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Why eco-reports can make or break firms

Sustainability reporting has become a buzz-word that companies, ranging from SMEs to large firms as well as multinationals, are aiming to put in place.

Last week the East Africa Breweries Limited (EABL) issued their inaugural sustainability report adding to the dozens of companies that have so far released their.

Some that have issued reports in the recent past include Safaricom, ABSA Kenya, KCB and Adrian Kenya.

Sustainability reporting is a means of communicating relevant information for understanding a company’s long-term economic value and contribution towards a sustainable economy, taking account of its economic, environmental, social and governance performance and impacts.

The main purpose of sustainability reporting is, therefore, about communicating the understanding of how the flows of material, resources and services between corporations, capital markets, society, the economy and the environment affect the mutual ability of those systems to continue and flourish.

Businesses are using their sustainability reports to frame their stories to the world. However, to use sustainability report as an effective communication tool, organizations need to assess and understand expectations of their stakeholders, credibly measure their impacts and adapt their messages to the needs of target audiences.

Other than considering the sustainability report as a communication tool, businesses should also see it as a business development tool. More players in the supply chains are looking for sustainable suppliers, which means they will always ask for evidence that shows sustainability.

A proper sustainability report will be a good tool to demonstrate this element. Financiers are also interested to assess the level of sustainability for businesses and in most cases they even provide a couple of basic discounts to sustainable companies.

This is more in the wake of sustainable finance where plain vanilla financing is no longer attractive and profits or financial return is no longer the only driver for transactions. Impact is taking the center stage meaning there is more sustainability in firms.

A sustainability report is not just about telling people that a business is sustainable; Nowadays, companies must also demonstrate what, how and why, meaning that there is a need to communicate correctly to the desired audience.

To be able to report properly, companies must follow a proper reporting protocol as provided by the selected reporting framework such as Global Reporting Initiative (GRI), Sustainable Development Goals (SDGs) and UN Global Compact among others.

GRI has become the most popular and including in the EABL report issued last week which claims to be using GRI standards core option.

There is a lot of improvement that can be done on the said reports as corporates seem to be in competition on who issues a sustainability report and how well the it is designed without consideration of the content.

As a minimum, the reports should aspire to ensure that the information provided is factual and relevant.

Generally, sustainability knowledge and skills including the reporting are missing in many organizations and yet there are so many demands to have such skills.

In the short term, there is a need for companies to use consultants but at the same time use them to build the internal capacity.

Other considerations for those wanting to initiate sustainability reporting within their organizations include linking of sustainability targets to the corporate strategy hence enabling the business to align resources with their current efforts and hence improving their chances of achieving the set sustainability goals.

There will also be a need to consider the peers and how they are conducting sustainability that is, the looking for the best practices.

Sustainability issues come in many shapes and sizes and are different across industries and regions and hence benchmarking will become a powerful tool that should be utilized to understand how a company reporting compares to industry peers.

Another challenge with companies is the fact that, many often have much of the information needed to populate significant sections of their sustainability reports, but they may not realize it because the information is not currently being used for this purpose.

It is, therefore, important to bring various functions in the business to work on the sustainability reports to ensure all the relevant information is captured.

Unfortunately, in many cases, the sustainability teams are the ones that are left to work on the reports and hence end up not capturing all the required information.

To avert the above challenges, there is need to set up a proper reporting mechanism in the organisation based on relevant sustainability framework.

Additionally, businesses may need to have knowledge management systems to track sustainability data, which may lead to more efficient reporting across departments.

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