Driving Sustainable Futures
June 10, 2022
Why Organizations Need Standardized Sustainability Reporting as a Scientific Tool
Natalia Scherbakoff, Global Technology & Innovation Director, Engineered Materials
Most people have heard about the Graduate Management Admission Test (GMAT) exam, the results of which are used by 7,000 MBA programs at 2,300 universities and organizations in 110 countries. Why do different universities around the world require GMAT results as an admissions requirement?
The answer is obvious: When recruiting students from different countries with different standards, comparing the results of the same examination is a standardized way to compare candidates from different education systems or school systems.
From a transcript to an accounting report to a listed company's annual report, reporting is a well-regarded tool for summarizing and illustrating key performance indicators (KPI). All of these are perfect examples to illustrate how to compare apple to apple in a scientific way. In real-world situations, this seems like common sense.
Now, the bigger topic: sustainability. Sustainability means meeting humanity's current needs without impairing future generations' ability to satisfy their own needs. Going far beyond the "let’s go green" buzzword, talk about sustainability has become a lot more sophisticated and science-based over the last decade.
Sustainability Reporting in Business
Broadly speaking, companies implement sustainable practices by reducing the consumption of limited resources or by finding alternative resources that have less impact on the environment. While the topic may still be perplexing for some, the ultimate focus is on performance and impact. Naturally, it is not just about generating reports from collected data; rather, it is a way to internalize and improve an organization's commitment to sustainability.
Organizations need to be careful, though, to avoid "greenwashing," the term for making the company appear greener or more ecological than it actually is through marketing efforts instead of actual impact. Therefore, a common language for public sustainability reporting is needed, which would allow more global comparability while also allowing the public to have access to better quality information about organizations' sustainability programs and products. This would create a balanced representation of a company's contributions and impact on the world.
Here’s where international and industry standards kick in. The European Commission and U.S. SEC, for example, have recently announced that they will push for more mandatory reporting on sustainability in the next few years. To a considerable extent, the demand for comparability has been met with several standards on sustainability and impact reporting, such as:
- The Global Reporting Initiative (GRI), which is an independent, international organization that helps organizations take responsibility for their impacts by providing them with a global common language for sustainability reporting, the GRI Standards.
- The Sustainability Accounting Standards Board (SASB) enables businesses around the world to identify, manage and communicate financially material sustainability information to investors.
- The Task Force on Climate-related Financial Disclosures (TCFD) releases climate-related financial disclosure recommendations designed to help companies provide better information to support informed capital allocation.
- The Disclosure Insight Action (CDP) scores companies and cities in an effort to incentivize and guide companies and cities on a journey through disclosure toward becoming a leader in environmental transparency and action. The areas of focus include climate, water and forests.
- The International IR Framework is used to accelerate the adoption of integrated reporting across the world.
Based on the KPIs reported in a sustainability report, both the organization and the public can take a more holistic look at the economic, environmental and social impacts of the organization that publishes the report. Organizations also have a clearer picture of their sustainability performance as well as a scientific way to compare their year-to-year results, compare with their peers and make decisions and plans on where and how to improve further.
These reporting tools are objective and provide reliable data through standard and systematic processes. Each and every participant is applying the same methodology, which means we are all on a level playing field, and the information can be considered trustworthy.
Different people may have very varying opinions on an array of topics. When it comes to sustainability reporting, quality data and reliable international standards are prerequisites in order to serve the purpose objectively.
Organizations' sustainability efforts are not only for the present but also for future generations. At the end of the day, sustainability will not manifest by the effort of a small number of organizations. It will take a global, concerted effort to make things happen. Let’s start by employing the same international standards in sustainability reporting so we speak the same language.
Natalia Scherbakoff is a member of Forbes Technology Council. Get more insights from Scherbakoff’s thought leadership by reading her posts published on Forbes.com.