Organizations all over the world are speaking about sustainability. Irrespective of their company size and what services they provide, significant amounts of time and resources are spent driving the sustainability agendas in their activities. I recall some of the gaps identified in the Sustainability Champions project, a study on the state of corporate sustainability in Nigeria conducted in 2015 and how in the time since, these gaps remain: the need for stronger and more meaningful collaboration, awareness, capacity-building initiatives, for sustainability practices to incorporate small and medium-sized businesses and more effective reporting.
The calls for a more sustainable world, to prevent us getting to the brink of a global catastrophe continue. Organizations, individuals and governments continue to seek innovative ways to address the challenges of climate change, air and water pollution, loss of habitat, depletion of earth’s resources, socioeconomic inequalities, poverty, anomie and insecurity. Admittedly, addressing these challenges whilst trying to run a profitable venture is not easy. But the question on profitability needs to go beyond the short-term towards a long-term approach that incorporates the elements that contribute to what makes a society a better one.
Looking towards the green economy, the circular economy, sustainable futures, and seeing the efforts by various
bodies to grapple with these show that there still is a lot of work to do. How can we hope to meet the needs of the future when we are as yet unable to meet those of the present generation?
In light of the increased awareness of the impacts of industries’ activities on the environment, there has been growing demand for organizations to take more responsibility in how they track the impact of their operations across the environment (planet) and social (people). The sustainability discourse seeks to identify the best ways to ensure that the economic (profit) includes the benefits/costs from the impact of activities on the environment and social pillars. This is hard. One avenue that is perhaps relatively easier and more tangible is to track how we are doing in the bid to address these sustainability objectives. The sustainability reporting landscape needs to change, in general, globally, but also closer to home, within our operating contexts on the continent.
The practice of reporting, where the annual sustainability report is hurriedly produced in the time period between when the annual accounts are collated and when the report is released needs to change. Reporting is a powerful strategic tool that goes beyond a box-ticking exercise for organizations to demonstrate how they meet certain regulatory and governance requirements.
The sustainability report can be so much more. It can be a tool to demonstrate leadership and effective stakeholder engagement and management, shaping the industry’s direction for the future. Understandably, the proliferation of frameworks, guidelines and standards for sustainability reporting – there are currently over 600 different industry sustainability reporting standards globally – has made the process complex and daunting, whilst confirming the importance of sustainability reporting to organizations who seek to answer the question of: how can we better report our activities?
According to the World Economic Forum (WEF), the lack of comparability across frameworks has led to inconsistencies in how businesses assess and communicate their shared and long- term values to investors and stakeholders. As a result, companies are struggling to navigate the various reporting requirements, with some opting to utilize multiple standards and metrics, increasing the reporting costs, high complexity risk, and limited effectiveness and impact. And then there are questions as to how sustainability benchmarks can be standardized across the board. And which ones should organizations generally adopt?
Various international standard-setters such as the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), the Climate Disclosure Standards Board (CDSB), the Task Force on Climate-related Financial Disclosure (TCFD), the Sustainability Accounting Standard Board (SASB), and the World Economic Forum (WEF) have released a wide range of sustainability reporting guidelines over the past 20 years, and these guidelines
have grown in acceptance. However, the lack of comparability and harmonization among the standards has led to mergers across standards, such as the Value Reporting Foundation (VRF), which was formed from a merger of the SASB and the IIRC in June 2021.
The race to harmonize the various standards also led to the creation of the International Sustainability Standards Board (ISSB) at COP26 in Glasgow in 2021 by the International Financial Reporting Standards (IFRS) Foundation. The ISSB, which consolidates the resources of the CDSB, VRF, TCFD and WEF, aims at “establishing a comprehensive global baseline of sustainability disclosures to satisfy the information needs of investors”. Overall, the aim of GRI, IFRS Foundation, and EFRAG is to improve interoperability and harmonization in reporting.
Let’s return home a bit and talk about sustainability reporting in Nigeria …
I would say that some organizations – most notably in financial services, energy and agro-allied industries – have demonstrated a commitment to sustainability. For example, the conversations on the green economy present opportunities for innovative solutions, if we go by attendee feedback from the recently completed annual AVCA conference in Egypt. Yet, there is still a long way to go in understanding, tracking and reporting corporate sustainability effectively, even for these investor classes.
Whose responsibility is it to enforce sustainability in the organization? This goes back to leadership, organizational targets and policy documents that show a commitment to effective sustainability reporting. Reports with no clearly stated targets, opaque progress and a disproportionate focus on the external (corporate sustainability responsibility), unsupported by internal sustainability considerations for the wellbeing of employees and customers, cannot be effective in driving the organizations of the future. The sustainability agenda, and the ESG metrics that guide long-term performance go beyond CSR. What, then, should be the attitude of organizations in Nigeria towards sustainability reporting? Here are three key areas to look at.
The Global Reporting Initiative (GRI) is the reporting standard adopted in Nigeria. For this to be very effective, organizations will need to understand the GRI requirements as it applies to their industries, and align their organizational goals to begin their sustainability reporting journey. These goals should show the monitoring and evaluation plan for each of the set sustainability targets, and track the journey and mileage achieved. Of course, this may require a restructuring of how frequently sustainability should be reported, and more importantly, how the monitoring, evaluation and learning is conducted within the organization (monthly or quarterly) and then collated into the report, reducing the reporting burden.
Who should take leadership of sustainability in the organization. Should sustainability reporting only be disclosed by the end of the year, or can this be achieved quarterly? Can we have sustainability champions in every department in the organization, and up to the board level? When members at the leadership level in organizations are committed to ESG and sustainability, it makes the reporting process effective and impactful, as it closes the feedback loop and makes the reporting process a live one.
Secondly, resourcing and skill development are anticipated to be top of mind as businesses continue to navigate the rapidly-evolving ESG reporting landscape. This highlights the importance of articulating a comprehensive and future-ready ESG reporting strategy. Questions on what being future-ready can mean need to be engaged with, and integrated with organizational strategy to be able to achieve the desired impact. Businesses will be better able to anticipate new regulations, respond more quickly to customer and investor needs, future-proof their business, and maintain their competitiveness by mapping the current voluntary standards and frameworks.
What about sustainability reporting for SMEs? The conversation appears to be focused on the larger organizations. Yet, for SMEs, the opportunity to be a marketplace differentiator and explore innovative solutions in agile and experimental environments strengthen the case for them to prioritize sustainability thinking. Understandably, getting started on the journey, within the complex environment can be challenging. Challenging, but not impossible. More on this in a subsequent edition.
Thirdly, a commitment to monitoring and evaluation is another crucial step to be taken. An important part of this is collecting and verifying sustainability data using reliable and transparent methods. Conducting regular sustainability audits and using data management systems to ensure data accuracy and integrity is important. Involving stakeholders in the sustainability reporting process is equally important. This will ensure that their needs and concerns are being addressed. Conducting stakeholder consultations and providing opportunities for feedback
might be a way to approach this.
Organizations should communicate their sustainability performance in a concise and meaningful way to stakeholders. This can involve using visual aids such as infographics or charts and providing context for the data being reported. Organizations should continuously review and improve their sustainability reporting processes. They can do this by measuring their progress against goals, benchmarking against peers, and seeking feedback from stakeholders.
While the conversation goes on about who takes the lead in sustainability thinking in society, shared responsibilities for the public, private and third sector who all have a role to play in ensuring that we build better communities and better societies, for all.
————————————————
This newspaper article appeared in whole or part in BusinessDay, Independent, New Telegraph and Yes International! Magazine