An organisation's adoption of sustainability reporting marks a significant milestone in its corporate reporting journey. While the reasons for sustainability reporting adoption vary, having clarity on the motivation is essential to guide the implementation of the reporting process.
The high demand for non-financial information, particularly from capital markets, investors, and providers of capital, indicates the limitations of a financial reporting-only view or lens of an organisation's performance.
This demand shows that investors consider non-financial information more than ever when making investment decisions today.
Therefore, there is an appreciation that, for investors and other stakeholders to get a comprehensive view of how an organisation creates value over time, they require financial and non-financial perspectives. It provides insights into how non-financial factors affect the organisation's long-term financial prospects.
These non-financial issues are what are determined through the materiality process. Providing information on these relations and how they influence the organisation's long-term success, including information on value creation for the organisation and stakeholders.
Another motivation for sustainability reporting is the ability to support an organisation's business growth strategy development and implementation.
Material sustainability risks and opportunities are enablers of the organisation's business growth strategy, and therefore, monitoring the performance of sustainability key performance indicators will provide organisations with valuable insights into the short-, medium-, and long-term value drivers of their business and how those might be changing over time.
It provides organisations with practical solutions for translating their strategy into actionable steps.
Organisations can also achieve a good balance between short-term and long-term priorities.
An additional reason for organisations to adopt sustainability reporting is the breaking down of silos across the organisation and the driving of an integrated, connected thinking approach to how the organisation creates value.
Organisations can drive greater collaboration across their teams and functions, fostering a culture of innovation. Those who apply integrated thinking make better decisions and get better overall outcomes, ranging from financial to non-financial benefits.
Other benefits of sustainability reporting include better risk management, improved brand value, customer loyalty and operational efficiency.
Organisations should ensure that, when adopting and transitioning, their sustainability reporting team comprises a multidisciplinary team from across different functions, with clear roles and responsibilities for accountability.