Sustainability Reports Coming of Age‚Ä®

January 4, 2013

Just ten years ago, sustainability reporting was essentially non-existent. A few leading companies had web pages that addressed their sustainability initiatives; even fewer issued official sustainability reports. Times have changed.

Sustainability reporting is no longer just for the leaders but for the majority of companies. Research by Ernst & Young shows that more than two-thirds of the Fortune Global 500 companies publish some form of sustainability or corporate responsibility report.  The Global Reporting Initiative (GRI) states there are currently 9,981 GRI reports on their website.

But reporting has evolved beyond creating a report and posting it to the world.  More and more, companies are requiring sustainability reporting from their suppliers as part of the RFP (request for proposal) process. Why is this happening?  Several reasons, including:

1.) Goals. Many companies have set sustainability goals that span their entire value chain (e.g. AT&T has the following 2015 goal -- “By the end of 2015, majority of spend with strategic suppliers will be with those who track greenhouse gas (GHG) emissions and have specific GHG goals.”)  If you supply a major retailer or manufacturer, this is you... or will be you.

2.) Tie Breaker. Companies with sustainability missions or goals often give preference to suppliers with better environmental and social performance. Often, this plays out as " if all things are equal (price, quality)," then sustainability is the tie-breaker.  In more stringent cases, sustainability is an upfront filter to weed out supplier candidates.

3.) Risk Reduction. Leading companies are the ones that realize that environmental and social performance correlates to good management practices. In other words, good supplier sustainability performance reduces the buyer's risk. This is especially true when sourcing from countries, such as China, where environmental and social standards are much less strict than in the U.S.

What is the next wave in reporting?  All indications point to greater and deeper levels of transparency due to increased interest in sustainability metrics from a vast array of stakeholders, including shareholders, government, and, of course, consumers.  This is good news for those companies already in the reporting arena and those with savvy strategies on preparing for what is next to come.



Jeff Gowdy is Founder and President of J. Gowdy Consulting -- Profitable Sustainability Solutions. He is an Adjunct Assistant Professor at the Vanderbilt University Owen Graduate School of Management and serves on the board of multiple sustainability-focused organizations.

 

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