the company. Sustainability reporting can help businesses do just that by identifying different groups that have an interest in a company’s environmental and social performance.

Stakeholders can include customers, employees, shareholders, suppliers, communities near company facilities, and other interested parties. When a business understands who these people are and what they want, it can develop better relationships with them and even garner their support for sustainability initiatives.

4) Building Brand Loyalty
In today’s competitive marketplace, businesses need to stand out from the crowd. Sustainability reporting can help businesses build brand loyalty by showing customers they care about more than just profits. Customers are increasingly interested in how their purchases affect society and the environment, so businesses that report on their sustainability performance will likely be more successful than those that do not.

Recent research has found that a staggering 81% of consumers would prefer to do business with sustainable brands and companies. To capitalize on this eager market, companies need to market their sustainability credentials through comprehensive reporting.

5) Attaining Regulatory Compliance
Sustainability reporting can also help businesses attain regulatory compliance. Many governments and regulatory agencies are now requiring companies to report on their environmental and social performance. By doing so, businesses can avoid potential fines and penalties.

According to a 2016 study by Carrots and Sticks, there are around 400 sustainability reporting instruments actively used by 64 countries. Of these instruments, over 65% are mandatory—and this number is growing annually. That means that for millions of businesses around the globe, sustainability reporting is a necessity.

6) Managing Risk

Sustainability reporting can help businesses manage risk by identifying potential environmental and social hazards. For example, a business may find that its operations are in an area that is prone to natural disasters. By understanding this risk, the company can put in place plans to minimize the damage caused by such disasters.

In addition, sustainability reporting can help businesses identify legal and compliance risks. By knowing which laws and regulations they need to comply with, businesses can avoid costly fines and penalties.

7) Attracting Investors
Shareholders are increasingly interested in sustainability performance to predict market performance. A study by Ernst & Young recently found that 73% of investors would consider investing in a company that provides comprehensive sustainability reporting that shows strong performance.

The reason behind this confidence is simple: sustainable businesses are less volatile. A study by the USSIF—a think tank that studies the economic effects of social initiatives—found that companies who engage in sustainable practices see far less price action in times of financial crisis than companies that don’t.

To illustrate, let’s look at a real-world example. After the 2008 recession, companies that were committed to sustainability practices like ESG reporting and impact reduction we found to have achieved impressive financial performance despite the economic downturn. To quantify their success, these companies saw an average of $650 million in incremental market capitalization during the crisis.

8) Motivating Employees

In order to be successful, businesses need engaged employees who are working towards common goals. Sustainability reporting can help to motivate employees by giving them a sense of ownership and responsibility for the company’s environmental and social performance. Employees who are interested in sustainability may be more likely to stay with the company in the long run.

Wrapping Up
As you can see, there are many benefits to sustainability reporting. By conducting a sustainability report, businesses can identify their environmental and social impacts and reduce them. Not only is this good for the environment, but it can also be good for the bottom line, as sustainable practices often save money in the long run.

So, why wait? Start reporting on your sustainability performance today!