Last updated on January 3, 2023
Clients often ask, “Why would we want to do sustainability reporting?” Money and reputation are certainly two big factors. But for many companies, doing better business helps them to improve their bottom lines.
Proving business resilience
If 2020 has shown us anything, it’s the importance of business resilience. Think of sustainability reporting like financial disclosures or annual reports; it’s another way to build transparency and help key stakeholders to understand your efforts towards continuous improvement. Some studies have shown that “investors reward those firms that have been recognized to excel in [corporate sustainability performance], and that this compensation results in a permanent price increase for these securities.”
As I’ve pointed out before, institutional investors believe that “we are on the edge of a fundamental reshaping of finance.” BlackRock Capital CEO Larry Fink says that “climate change has become a defining factor in companies’ long-term prospects.” He says that investors are “recognizing that climate risk is investment risk.” He goes on to say that:
“We believe that all investors, along with regulators, insurers, and the public, need a clearer picture of how companies are managing sustainability-related questions. This data should extend beyond climate to questions around how each company serves its full set of stakeholders, such as the diversity of its workforce, the sustainability of its supply chain, or how well it protects its customers’ data. Each company’s prospects for growth are inextricable from its ability to operate sustainably and serve its full set of stakeholders.”– Larry Fink | CEO, BlackRock Capital
Notice that he refers to sustainability in the broader sense, which includes diversity and supply chain resilience.
Identifying areas for process improvement
In spite of the trends towards sustainability reporting, not every company thinks it’s ready. Even if you don’t formally publish a sustainability report, there are benefits to simply going through the underlying process. It helps your organization understand strengths, weaknesses, and stakeholders’ needs. The process helps to reveal whether or not you’re truly putting your efforts in valuable, measurable areas.
Sustainability reporting can provide you with the tools you need to operate a resilient business for the long term.