Sustainability strategy is business strategy. It’s about demonstrating long-term value creation for all stakeholders, and developing a robust social licence to operate. Those organisations able to develop and articulate an ambitious sustainability strategy will build a strong competitive advantage on multiple fronts.
The investor space has shifted dramatically over the past few years and most of it boils down to the growing expectations of investors, analysts and specialised media, but also those of employees, communities and customers. Today, these stakeholders expect more from the companies they associate with: more clarity, more transparency and more ambition.
Today, sustainability – understood as an organisation’s ability to create long-term value by taking into consideration the way it operates in the ecological, social and economic environment – determines access to capital, including (critically) human capital. An ambitious sustainability strategy builds trust, resilience and longevity, and it helps stakeholders understand what the company stands for and where it’s heading.
The increased visibility of sustainability strategy is having a ripple effect across the communications space, both internally and externally. It is forcing companies to look at themselves in the mirror and consider: Are we taking tangible action and is it connected to our business strategy? Have we engaged our stakeholders to identify the material issues that we face as an organisation? How are we future-proofing our business?
Central to this challenge is the need to elevate sustainability reporting to deliver what stakeholders demand. Reporting shouldn't be an annual ‘box-ticking’ exercise, it's a strategic opportunity to build preference and advocacy with the people who matter the most, and instil a culture of continuous improvement within the organisation.
Sustainability reporting is about commitment AND compliance. It’s about numbers supporting a narrative.
At Designate we partner with listed companies at different stages of their sustainability journey. While many have a dedicated team, clear strategy and specific targets, some are only trying to determine what’s possible in the short run, and what the next 2–3 years will look like.
Here are some key questions that help us (and our clients) figure out where they are at, and how to develop a successful sustainability report.
- Is your purpose driving strategy across every aspect of the business?
Purpose is the driving force behind many of the most successful businesses in the world, including many that are challenging the status quo. Purpose serves as a decision-making lens to determine everything from sourcing to growth, from recruitment to communication. How are your cultural values contributing to the delivery of that strategy?
- How are your business and sustainability strategies aligned?
Businesses must determine how these overlap, particularly the way in which tactical decisions that shape strategy impact the material topics relevant to the future of the business. Robust stakeholder engagement is critical to ensure alignment – what matters to them and how can you report efficiently?
- Which frameworks are relevant to your business, sector and investor base?
Frameworks such as GRI and SASB help bring consistency to sustainability reporting so that investors and other stakeholders can compare and draw conclusions. This is a dynamic space where change is happening quickly, but organisations must choose a lane and stick to it.
- How are you creating long-term, sustainable value?
Clearly defining your material topics, risks and opportunities, and the way that the organisation leverages key resources to mitigate risks and create value for relevant stakeholders, is the linchpin of any strong sustainability strategy. A visual value creation model not only helps link stakeholders, capitals, business model and outputs, it can also help structure the report. It can guide the reader to better understand your sustainability strategy, how it relates to your business and how it translates into specific, measurable targets.
- Are you capitalising on infographics and data visualisation to explain your strategy and showcase progress towards your goals?
Effective design is about enhancing clarity to deliver a better user experience across all channels, digital and print. As with many other investor communication pieces, time-poor audiences require that complex information is broken down with both logic and creativity. Infographics and other design elements must feel unique to your business and fit seamlessly with the structure and layout of the report.
- What are rating agencies saying about your business?
Investors care about comments from MSCI or Sustainalytics; they are a helpful proxy to better understand where a company sits in the minds of those who often shape capital allocation and voting decisions. Taking the time to determine which agencies are relevant, and engaging effectively with them, can often be the difference between being championed or being ignored.
- What are your peers reporting against and what are the trends shaping the future of your industry?
No business exists in a vacuum, and when it comes to sustainability reporting it helps to know the benchmarks you are up against. Competitors may be at a different stage of their own journey, and yet their own reporting efforts can help clarify your decisions or suggest improvements for the future. Think of them as the competitors that keep you hungry and focused.
- What are your governance processes, and how do you delegate control of risks?
Stakeholders are constantly trying to understand and mitigate their own exposure to financial and non-financial risks. Having a clear and concise description of material risks, the way in which they are being managed and how the company is performing across each one of them, can support shareholders to make informed decisions about the benefits of investing in your business.
- How are you capturing and verifying data?
This can often be the greatest hurdle companies face when developing their sustainability report, even those with an ambitious strategy and a committed team behind it. However, technology-driven platforms like Worldfavor or Socialsuite are developing software to help businesses go from theory to practice, even allowing real-time data capture to close the gap between measuring and reporting.
- What resources do you have internally and where do you need help from consultants or other outside experts?
Many organisations have access to partners who can help craft a message and design a report, but is that enough to really deliver on your needs? The goal must be to build a unique and memorable story, taking complex information and communicating it with clarity and creativity to leave a lasting impression. Who can help you to do so?
Always looking for what’s next
Effective sustainability reporting is far from a sprint. While pressure continues to grow, investors are often looking for a roadmap – a clear sense of where your business is heading, and what needs to happen to get there.
It is critical that organisations adopt a new mindset; one that is constantly looking for improvements and takes last year’s achievements as an incentive to be more ambitious, more transparent, and more engaged. Your sustainability report is a vehicle to communicate this, not solve it right away.