Corporate Sustainability: The Importance of Integrated
Reporting
Sustainability reporting advances sustainability goals because
it clarifies triple bottom line materiality issues, risks and
opportunities. By having a tangible report surrounding both external industry
and internal company aspects, the success of a companies desired mission and
outcome can be analyzed while giving stakeholders transparency and
accountability.
Integrated reporting is a growing trend where businesses combine
sustainability reporting with financial information or 10-K’s. The more
companies do this, the more an expectation and standard is cemented for
lagging companies to feel the pressure, take initiative and practice integrated
reporting. A benefit of combining sustainability reporting with financials is
that stakeholders can see where one influences the other – more and more
companies are realizing that the two worlds impact one another—this is
partially driven by a demand in transparency and accountability by B Corp
assessments, GRI’s and CDP reports. Investors, policymaking bodies, and employees
(just to name a few stakeholders) are more eager than ever to understand
how the seemingly intangible “outside” issues (ESG's) impact tangible financial
performance within a company and vice versa. If information is power then
education for all related to as many metric links as possible will help shape
businesses and the future of society. For example, as an investor I may want to
better understand how Coca-Cola's extreme water usage may inversely impact the
future global water supply. Scarcity and rising water prices contribute
significant expenses to most corporations who depend on water for sourcing,
production and transportation of goods. An increase in water prices and supply
make a large material dent in the depletion of the world’s growing water
deprived populations, in fact many scientists have predicted that by 2030, half
of the global population won't have access to fresh water. Hopefully, as more
stakeholders become informed their will be a greater motivation to push for
innovative sourcing and recycling techniques, accountability and tariffs. Once
a mainstream consumer awareness tipping point is reached through public
transparency practices such as IR, corporations will be more inclined to listen
and take action to create change. If they don't, their bottom line profits will
be jeopardized.
A downside to integrated reporting is that it is very new.
Because of this a common framework hasn’t been developed yet. With no real
accountability system standard in place, internal stakeholder confusion is
often a result for the limited number of companies currently publishing
reports. It's challenging to benchmark against other companies when everyone is
measuring differently. Biased reporting lacking in a set of standards, can also
cause confusion for outside stakeholders. They can easily choose what to report
on and what to leave out—like B Corp and SASB, there is no requirement to be
assessed. Today, IR’s are a tool that forward thinking, sustainability
focused companies are choosing to do to inform their stakeholders and track and
refine their growth plans. As more and more company IR’s are being generated,
there will hopefully be a best of practices standard established so that a
company report not only incorporates financials but includes a well-rounded and
complete array of social and environmental impacts.
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