We must tend our garden: Reaping rewards from reporting

When we published our Actions for Business report earlier this year the focus vis-à-vis reporting was very much on how to make it easier: find out what you need to do and where your requirements overlap, and get the ball rolling. Simply taking the time to map out the demands of these myriad disclosure frameworks can illustrate efficiencies you never knew existed to ease the burden immensely.

So now you’ve started, and coming in typically ahead of the curve, we’re already thinking about what comes next. More to the point, we’re thinking about why this is important. So if the recommended actions were about easing the reporting burden, this article is about finding that strategic benefit.

It’s like tending a garden. We go through all the effort of preparing the soil, purchasing seeds, planting and watering them until we can reap the rewards of a good harvest. The same can be said of reporting – we collect key datapoints, establish strong internal governance, identify what and against which framework we disclose, and go through the motions of putting that key information out there. This could be an S&P Corporate Sustainability Assessment (CSA) questionnaire for investors or an EU Corporate Sustainability Reporting Disclosure (CSRD) tabulated statement for regulators. The fruit – or flower – of our labour may be, yes, the reassurance that we impressed stakeholders or could demonstrate compliance, but it is also business insight that can go back into the soil and improve the process year after year. Regenerative reporting, one might say.

Assessments, questionnaires, investor indices, and regulatory frameworks. They all promise a delightful variety of benefits, but insight into the business is the one absolutely guaranteed denominator. Only, that is, if companies know how to interpret it.

Say you scored 20/100 on the climate transition questions of the CSA, and every risk identified under climate adaptation in your CSRD assessment was flagged as material. One’s first instinct might be frustration. “We have a plan! Why are these rules so strict?”

What your reporting is telling you is although you might have a plan, it needs developing. You could continue your current efforts, and see marginal gains on investor indices or slight changes in materiality refreshes, or, you could flag it as an area of strategic importance. Go back to the underlying methodology of these reporting frameworks, consult experts, and find out what it is about your current transition planning that is falling short of expectations.

Let’s go back to the gardening analogy momentarily. The flower you’ve grown brings with it seeds encoded with its DNA, and you have a year’s more experience growing it. By replanting it, and taking better care of it, you can gain last year’s harvest and more. So also in reporting: if you build on your sustainability data and business processes, the results of one year’s reporting cycle can be next year’s gold dust for improving not just your reporting, but your sustainable strategy.

This goes for your full cohort of sustainability indicators in all your reporting activities. Take advantage of every EcoVadis, CDP, materiality assessment your management urges you to complete. Encoded in every response is a roadmap to building better processes that will ultimately make a more sustainable – and commercially successful – business. This can encompass your climate activities, as mentioned before, but also supply chains, investment activity, labour practices and more.

With more voluntary and mandatory disclosures coming down the line, we’ve always recommended companies find efficiencies. So now we’re saying: find rewards. For the supply chain, there is the EU Corporate Sustainability Due Diligence Directive and the upcoming EU ban on forced labour. Your ticket to compliance with as-of-yet unannounced regulation lies in how well – or not – you can meet requirements for these. For labour practices, ShareAction’s Workforce Disclosure Initiative, local Modern Slavery legislation, the CSA. For Sustainable Finance, there is the UN Principles for Responsible Investment, the Global Impact Investing Network, and so on. Few exemplify this quite as much as CSRD, whose purpose isn’t to make companies look bad, but to encourage them to interrogate identified impacts, risks and opportunities. That is: if this identified risk is indeed a risk, and unmanaged, what are you going to do about it? And if the scale of this identified impact can’t be assessed, what do you need in order to assess it next year?

In all, this is a public service announcement to stop thinking about reporting and disclosure as simply tick-box exercises. If you can take the steps to stop viewing them as a reporting burden, you are better able to take advantage of them as a strategic benefit.