What is a Corporate Sustainability Report?
A corporate sustainability report is a voluntarily written report by a company that communicates its commitment and progress towards reducing negative impact on the communities, the environment and the economies where it operates. This report should be tailored specifically toward stakeholders, including employees, investors, consumers, suppliers and the community.
The practice of reporting on corporate sustainability efforts has been growing remarkably since its first introduction in the 1970s. In just the last five years, the number of sustainability reports has increased by 125 percent (GreenBiz.com, 2012). Stakeholders are increasingly interested in the impact companies have on society, the environment, and the economy, leading to a demand for greater transparency, accountability, and consistency in reporting.
Increase in Sustainability Reporting
Sustainability Reporting History & Trends
During the 1970s, the first wave of corporate sustainability reports emerged in the form of “social reports” that were published by companies in the U.S. and in Western Europe. Since the practice wasn’t institutionalized, it faded in the 1980s, only to reemerge during the late 1980s focusing more on environmental issues. Since then, it expanded to encompass social and economic aspects (Kolk, 2010). Reporting has been done in the form of stand-alone reports or as sections in financial reports, and has been going by names such as non-financial reporting, sustainable development reporting, corporate social responsibility reporting, corporate citizenship reporting or integrated reporting (Kolk, 2006; KPMG, 2011).
Corporate sustainability reporting has been growing substantially amongst the largest global companies in the past two decades. Reporting on corporate sustainability efforts rose from 12% in 1992, to 17% in 1993, to 24% in 1996, and to 28% in 1999 (Kolk, 2006). In 2002, 45% of the Fortune Global 250 (G250) companies reported their corporate responsibility efforts (KPMG, 2002). In 2005, the number rose to 52%. In 2008, the percentage rose to 79% (KPMG, 2008). In 2011, the percentage of G250 companies reporting on their corporate sustainability efforts was at a whopping 95% (KPMG, 2011).
Reasons for Sustainability Reporting
Sustainable Business Trends for 2013
Trends we can expect to grow in 2013 include:
- Integrated reporting (a report combining a company's financial data and corporate sustainability information)
- Further consumer awareness of resource scarcity, especially water
- Growing reliance on social media for stakeholder engagement
Does your employer plan on or already put together sustainability reports?
Benefits of Sustainability Reporting
Corporate sustainability reports are playing an increasingly important role in both business and in society. Stakeholders are using sustainability reports in decision-making; businesses are reading them to better assess potential partners; consumers are reading them to better understand the companies from which they buy products; and job seekers are reading them to evaluate perspective employers.
Organizations choose to publish sustainability reports because they believe that reporting will provide some type of benefit. A 2011 KPMG survey identified the driver of corporate sustainability reporting to be: reputation and brand (67 percent), followed by ethics (58 percent), employee motivation (44 percent), innovation and learning (44 percent), risk management (35 percent), access to capital or increased shareholder value (32 percent), economic considerations (32 percent), strengthened supplier relationships (22 percent), market position improvement (22 percent), improved relationship with governmental authorities (18 percent), and cost savings (10 percent) (KPMG, 2011). Reputation and brand considerations as a top driver is reinforced in an academic study of 600 global companies which cited competitive and media pressure, media visibility and publicity efforts as important motivators for reporting (Nikolaeva & Bicho, 2010). Additionally, sustainability is seen as a potential source of competitive advantage and a way to innovate a company’s product offerings - whether it is in the products the company sells, services it provides, or in its internal processes.
It has also been recognized that publishing a sustainability report enhances employee morale and has a strong positive impact on readers’ perception of the reporting company – with 85 percent of readers reporting a more positive perception (KPMG International and SustainAbility Ltd., 2008). Furthermore, advantages of engaging in corporate sustainability are evident from the ‘people’ perspective, in terms of employee engagement, recruitment, and retention. Studies indicate that employees are concerned about the impact that the companies where they work have on their communities (Do Well Do Good, 2010) and findings show that:
- 83% of employees would seriously consider leaving their job if their employer used child labor in sweatshop factories.
- 65% would seriously consider leaving their job if the company where they work harmed the environment.
- 32% would seriously consider leaving their job if their employer gave no or little money to charity.
One could expect that the employees who identify with their organization would increase their motivation to give their best to it and be proud of being part of it. Furthermore, a corporate sustainability report can be used for communication purposes in marketing. It can be used as a tool to demonstrate a company’s transparency, its commitment toward sustainable development, showcase the actions the company has taken and plans to take, and demonstrate its performance from year to year (Kolk, 2004). Evidently, there are many motivations to publishing sustainability reports.