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Why Report on Sustainability? It’s Not Mandatory
May 12, 2010
While reporting on environmental sustainability is not mandated by U.S. government regulations, many of the most successful companies make a significant effort to inform stakeholders about their environmental efforts. Why do they do it? By Kathleen Gilligan & Karen Janowski
This was one of the questions explored by EcoStrategy Group in its recent report, “Trends in Sustainability Reporting: A Close-Up Look at Bay Area Companies.” We discovered that the reasons companies report are to:
Respond to Increasing Volume of Queries – Many companies have seen an increase in requests for environmental performance information from customers and from socially responsible investors. HP, for example, has seen a steady increase in the percentage of customer Requests for Proposal (RFPs) that ask for sustainability information. For them, reporting is now seen as a market access requirement.
Manage Reputation and Brand Image – Brands that have a meaning to end users (as opposed to companies that sell components for someone else’s branded product) are particularly interested in managing their reputation. Disclosure can have a “marketing value” when it helps garner recognition from third-parties such as the Newsweek Green Rankings. Symantec, for example, believes such recognition increases “customer trust” in their brand.
Compete Effectively – Over the last 5 years, reporting to the Carbon Disclosure Project has increased by a factor of more than 6. In certain industries, maintaining competitive parity requires reporting.
Meet Channel Requirements – Distribution channel powerhouses like Walmart are beginning to require that their suppliers report to the CDP. 56% of CDP members recently surveyed said that in the future they would cease doing business with suppliers who do not manage (and report) their carbon footprints.
Stay Ahead of Future Requirements – While sustainability reporting and carbon accounting are not currently mandated, the SEC recently issued guidance indicating that companies should consider the risks associated with climate change in their financial reporting. Software company, SAP, recently stated that it would soon begin including carbon accounting in its financial statements. Engelina Jaspers, VP of Environmental Sustainability at HP, noted at a recent conference, “Getting out ahead of future requirements will eventually save money and work in the long-term.” Christina Page, Director of Climate and Energy Strategy for Yahoo!, echoed Jaspers’ thoughts, “What is voluntary today is likely to be regulated in the future. It’s good to stay ahead of the curve.”
Attract and Retain Employees – Many companies believe that transparency about environmental impacts and efforts will make them better able to attract and retain employees. They see an evolution in the workforce that is placing greater emphasis on factors like company reputation and social responsibility.
Focus Internal Execution – A public statement of sustainability goals commits a company to take action. This can focus and drive internal execution in a powerful way. One company we interviewed found that when they exposed their goals to the public, the senior management felt more committed to achieving those expectations.
The era of “voluntary” sustainability communications is waning. For companies who want their brands to compete effectively in today’s business environment, sustainability reporting is a market requirement.