How to design your company’s Sustainability Report (Harvard Business Review)
Deciding which metrics to use when reporting on sustainability performance can be overwhelming. Some companies report only their greenhouse gas emissions while others publish glossy reports about their CSR (corporate social responsibility) initiatives, and most executives don’t know why or when to choose one of these reports over another.
The past decade has seen a boom in sustainability reporting options, which means that companies can end up investing in sustainability disclosures while still not meeting the expectations of legislators, clients, investors, and employees.
Dubai’s Sustainable City recently developed a better way to navigate this complex set of choices. The 46-hectare mixed-use community is designed to achieve net-zero energy, but the developer’s knowledge arm didn’t know how to best report on achievements towards that goal and choose from a wide range of reporting standards, each with a different view of what sustainability reporting should cover.
In response to these challenges, Tim Rogmans Karim El-Jisr developed a matrix to categorise reporting standards and ratings in terms of the scope of topics they cover and their target audience. Tweet This! Thus, executives at the Sustainable City were able define a sustainability reporting approach that matched the company’s needs and those of its stakeholders. The exercise resulted in an annual sustainability report that focused on the most critical environmental challenge that the Sustainable City could impact: the reduction of greenhouse gas emissions. As none of the existing ratings could adequately summarise an entity’s greenhouse gas emissions reduction performance, it was decided not to seek a sustainability rating. This decision enabled the Sustainable City to focus its communication on its critical message of combating climate change and earned it multiple regional awards for its sustainability reporting.
Dubai’s Sustainable City was not unique in the choices it had to make. The matrix Tim Rogmans Karim El-Jisr developed can help others find the best approach for deciding on both sustainability reporting and sustainability ratings.
Sustainability reporting standards
Sustainability reporting refers to the information companies provide about their performance, while sustainability ratings (discussed briefly below) provide a summary indicator of an entity’s performance.
There are at least seven well-known sustainability reporting frameworks and standards available, each one backed by credible organisations. In alphabetical order they are:
- CDP – Carbon Disclosure Project
- CDSB – Climate Disclosure Standards Board
- GRI – Global Reporting Initiative
- IIRC – International Integrated Reporting Council
- SASB – Sustainability Accounting Standards Board
- TCFD – Taskforce on Climate Related Disclosures
- WEF IBC – World Economic Forum International Business Council
Each standard deals with a different scope of topics, from narrow to broad ones, and relates to a different range of audiences.
The first matrix developed by Dubai’s Sustainable City sorted through these differences by placing topic on one axis and audience on the other, also positioning the major global sustainability reporting standards in the relevant quadrant on the matrix.
Using this matrix, executives can see that if they want to report on the specific risks that climate change presents to financial results, they can choose to use CDSB (a specific standard) or TCFD (a broad framework). Companies looking to report on a wide range of issues (such as the company’s contribution to the UN Sustainable Development Goals) can use SASB and IIRC.
On the top half of the chart, the CDP focuses on a company’s impact on greenhouse gas emissions. Companies looking to report on a broad set of environmental and social topics can use GRI or the WEF IBC. GRI is the world’s most widely used sustainability reporting standard. The WEF IBC has mapped its own metrics to GRI standards, so as to enable some level of comparability between the two.
Managers using this matrix have to decide whether to focus reporting only on environmental aspects or a broader set of non-financial topics. A second consideration is whether companies are reporting their impact on the environment or the environment’s impact (in particular, climate change) on the company. The sustainability reporting standards matrix provides guidance on which standards are appropriate in each of the four scenarios that emerge.
Sustainability ratings
The second matrix the Sustainable City developed charted sustainability ratings. A sustainability rating offers an independently determined, standardised summary indicator of an organisation’s sustainability performance based on a specific set of criteria. Ratings serve as easy-to-understand communication tools that can facilitate comparisons of performance between different organisations.
As there is an even greater variety of sustainability related ratings than reporting standards, companies first need to choose whether they need a rating that is focused on environmental aspects only or on a broader set of topics, and if they want a rating that is aimed at investors only or at a wider range of stakeholders.
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SustainCase was primarily created to demonstrate, through case studies, the importance of dealing with a company’s most important impacts in a structured way, with use of the GRI Standards. To show how today’s best-run companies are achieving economic, social and environmental success – and how you can too.
Research by well-recognised institutions is clearly proving that responsible companies can look to the future with optimism.
7 GRI sustainability disclosures get you started
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GRI, IEMA, CPD Certified Sustainability courses (2-5 days): Live Online or Classroom (venue: London School of Economics)
- Exclusive FBRH template to begin reporting from day one
- Identify your most important impacts on the Environment, Economy and People
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References:
This article is based on published information by Harvard Business Review. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the publication’s meaning. If you would like to quote these written sources from the original please revert to the following link:
https://hbr.org/2022/01/designing-your-companys-sustainability-report