SUS­TAIN­ABIL­ITY RE­PORT­ING: 10 REA­SONS WHY OR­GAN­I­SA­TIONS FAIL TO DIS­CLOSE

Sus­tain­abil­ity re­port­ing:

NZ Business - - FROM THE EDITOR -

Glossy magazine-style sus­tain­abil­ity re­ports of­ten fail to live up to the hype, ne­glect­ing to high­light im­por­tant is­sues or ad­dress the tough ques­tions. Muham­mad Bi­lal Fa­rooq in­ter­viewed 50 ex­perts to find out why the sus­tain­abil­ity mes­sage is be­ing buried.

Glossy magazine- style sus­tain­abil­ity re­ports of­ten fail to live up to the hype, ne­glect­ing to high­light im­por­tant is­sues or ad­dress the tough ques­tions. AUT Busi­ness School’s Dr Muham­mad Bi­lal Fa­rooq in­ter­viewed 50 ex­perts to find out why the sus­tain­abil­ity mes­sage is be­ing buried.

In short, or­gan­i­sa­tions don’t nec­es­sar­ily seek to in­ten­tion­ally mis­lead peo­ple. But the re­search sug­gests the sit­u­a­tion is not sim­ple. Or­gan­i­sa­tions are learn­ing what sus­tain­abil­ity is and how to re­port their sus­tain­abil­ity per­for­mance in high qual­ity sus­tain­abil­ity re­ports. Hope­fully, an un­der­stand­ing of these ten rea­sons can as­sist reg­u­la­tors, pre­par­ers and users of sus­tain­abil­ity re­ports, he writes.

1. In­ten­tion­ally avoid­ing bad news: Yes, man­agers are afraid to dis­close ma­te­rial bad news. This is a ma­jor rea­son why some sus­tain­abil­ity re­ports do not re­veal dif­fi­cul­ties while oth­ers gloss over prob­lem ar­eas. But hang on, this is not the only rea­son? Some­times there may be a host of other rea­sons why an is­sue was not cov­ered in a sus­tain­abil­ity re­port.

2. Man­agers are learn­ing: The peo­ple re­spon­si­ble for pre­par­ing the sus­tain­abil­ity re­ports are still learn­ing how to gen­er­ate a com­pre­hen­sive re­port. In­ex­pe­ri­enced man­agers will un­in­ten­tion­ally fail to dis­cuss an is­sue within the sus­tain­abil­ity re­port.

3. No sys­tems in place: Or­gan­i­sa­tions new to sus­tain­abil­ity re­port­ing will still be de­vel­op­ing sys­tems to sup­port thor­ough re­port­ing. For ex­am­ple, sys­tems need to be set up that help or­gan­i­sa­tions fig­ure out who their stake­hold­ers are, what is­sues are im­por­tant to these stake­hold­ers and how to talk about these is­sues in the sus­tain­abil­ity re­port. Not easy. 4. Lack of man­age­ment sup­port: An or­gan­i­sa­tion needs to spend time and money pre­par­ing a good qual­ity sus­tain­abil­ity re­port. For that to hap­pen boards must be will­ing to sup­port their man­agers by pro­vid­ing them with the time and re­sources they need to pre­pare a high-qual­ity sus­tain­abil­ity re­port. 5. Peo­ple don’t take sus­tain­abil­ity re­port­ing se­ri­ously: Man­agers com­plain no­body reads the sus­tain­abil­ity re­ports they’ve spent time and ef­fort pre­par­ing. If it’s per­ceived no one reads the re­ports then com­pa­nies be­gin to ex­pe­ri­ence sus­tain­abil­ity re­port­ing fa­tigue with board sup­port also likely to wane. This trans­lates into a re­luc­tance to in­vest fur­ther time and re­sources into sus­tain­abil­ity re­port­ing.

6. We need in­for­ma­tion we don’t have: An or­gan­i­sa­tion may need to get the data from an­other or­gan­i­sa­tion that may not be re­port­ing any sus­tain­abil­ity met­rics. 7. It’s the par­ent’s re­spon­si­bil­ity: Com­plex com­pany struc­tures, in­clud­ing fully-or par­tially-owned sub­sidiaries, can mean that col­lect­ing and re­port­ing data is seen as some­one else’s re­spon­si­bil­ity. The re­sult can be an in­com­plete sus­tain­abil­ity pic­ture. 8. “Where’s the ev­i­dence?” the au­di­tor asks: If an or­gan­i­sa­tion is get­ting its sus­tain­abil­ity re­port as­sured/ au­dited, which is a good thing, it may de­cide not to talk about a key is­sue un­til sys­tems are in place and ev­i­dence avail­able to sup­port assurance. Hope­fully this is just tem­po­rary.

9. “But they’re not do­ing it”: Why should one or­gan­i­sa­tion have to be open and hon­est while ev­ery­one else car­ries on as usual? Or­gan­i­sa­tions think that’s un­fair. Reg­u­la­tors may need to step in to get ev­ery­one to re­port, to re­port ac­cord­ing to an agreed set of stan­dards and, hope­fully, get ex­ter­nal in­de­pen­dent assurance. The NZX has done this in its new Governance Code launched in 2017 but the assurance part is still miss­ing. 10. Just be­cause it’s a trendy sus­tain­abil­ity is­sue

doesn’t mean it’s a ma­te­rial is­sue: It might be pop­u­lar on so­cial me­dia or get­ting cov­er­age in the press, but it doesn’t al­ways mean it’s a rel­e­vant or mean­ing­ful sus­tain­abil­ity mea­sure for ev­ery or­gan­i­sa­tion. Or­gan­i­sa­tions need to care­fully de­cide what is im­por­tant, both to the busi­ness and stake­hold­ers, and then fo­cus on pre­par­ing good re­ports cov­er­ing those is­sues.

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