For companies to report and manage sustainability exposures for long-term value creation, they need develop strategies to improve environmental, social and governance performance.
So says the Australian Institute of Chartered Accountants, which has published a list of 20 sustainability issues for professionals seeking to integrate sustainability into core business strategies. In Business briefing series: 20 issues on building a sustainable business, co-authored with KPMG, the institute presents steps, from integrating the consideration of externalities stakeholder concerns and expectations to developing the business case for sustainability to embedding sustainability into core business processes and through to creating value through sustainability reporting.
“It’s aimed at members who are actually the finance professionals in an organisation – CFOs or the finance department,” said Geraldine Magarey, the institute’s manager sustainability. “It really is for people perhaps who are looking to where to start and where to understand the process. It’s about looking at those key themes, vital things from a big picture perspective and embedding sustainability into the institution. There has to be a business case for it, and at the end of the day, these measures need to stack up financially.”
The paper presents sustainability as an integrated strategy, given the convergence of international standards towards integrated reporting and oversight, but they can be used with standalone sustainability strategies.
In addition to defining and surveying stakeholders, the report also discusses how financial professionals can map business risks and opportunities, incorporate sustainability within the risk management framework, and eventually, at the end, identify assurance needs to ensure credibility.
“The reporting side, I think, is crucial as well,” Magarey said. “It comes back to what gets measured gets done, so it’s very important that to collect the data and look at it against key metrics.”
The institute’s recommendations and study come at a time when Australian companies are in danger of being lapped by overseas organisations when it comes to corporate responsibility reporting. KPMG recently released its International Survey of Corporate Responsibility Reporting 2011, a report into corporate responsibility (CR) reporting in 3400 companies representing the national leaders of 34 countries. The report finds that 57% of Australian companies do CR reporting, an increase from 45% in 2008, the date of the last survey. But the report found that 59% of Chinese companies in the survey perform CR reporting and 58% of Russian companies provide CR reporting. In comparison, 83% of US companies do CR reporting, 100% of UK companies provide CR reporting, South Africa, which recently instituted a “report or explain” policy for companies listed on the Johannesburg Stock Exchange, saw 97% with CR reporting ,and 99% of Japanese companies provided CR reporting.
“There are companies who do sustainability report, there are companies that are moving towards doing an integrated report and pushing it into their main report, and there are companies that are disclosing data on the web,” Magarey said. “I’m not sure if that’s being picked up on in the survey. But yes, a lot of companies are not reporting any sustainability reporting in any context and we have a long way to go to get ourselves up where a lot of other countries are.”
From Magarey’s perspective, shifting the majority of wholesale Australia into integrated sustainability measurement and management requires action on a variety of fronts – internal corporate leadership, government action and pressure from capital markets, such as institutional investors.
“You do have some people in companies with vision on this, but to get wholesale change, you need a complete change,” she said. “You need a legislative change, or even the pressure from capital markets demanding change. Investors are doing that, they’re starting to demand more information around sustainability data. The other trigger is work around the supply chain. You have Westpac, for example, asking questions of suppliers and people are providing information on how they match up to these questions and priorities. We have all those things coming together, but will take more than just one to get that wholesale change.”