Sustainability reporting: five ways companies should prepare

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Carmine Di Sibio, Global Chairman and Chief Executive Officer, EY & Ruchi Bhowmik, Global Vice-Chair, Public Policy, EY

  • Companies need sustainability-related reporting standards to measure social and environmental impact more effectively and to reach the Paris climate goals.
  • The business world is soon likely to see some of the most significant innovations in corporate accounting and reporting in decades.
  • New research highlights five ways companies can prepare.

An increasing number of companies are embracing sustainability goals and seeking to reduce their carbon footprints. And yet we still lack global standards that allow the public and investors to evaluate how sustainable a company is.

A robust set of sustainability-related reporting standards will help channel investment towards companies that have a positive social and environmental impact. This will support progress in preventing a climate catastrophe, as well as addressing other social and political problems.

Over the last 18 months, important progress has been made toward establishing sustainability standards. The International Financial Reporting Standards (IFRS) Foundation has proposed an International Sustainability Standards Board (ISSB), which is set to launch at COP26 in November. In a recent communiqué, the G7 Finance Ministers and Central Bank Governors expressed support for the ISSB and called for mandatory climate-related financial disclosures.

This means that in the coming years, the business world is likely to see some of the most significant innovations in corporate accounting and reporting in decades. What can companies do to start preparing for these changes? New research by Oxford Analytica and EY, The future of sustainability reporting standards, makes the following five recommendations:

1. Don’t wait for sustainability reporting to be mandated

Companies have a great opportunity now to prepare for new regulations around sustainability reporting, and commit to transparency and accountability. While the IFRS and other regulatory efforts are expected to take a “climate-first” approach, it will be important for companies to consider reporting across a range of environmental, social and governance (ESG) areas.

This means setting out to gather information, in order to inform company strategies, manage risks and achieve a stronger, more sustainable performance over the long term.

Companies should begin by identifying the metrics most relevant to their sector, strategy and stakeholders. The Stakeholder Capitalism Metrics, developed by the World Economic Forum International Business Council, are a good starting point.

A chart showing the timeline of changes to reporting regulations
In the coming years, the business world is likely to see significant innovations in corporate accounting and reporting Image: Oxford Analytica

2. Put environmental, social and governance and sustainability reporting on the board’s agenda

For companies to remain competitive, their boards must understand how ESG investing and stewardship trends are impacting access to capital and relationships with investors. They also need to be aware of private market and regulatory initiatives relating to ESG areas. Boards should monitor international developments in sustainability reporting and keep track of how ESG data providers view their company. Furthermore, they should assess which ESG areas are most relevant to their company. These will then need to be integrated into the company’s broader strategy and enterprise risk management.

3. Prioritize building trust in sustainability reporting

As organizations report and disclose more ESG information, they should expect to face more questions. These may be around the depth and reliability of their disclosures, risk exposure and resilience, as well as concerns over so-called ‘greenwashing’. Companies will need to build trust by ensuring that their sustainability reporting has robust processes and controls with a supporting audit trail, similar to those for financial reporting.

An important part of getting ready for the new regulations will be preparing for a sustainability audit. The European Commission’s proposed Corporate Sustainability Reporting Directive will, for example, require large companies to seek ‘limited assurance’ around their reported sustainability information from either their statutory auditor, or an independent assurance services provider.

4. Integrate the finance function

A company can only deliver value to all its stakeholders when it draws on the skills and input of the entire organization, under the shared vision of leadership. Finance departments can play a key role in preparing for sustainability reporting. They will need to understand what the public and investors need to know about sustainability, and translate that into the most relevant metrics and disclosures.

Reporting must be trusted, credible and relevant to stakeholders, and make a clear link between financial and non-financial information. Chief Finance Officers and financial controllers can use their experience and knowledge to shape non-financial reporting processes and controls. The finance function can help to establish effective governance of sustainability reporting, and obtain independent assurance over non-financial processes. energy, mining, metals, blockchain

What is the World Economic Forum doing to help companies reduce carbon emissions?

Corporate leaders from the mining, metals and manufacturing industries are changing their approach to integrating climate considerations into complex supply chains.

The Forum’s Mining and Metals Blockchain Initiative, created to accelerate an industry solution for supply chain visibility and environmental, social and corporate governance (ESG) requirements, has released a unique proof of concept to trace emissions across the value chain using distributed ledger technology. Building Resilient Global Value Chains | Sustainable Deve…

Developed in collaboration with industry experts, it not only tests the technological feasibility of the solution, but also explores the complexities of the supply chain dynamics and sets requirements for future data utilization.

In doing so, the proof of concept responds to demands from stakeholders to create “mine-to-market” visibility and accountability.

The World Economic Forum’s Mining and Metals community is a high-level group of peers dedicated to ensuring the long-term sustainability of their industry and society. Read more about their work, and how to join, via our Impact Story.

5. Contribute to the process of setting standards

Many of the world’s leading companies acknowledge that ESG issues are integral to how they – and other organizations – create value over the long term. They also know that the way in which information is disclosed could potentially make a big difference to how investment capital is channeled in future.

Companies don’t just want to wait on the sidelines while the process of setting standards takes place around them – they would much rather be actively involved, contribute and learn valuable lessons from the experience. Those companies that respond to government consultations, participate in meetings with regulators, and start to disclose sustainability metrics now, will benefit from greater credibility in those standard-setting discussions. For example, the companies that have committed to reporting the World Economic Forum International Business Council Stakeholder Capitalism metrics are sending a powerful message that the private sector is ready to engage on these issues at the highest levels.

Altogether now

Companies can show that they contribute to making the place a better place to live, work and do business. This means focusing on sustainability efforts and communicating them to the public and investors. Now is the time for companies and their leaders to work together with regulators and civil society to achieve consistent, global standards that will help define corporate reporting and accountability for the next generation. The planet won’t wait – and neither should we.

The views reflected in this article are the views of the authors and do not necessarily reflect the views of the global EY organization or its member firms.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

5 challenges for government adoption of AI

A Sting Exclusive: “Sustainable development goals: what role for business?” Commissioner Mimica asks live from European Business Summit 2015

Christmas spending: Who can afford not to cut?

How teaching ‘future resilient’ skills can help workers adapt to automation

High-Level Forum on providing protection to Afghans at risk

How India is harnessing technology to lead the Fourth Industrial Revolution

It’s time to end the stigma around mental health in the workplace

Yes, together we can make a change! YO!Fest and EYE 2016

More urgency needed to help increasing numbers ‘locked out’, before 2030, says UN’s Bachelet

Climate change is forcing 20 million people a year from their homes, Oxfam says

COVID-19 has been a setback for women. Gender-responsive policies can stem the losses

Gig workers among the hardest hit by coronavirus pandemic

This Brooklyn farm company is training a new generation of urban farmers

Empathic AI could be the next stage in human evolution – if we get it right

UN chief urges emergency fund support as one of the ‘most effective investments’ in humanitarian action

LGBTQ+: The social evolution of a minority

EU job-search aid worth €9.9 million for 1,858 former Air France workers

Armed groups threaten every child in Central African Republic, UNICEF warns

Inegalitarian taxation on labour haunts Europe’s social model

Here’s how one business leader is tackling injustice: It starts with personal commitment

To my Chinese friend

UN agency warns conditions around Yemen’s key port city of Hudaydah still ‘very bad’, as staff rush to deliver aid

Commission launches debate on responding to the impact of an ageing population

Honeybees are transforming the lives of mangrove farmers in Viet Nam – here’s how

Migration crisis update: mutual actions and solidarity needed as anti-migrant policies thrive

India vs Virus: voices from the COVID front line

Coronavirus: 70% of the EU adult population fully vaccinated

Azeri natural gas will keep the EU warm soon

Black Lives Matter – for Pakistan’s Sheedi community too

Go early, go hard and keep it simple: how Senegal is staying ahead of the COVID-19 pandemic

Busting the myths about coronavirus

4 key steps to decommissioning coal-fired power plants

Coronavirus response: Team Europe supports Somalia with three EU Humanitarian Air Bridge flights

‘Huge’ stakes, ‘daunting’ job to tackle gender-based violence, UNICEF chief tells ground-breaking conference

We need tech solutions that value human interaction more than ever

European Commission adopts new tools for safe exchanges of personal data

Health Systems and Society: ways to reinforce the human power during the pandemic

Eight years after Fukushima, nuclear power is making a comeback

World Wildlife Day: UN chief urges ‘more caring’ relationship with nature

US – Russia bargain on Syria, Ukraine but EU kept out

How COVID-19 is driving a long-overdue revolution in education

Portugal: €4.66 million in aid for 1,460 dismissed workers and jobless young

‘A new chapter’ dawns for democracy in Guinea-Bissau: top UN official

Statement by Executive Vice-President Margrethe Vestager on the Commission’s proposal for a new Regulation to address distortions caused by foreign subsidies in the Single Market

5 surprising ways major cities are going green

The right approach to addressing overcapacity problem from a Chinese perspective

WEF Davos 2016 LIVE: “Chinese economy has great potential, resilience and ample space for policy adjustment”, China’s Vice President Li Yuanchao reassures from Davos

New neighbours: Could Venus really be home to alien life?

Remarks by Commissioner Virginijus Sinkevičius on the Zero Pollution Action Plan

Chart of the day: When do young Europeans leave home?

UN chief condemns attack targeting international forces in northern Mali

Emotional stability and the COVID-19 pandemic: is it possible to reconcile them?

Volkswagen scandal update: “We want clarity fast, but it is equally important to have the complete picture”, Commission’s spokesperson underscores from Brussels

Nordic noir: The unhappiness epidemic affecting young people in the world’s happiest countries

Climate change: cutting the good by the root?

Why the global trade of chemicals is key to COVID-19 recovery

What does the future of energy look like, how do we get there, and who will benefit?

Brexit: PM May must hush Boris Johnson to unlock the negotiations

Eurozone needs more than some decimals of growth

GSMA Reveals Global Partners for MWC21 Barelona

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: