THE IMPORTANCE OF SUSTAINABILITY AND NON-FINANCIAL REPORTING – WITH AN EMPHASIS ON INTEGRATED THINKING & INTEGRATED REPORTING
Meaningful Social & Environmental Impact: Measurement & Reporting
Reporting in monetary terms is no longer sufficient. Financial reports only cover about 20% of an organization’s value. Financial and sustainability / non-financial reporting are essentially ‘two sides of the same coin’ and are inherently and intrinsically connected.
The myriads of events over the past decade, exacerbated by Climate Change (the greatest threat to humanity), the pandemic and the effects of supply chain disruption, as well as technological innovation, have led to seismic changes taking place globally, not excluding regulation, governance, financial and non-financial reporting.
With these changes, all manner of entities – including companies, governments, non-government, and non-profit organizations need to ensure survival and plan for prosperity – for the long term and for the benefit of society and the environment – with good governance at the epicenter. They now operate in a triple context– for sustainable development, namely the Economy, Society and the Environment.
Environment, Social and Governance (ESG) is a key acronym that needs to be authentically followed and must not be used as a market exploitation exercise.
The emphasis has changed from shareholder and investor centricity to stakeholder centricity, and demographics too have changed significantly, with the Millennial and Gen-Z generations becoming major role-players and stakeholders.
Nature and society are part of the business imperative, and it is crucial that Sustainability and ESG must get the attention they deserve!
Navigating the ‘tectonic change’
The playing field is now global and not regional, moving from emerging to global economies. Accordingly, all organizations and companies are now compelled to ‘play by the rules’. Major mandatory regulatory reporting standards and frameworks are being introduced or changed, to accelerate change. In the interests of uniformity, the ‘alphabet soup’ of standards and frameworks are converging, with the emphasis now being on interoperability and integration. This has led to immense pressure on companies to change and diversify, and start their sustainability transformation journey.
The biggest risk is not knowing what the cost is of doing nothing is, and the opportunity cost of lost opportunities.
The catalyst which would ensure desired outcomes, with impact and value creation, is that of Integrated Thinking, which is the active consideration by an organization of the relationships between its various operating and functional units, and the multiple capitals that the organization uses or affects. Integrated Thinking leads to integrated decision making. Integrated Reporting communicates concisely and coherently an organization’s strategy, governance, performance and prospects that lead to value creation over time.
The majority of organizations are far behind the curve, and much needs to be done. That is the burning issue for them, but in reality ‘the problem(s) behind the problem’ is their lack of awareness and understanding of the issues; shortage of skills and talent; lack of acceptable sustainability governance; a mindset change; and their inability to know what to do and where to start.
Fortunately, it’s not too late to act and make a start.
When connecting the financial with the non-financial, the ‘gold standard’ route to follow is that of Integrated Thinking and Integrated Reporting.
Effective Integrated Thinking and Integrated Reporting requires trusted advisors to assist companies to start and move forward on this journey.
Success depends on collaboration, a key driver to achieving outcomes that matter. The pandemic compressed years of innovation into mere months. It took 7 months instead of 7 years to invent the vaccine.
We have industry-leading experience and expertise in this essential new area of sustainability reporting and era of governance. Together with our strategic partners, we will be there to guide you throughout your sustainability and sustainability reporting journey. Our specialized expertise is focused on integrated thinking, and integrated reporting – supporting effective integrated decision-making. We help companies and organizations communicate their authentic sustainability and value creation story and progress on this transformational journey, achieving outcomes that matter.
We will be there for you ‘every step of the way’!
We will enable you to unlock value through a durable and resilient sustainability strategy, and its successful execution. We will show you how your competitive advantage will improve in the long term, delivering positive outcomes, for the benefit of society and the environment.
The triple dimensions of the Environment, Society and the Economy need to be reported on, with consistency, reliability, rigour and being capable of comparability and auditability. The reporting needs to reflect both the positive and negative aspects of the triple dimensions.
The business models of companies need to have sustainability at their core and must embed the pertinent UN Sustainability Development Goals (SDGs). The impact of ESG on the financial condition, operating performance and risk profile of the organization must be reported on.
The new thinking is now identified as enterprise value creation. Companies and organizations need to show how they make their money in a sustainable way and create value for the long-term – in a resource constrained world.
Integrated Thinking & Integrated Reporting
Integrated Thinking is the awareness and consideration of the resources and relationships used and relied upon by a company, and the impacts thereon through its activities over the short, medium and long-term. Applying Integrated Thinking considers the necessity to maximize positive impacts and minimize negative impacts.
There needs to be an adoption of a multi-capital approach and an active consideration of the Six Capitals, namely: Financial – Intellectual – Manufactured – Human – Social – Natural.
The Integrated Thinking approach embodies:
- How INPUTS, ACTIVITIES, OUTPUTS and IMPACTS lead to OUTCOMES (both internal and external)
- Enabling and sustaining the long-term health of the company
- For the three dimensions – Economy, Society and the Environment
Integrated Thinking leads to integrated decision-making and actions, considering the creation, preservation or erosion of value – over the short, medium and long term.
Integrated Thinking considers the connectivity and interdependence between a range of factors affecting an organization’s ability to create value over time.
Every company / organization is highly dependent on relationships and sources of value creation (Key Value Drivers).
Integrated Reporting is the concise communication how an organization’s strategy, governance, performance and prospects – in the context of its external environment – lead to the creation, preservation or erosion of value, in the short, medium or long term.
A call to action
Sustainability reporting is here to stay! In the foreseeable future, i.e. the next 12 to 24 months, the reporting net will widen to include SMEs and the thresholds for reporting will be narrowed down.
Companies and organizations therefore need to have Transition Action Plans in place, upskill their staff, allocate sufficient financial and human resources, and very importantly – the right strategic intent, mindset change, and with the right leadership, setting the ‘Tone from the Top’!
We have something people, organizations and companies need but don’t have, and what is available is not enough.
Our advisory and training services are flexible for most industries, tailored and aligned to our clients’ needs.
Let us help you translate your vision into action, and build up your ‘Sustainability Premium’, a key enterprise value enhancer.
The ESG journey must take the ‘high road’!
The sustainability transition is well underway. Don’t get left behind. ‘Seize the day!’
