Are You Prepared to Answer the Sustainability Question?
By Mike Wallace, President, Wallace Partners
An increasing number of stakeholders –- ranging from employees and customers, to shareholders and government agencies -- are asking about sustainability. Shareholders in particular want to know how sustainability affects the bottom line. Responding to these questions is becoming an integral and necessary part of business in today’s global marketplace.
Some companies are actively measuring and reporting sustainability metrics and reporting on how sustainability affects the bottom line. Because sustainability metrics are both non-financial and non-regulatory reporting, many companies remain silent, often citing the absence of regulations for such reporting. In the meantime, voluntary sustainability reporting increases in numbers and in depth and breadth of data.
Shareholders and other influential stakeholders are actively comparing and contrasting sustainability reporting across all industries. The increasing availability of quantified sustainability information creates the connection between environmental performance and corporate governance. The reporting of quantified sustainability data from complex, multinational corporations leads shareholders and stakeholders to question why other businesses can’t or won’t be more transparent on these increasingly important issues.
As shareholder awareness of sustainability performance increases, there are a growing number of reputable listings being used to rank and rate a company’s sustainability or corporate social responsibility (CSR) performance. The Dow Jones Sustainability Index and FTSE4Good are two of the more recognized international listings. There are actually dozens of entities actively reviewing corporate information, assessing sustainability performance and reporting to their clients and the markets. In addition, investor coalitions such as the Carbon Disclosure Project (CDP) or the Investor Network on Climate Risk (INCR) are orchestrating, supporting and facilitating shareholder activity on sustainability related issues, such as carbon emissions.
These groups are measuring and rating companies using a number of qualitative and quantitative criteria. Environmental reduction targets –- especially carbon management and greenhouse gas emissions –- are some of the highest priority items. Stakeholders also want to know that companies have strategic environmental management plans, corporate environmental policies and comprehensive management system such as ISO 14001 to facilitate execution of sustainability initiatives. In addition, stakeholders are seeking quantifiable reduction goals, as well as third-party verification of measurements and the established baseline.
Many small- and medium-sized companies believe these market changes apply only to multi-national corporations or publicly traded companies. Pressure on public companies, however, ripples through supply chains much the same way quality initiatives like ISO 9000 rippled through supply chains in the 1990s. Wal-Mart, for example, recently announced a partnership with the Carbon Disclosure Project to initiate a supplier program that will begin to seek standardized carbon emissions reporting from their suppliers.
In addition, federal, state, and local officials are publicly announcing their own commitments to sustainability and asking for local business to partner in their efforts to reduce consumption and pollution. As a result, government agencies are increasingly requesting sustainability information in their requests for qualifications and proposals (RFQs & RFPs) from vendors, as well as through supplier questionnaires. Employees, consumers and local citizens are also raising the bar by asking for greater transparency from corporations, and by demonstrating their interest in, and preference for sustainable companies and products.
So how do you prepare for these emerging market demands?
Understanding external stakeholders, their interests, and where they get their information is a key step in preparing for the sustainability question. Many companies are already reporting on some sustainability criteria through regulated databases that collect environmental and social information. Companies are also voluntarily responding to surveys and questionnaires from external stakeholders without internally verifying and coordinating their responses. In essence, this creates a sustainability story whether or not the company is actively reporting.
Sustainability-related policies, programs and activities already exist in almost every company; it’s a matter of reviewing operations and management systems through a sustainability lens. Existing performance measurements capture a number of the environmental and social aspects that can be translated into sustainability metrics. Many environmental, health and safety (EHS) programs have sustainability components already embedded, such as recycling programs, or an environmental management system that tracks overall performance. Human resources, public and government affairs, and corporate foundations are also areas within companies where sustainability activities often exist.
The key to meeting the demands of this rapidly changing market is recognizing the interests of external stakeholders and identifying how existing internal systems can efficiently and effectively meet these new demands. In many instances, these stakeholders have already developed the ‘business case’ for sustainability and are ready, willing and able to share their knowledge with business. The challenge for most business is to identify these key stakeholders and to develop and manage a mutually beneficial relationship. This relationship can become a core component of a successful and dynamic sustainability program, as well as become an extended set of eyes and ears for emerging sustainability issues.
Through our partnership, EORM, Wallace Partners, and Entrix can help you understand these emerging business issues and address them in the most effective and efficient manner. Our respective expertise can help you quickly identify the stakeholders, the issues, and the existing management systems that can help to create a sustainability program.
Additional Resources:
- Read more about the EORM, Wallace Partners, and Entrix partnership in providing a broad range of sustainability services.
- View our Sustainability Services brochure
- EORM, Wallace Partners, and Entrix recently presented the webcast Promoting Sustainability in Your Organization: How to Create Sustainability Programs that Address Governance, Social, and Environmental Demands
Click here to view the archived webcast
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