Many public and private companies, with more than roughly 200 employees, have not yet started disclosing their sustainability data to the market. There are a number of essential market factors that we recommend you to (re)consider concerning your approach to sustainability.

The key market factors are:

  • ESG data reporting is becoming mandatory as of 2023 for most companies in the EU with more than 250 employees or other disclosure criteria, impacting up to 50’000 companies.

  • Sustainability reporting is rapidly evolving from obligation to competitive advantage.

  • Customer loyalty and access to capital and talent are quickly becoming dependent on a company’s position on sustainability.

 

Make sustainability your own business strategy

Now that you may decide to start preparation for your sustainability reporting, you will quickly realise that there is a really confusing mix of non-financial accounting standards and voluntary reporting frameworks. Most companies and investors cannot make sense of what is going on with ESG reporting metrics. Companies that have already started reporting or have explored their options typically complain about the complexity of reporting and lack of knowledge, skills and training.
So how can this possibly be the right time to start ESG data reporting? Driven by market demand for better and easier non-financial reporting standards, the key players in the market have started a process to converge, consolidate and standardise non-financial reporting. In parallel, the World Economic Forum – International Business Council, a group of over 150 global companies took the initiative to engage all the Big-4 companies to create a set of Stakeholder Capitalism Metrics for non-financial reporting. This is a welcome and important development now that more and more companies are making sustainability their core business strategy. Finally there is a stop of further sustainability reporting framework proliferation and a concerted effort to simplify ESG data reporting. The simple logic is that the effort and energy that goes into sustainability reporting can be put to use to take action to improve sustainability performance and make real progress, not just making better claims. The call to action to business leaders therefore is: stop debating the measuring, start talking about action and progress.

Build trust with sustainability reporting

We are coming from a period with a sustainability trust deficit with an opportunity to move towards trust, created through disclosure of quantified and standardised metrics. A great benefit of standardised metrics for non-financial reporting is that all the metrics can be used throughout the entire organisation and across supply chains. A simple set of core metrics, as defined in the Stakeholder Capitalism Metrics (SCM) framework from the WEF-IBC, are most effective to align and drive the organisation towards stated sustainability goals and year-on-year progress.
The SCM core metrics are a very doable set of ESG data metrics that can be implemented end-to-end in almost all organisations in one to two years time. Using digital technology to support the implementation of ESG data measurements and disclosure for the SCM core metrics typically leads to 10x cost savings within 3 years.

Gain the knowledge you need for sustainability reporting

Starting with systematics measurements of ESG data, company wide reporting and disclosure to stakeholders marks the start of a sustainability strategy implementation. Many companies find that they need new and additional skills to achieve this. Companies that have an established sustainability reporting practice will experience a need for additional skills as they progress to include scope-2 and 3 reporting about their supply chain.
There is a need for skills training on the topics of sustainability measurement, reporting and management. New digital technologies like Trusted.one help to automate and simplify the measurement and reporting process. Intelligent data technology captures ESG data as well as knowledge about the source, management and governance processes of sustainability. This is the primary driver of the huge effort and related cost saving that our new digital technologies enable.

 

Companies that have already adopted a sustainability reporting practice, culture and capabilities have observed the business impact of endorsing a circular economy concept:

  • They improved customer loyalty.

  • It did not raise cost.

  • They track sustainability progress as a percentage of revenue.

  • It has not impacted profitability as is often assumed by investors.

 

Blog article written by: Peter Storm

 

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Kind regards
Peter Storm