It is becoming increasingly clear that climate change, biodiversity and social inequality entail significant economic risks. Yet many organisations find it difficult to translate their sustainability policy (fortunately increasingly present) into materiality and sustainability performance, to identify risks and opportunities and to set concrete ambitions. Sustainability reports offer a solution. Collecting, valuing and managing relevant data helps to achieve set sustainability targets. But not everyone finds this easy.
There is increasing legislation requiring companies to report on their social and environment-related challenges. Recently, Environmental Defence had filed a lawsuit against Shell, which Shell lost, with far-reaching consequences. "The oil company is obliged through its group policy to rigorously reduce the CO2 emissions of the Shell group, its suppliers and customers by a net 45 per cent from 2019 levels by the end of 2030," NOS reported on 26 May.
Organisations need to take responsibility and try harder to reduce their carbon emissions. Previously, reporting was more or less voluntary, but now it is a must to show that you are successful in achieving your goals. Many organisations have little or no experience with sustainability reporting. It involves different data from standard financial reporting. Sustainability data is often less hard to measure, less objective and more often causes debate or is simply not available.
Financial and non-financial data
Organisations intending to report on sustainability have to deal with different types of data, both financial and non-financial. With financial reporting, organisations have plenty of experience. Fortunately, because financial reporting is also very important in sustainability. After all, producing more sustainably requires significant investments. Money that cannot be distributed to shareholders. Good reporting for accountability purposes is therefore very important. Reporting on non-financial data is often less experienced and can pose challenges. For example, figures on staff diversity, CO2 emissions from the vehicle fleet, amount of waste or the energy consumption of a building. It is quite easy to know how much was spent on energy, but not immediately how much energy in kilowatt-hours (kWh) was then consumed. This is not always accurately recorded or included by default in the accounts.
The context of the organisation determines how they collect and report data. Reporting on sustainability often means a profound change in the organisation. In newcomers, organisations that have only just started reporting on sustainability, we see that motivation often depends on individual employees and that the sustainability idea has not yet taken root throughout the organisation, including the top. Newcomers find it difficult to determine what data is needed and often experience difficulties collecting relevant data as the necessary processes to collect this data have not yet been set up. This often lacks a clear format and sometimes lacks concrete objectives. Data are delivered in various ways and vary greatly in quality. Take, for instance, an inclusive office lease contract. Here, costs and data on waste disposal and energy consumption are often already included in the total rent. If these data are not available, estimates are made, to the detriment of accuracy and objectivity...a danger to data quality.
Organisations that already have considerable experience in sustainability reporting often already have processes in place to collect this data. A top-down sustainability policy can increase support in the organisation. If senior management proclaims support, this also affects staff. Sometimes a dedicated team is even appointed to be responsible for data collection and reporting, using state-of-the-art dashboarding tools. A pitfall for organisations that already have a lot of experience is that targets are often not ambitious enough (e.g. Shell). Meeting the minimum guideline is often the starting point. But fortunately, there are also forerunners who show great ambition.
These forerunners naturally experience bumps in their path. After all, the field is still far from fully developed so plenty of time to invent, develop, experience and adjust the wheel. In addition, investors are not always eager to invest in sustainability either. After all, these investments are no longer paid out to shareholders and the payback period, if there is any payback at all, is not always quantifiable. Fortunately, there are also advantages to being ahead. When the general public knows that an organisation is 'green', it is definitely good for its image. Being ahead also means building a lead that organisations can use to their advantage - for example, around embedding increasing laws and regulations. Finally, frontrunners can also be thought leaders and influence new developments, 'leading the debate'.
"In recent years, I have had the opportunity to experience how several large Dutch and international companies deal with their sustainability objectives and accountability. For example, one of these companies, Unilever, reported impressively on its environmental footprint, where I was closely involved in optimising the reporting processes. These are often hung up on Sustainable Development Goals (SDGs), for example around economic, social and environmental drivers. Once data are accessed in a structured way, data quality is in order and there is a clear design of the data model, you can develop dashboards that provide a lot of insight. You can then more easily interpret the drivers of change; extremely valuable." says Boudewijn van den Dool, Managing Consultant Sustainability at Improven.
More sustainable measures in the organisation create huge opportunities, including financial ones. During the Corona crisis, we saw that things could be done a bit less! For instance, not all business trips to faraway places are urgent, lease cars do not all have to join traffic jams every day and office buildings could be smaller. All sustainable measures and all good for the wallet.
Taking responsibility by reporting
With proper reporting and accountability, you can achieve a lot, both internally and externally. Awareness of responsibility can be created among employees, customers, suppliers and investors. But first we need to overcome all kinds of practical issues. Reporting processes are needed, investments in systems to record the data, and targeted steering of the sustainability policy. In this, motivated employees and clear policies already provide a good start.
In addition, an important determining factor is a guiding government. Both the literature and practice show that an assertive, guiding government is needed to fuel and accelerate these kinds of transitions. Efforts are needed from the government to standardise sustainability reporting. That way, companies are not only held accountable for their financial impact, but also for their impact on society and the environment.
Improven already has extensive experience in helping organisations ensure their data quality, reporting, and governance. We are happy to help organisations shape a data-driven sustainability policy. Would you like to have a sounding board? Great if you get in touch.
Boudewijn van den Dool (06 51683764 and firstname.lastname@example.org), Bibi Looijestijn (06 40019459 and email@example.com) and Chantal van Zeeland (06 82098086 and firstname.lastname@example.org).