How to drive value from your climate disclosures and sustainability reporting
At a glance
Forward-thinking organisations are viewing climate disclosures as a value opportunity rather than a mere box-ticking compliance exercise. Embedding robust reporting capabilities, whether for voluntary or mandatory reporting, unlocks operational efficiencies, guides decision-making and enhances resilience. This article provides insights into key considerations and opportunities for organisations that are rethinking their strategy or figuring out the next critical steps.
The shift from voluntary to mandatory reporting
Around the world, organisations embarking on their sustainability journey are under pressure to assess and minimise their impact on the environment. They must deliver on climate target setting, actual implementation and reporting on sustainability performance.
It’s customers, investors and regulatory bodies who are steering the move from voluntary to mandatory reporting. Disclosures have shifted from being a ‘nice to have’ to becoming a boardroom agenda and enterprise-wide initiative. However, reporting is a time- and resource-intensive undertaking that leaves organisations wondering if it is worth proactively pursuing or if the bare minimum is good enough.
Through GHD Advisory’s In View webinar, we engaged in meaningful conversations with industry leaders on how their organisations are tackling sustainability disclosures and unlocking value in the process. And the consensus was clear: don’t wait for stricter regulations to come in before acting. Regardless of the impetus, now is the time to embed robust reporting processes to better position companies for growth and innovation.
Effective disclosures go beyond compliance - they help accelerate growth
Reporting helps tell your sustainability story to external stakeholders and mitigates greenwashing risks. For instance, robust and transparent corporate disclosures contribute to access to capital. Investors and lenders make decisions around capital allocation based on how organisations demonstrate strategies to reduce risks and secure a viable future. These include decarbonisation projects, investments in research and development and initiatives to enhance supply chain resilience.
Likewise, communities and customers gain a deeper understanding of the progress you have made in the sustainability space. Strengthened stewardship enhances customers’ trust in organisations, which can contribute to bottom-line results. From an internal perspective, reporting can help reshape business models to address the gap between ambition and execution. Assessment findings reveal real progress toward achieving ambitious climate targets. These also uncover challenges and opportunities, providing a benchmark to measure against and a solid framework to guide future decisions.
Sustainability strategy and business strategy go hand-in-hand
As complexities around disclosures grow, reporting has changed from being one department’s responsibility to a cross-functional cooperation. Gone are the days when only select executives, PR and communication specialists in charge of reports were in the room. Now, this shared obligation entails all business functions to become more involved in the conversations, including the legal, financial, asset management, risk management and audit committees. This emphasises the need for alignment between the sustainability strategy and the overall business strategy, which underpins organisational practices and goals. It means the collaborative approach ensures that risks are minimised and opportunities are maximised across the enterprise, fostering broader buy-in and accountability.
Data builds confidence and credibility
Companies know they must tell a compelling sustainability story; most importantly, it must be true, consistent and credible. Does your sustainability data stand up to scrutiny and audits?
It is crucial to adopt strong data governance frameworks and align with recognised standards for reliable disclosures. Avoid risks of greenwashing by being transparent about any limitations and uncertainties associated with reported information. There needs to be a balance between communicating progress and acknowledging impacts. Claims with little or no assurance create a trust gap. Assurance helps verify the trustworthiness of sustainability claims. This is done by engaging your internal audit teams or an external assurance provider.
Leverage digital technology for data management
Data management takes front and centre as organisations grapple with consolidating volumes of data across disparate sources. Manual, spreadsheet-based processes no longer suffice. Digital tools enable more efficient data collection and accurate footprint calculations. Data analytics provide insights that inform decision-making. In addition, emerging technologies are helping companies decarbonise their operations and discover opportunities for cost savings.