The First 25: Sustainability supports reputation, growth and longevity
Businesses are increasingly thinking in an integrated way that takes into account people, the planet and profit.
The megatrends of climate crisis, erosion of natural resources, a growing global population, greater focus on fairness and equality, and an increasing threat on cyber security are causing business and governments alike to take sustainability seriously.
However, the last 18 months have bought uncertainty at a scale never before experienced. Big businesses have had to show ingenuity and determination in adapting to the extreme intensity of change. While the 2020–21 reporting cycle reveals the financial impact, it also casts a spotlight on the resilience of organisations. When faced with unchartered territory, having a strategy that encompasses the triple bottom line – people, planet and profit – allows management to make swift and ethical choices that help to ensure no one is left behind and keeps the business safe.
Sustainability's connection to agility
In our latest edition of the First 25 research, Navigating the sustainability odyssey, we noted that 80% of the businesses reviewed align to one or more sustainability frameworks. This points towards an increasingly balanced approach that takes account of the full range of stakeholders’ interests. Anecdotally, we noted a link between those businesses with strong, sustainability-based values and the deftness with which they were able to adapt. Those with a clearly stated set of values based around transparency, fairness and equality were able to prioritise actions and ‘get on with getting on’ more effectively than those solely driven by financial gain.
With ESG (environmental, social and governance) factors receiving greater attention and consideration, sustainability strategies are increasingly at the heart of the way companies do business, while being placed front and centre in communications.
Alongside findings such as 56% highlighting climate change as a principal risk, compared to just 12% as an emerging risk, in the last two years we have also noticed a significant shift in the governance of climate-related risk being led by the CEO – where previously accountability often sat with the CSR or risk team. As it is monitored and measured, we expect to see evidence of disparate management teams aligning to develop long-term plans and strategies that encompass innovative solutions to ensure an enduring future for the planet, people and business alike.
Today’s best performing organisations are basing business decisions on interconnected information across multiple capitals, including natural, social and relationship, human, manufactured and intellectual, as well as financial. This is integrated thinking.
As corporate strategies align evermore closely with sustainability issues we expect to see a trend towards more interconnected and aligned reporting. However, this is not an easy task. It’s the result of integrated thinking within an organisation, where all the parts of the organisation are acting and moving together. This goes further than simply cross-referencing different sections of a report.
In practice, there are difficult questions to answer – how do you define and measure success for a whole range of resources and relationships? What are the interdependencies and trade-offs between them that, over time, influence a business’s ability to create value? How you demonstrate linkages between your strategy, activities, material capital inputs and performance. Evidencing these activities is also critical.
With this ambition in mind, there are four practical steps to help you on your way:
Step 1: Look at the wider context in which you operate and engage with all of your stakeholders, in priority order, on matters such as opportunities and risks arising from megatrends, what your competitors are doing and what is most material to your future success.
Step 2: Determine your stakeholder value proposition and refresh your strategy to reflect the direction you need to take the business in.
Step 3: Align your internal processes and tools so that they support implementation of your strategy and give you the ability to measure what is important to your future success.
Step 4: Develop a set of management information that provides a holistic insight to the Board and Senior Management team.
The key to fully embedding sustainability
Integrated and interconnected thinking leads to better decision making and actions that consider the creation, preservation or erosion of value over the short, medium and long term. This delivers increased transparency and is forward looking, but requires focus, determination and time to be embedded within an organization.
Integrated thinking and holistic reporting go hand in hand – one might come before the other, but together, they can provide organisations with very powerful tools and processes, which combine into a continuous journey of growth, understanding and improvement.
For more information on how sustainability disclosure is evolving within corporate reporting, and much more, download the First 25: Navigating the sustainability odyssey. We’d love to hear your thoughts – please get in touch with Claire Fraser, Head of Stakeholder Reporting at [email protected] and join the conversation.