21 Apr 2022
By Richard Gordon
Wright Communications is well positioned to assess trends in sustainability reports in New Zealand as we produce many of them. This year alone we’re developing reports for organisations in banking, insurance, waste and retailing.
Based on our experience, here are this year’s trends in sustainability reporting: from frameworks to format.
An emerging trend in sustainability reports is a willingness, among businesses, to look beyond box-ticking exercises and adequate international frameworks. They're looking to tell a story, a sustainability narrative, where they are in terms of their pathway, and their progress against sustainability targets. They’re seeking to convey their commitment, their intent, in a manner that is succinct, compelling, readable, easy to access, and appeals to an array of audiences.
If a business’s sustainability practises have not been ideal, the business should not necessarily shy away from disclosing this. If there are ways in which the business needs to catch up, then they can promote the angle that they're being willingly transparent, accounting for any such omissions, and that their trajectory is towards better sustainability… and that’s okay. In fact, many would say, this is the point of sustainability reporting. We encourage our partners to take the first step towards sustainability reporting, which is internal transparency and a willingness to acknowledge the present position.
The first thing a company should do if they're considering a sustainability report is think about the audience.
It may be easier for a business to understand the audience for an annual report because it's mainly aimed at shareholders. A sustainability report, however, has multiple audiences, from customers through to regulators, investors, NGOs, employees and Iwi, and is geared toward emphasising sustainability, which focuses on the impact a business has on the environment and on society.
Each group has a different requirement, and so sustainability reports are also often used as a single source of truth. An investor-focused report, for example, will emphasise governance and creating value, prosperity for shareholders and staff and communities. A sustainability report aimed at a business customer might be focus on metrics, evidential statements and technical detail. In this case, a shorter executive summary version could be produced for other stakeholders such as employees and retail consumers.
Customers negotiating a large supply contract will often pose sustainability related questions and will want to detail on the provenance of a product, how sustainably grown it is, or the extent of its carbon footprint. With a sustainability report as that single source of truth, a business can say, here's our latest environmental and social impact report, it's all in there. For sustainability managers it’s an effective asset.
Another key question to answer is what is the story you’re intending to tell? What is the message you’re trying to get across? And then it's a matter of understanding what kind of format is ideally suited. Some have moved to online content and video, and most are determined not to write a massive tome. A general trend is to be concise and visual, delivering your message with infographics, pictures, and charts to produce a 16-page booklet, rather than a 60 page one.
Another trend we’ve noticed is consolidation of sustainability reporting standards and frameworks. Over the last few years, frameworks and reporting standards boards have worked with a large degree of autonomy to set global sustainability disclosure standards. Some are more focused on the impact a business has on the environment, others are more specific to the value created for shareholders. And honestly, most people don’t know the difference, which makes sustainability reporting such a complex beast.
Pleasingly, under the umbrella of the International Financial Reporting Standards Foundation there's been a consolidation of several of these entities (International Integrated Reporting Council, the former Climate Disclosure Standards Board, and the Value Reporting Framework) to form one new International Sustainability Standards Board (ISSB) which has released an array of draft reporting standards.
Another important and well-known entity is the Global Reporting Initiative (GRI), which, of all the standards, has been the most popular in New Zealand and adopted by companies around the world. The GRI is mostly about impact on the environment and communities by companies that use natural resources to create value.
The GRI has engaged with the ISSB to discuss further alignment of standards. With everything coming together into a greater global framework, life will be a lot easier for reporters and sustainability managers who will be able to spend less time untangling the technical standards and more on telling the organisation’s story instead.
In New Zealand, the External Reporting Board (XRB) has moved a step closer to releasing New Zealand-specific climate-related disclosure standards with the release of draft metrics and targets.
Development of the climate reporting standards follows a Government announcement and funding package for the XRB to develop and introduce a mandatory reporting regime for large, listed New Zealand companies and financial sector participants.
Once the XRB issues its first climate standard in December 2022, climate-related disclosures will be mandatory in 2023 for listed companies with a market capitalisation of more than $60m, large licensed insurers, banks, credit unions, building societies and managers of investment schemes with more than $1bn in assets.
The climate standards will require those affected to disclose in annual reports their approach to climate change, their strategies to reduce emissions and annual greenhouse gas emissions.
As the XRB’s standards and framework are likely to align with those of the Taskforce for Climate-Related Financial Disclosures (TCFD), several NZX-listed companies have got ahead of the deadline and have already published TCFD-style reports.
Not-for-profits and public sector organisations often ask Wright Communications to advise them on a sustainability reporting strategy. Because they also want to do the right thing, they may suggest using the GRI or Integrated Reporting framework.
Our advice is to think carefully about your audiences and your impact on the environment or society before settling on a standards framework. Does an international framework designed for listed companies help or hinder your ability to tell your sustainability story and the impact your organisation has on the planet and people?
The Centre for Social Impact has useful resources for organisations wanting to measure and demonstrate the difference they make to society. The Centre has two fundamental frameworks that can be used to tell a social impact story.
Is third-party assurance of a sustainability report really needed? It often depends on the culture of the company and the level of rigour and verification required by an organisation’s Board of Directors.
Various elements of a sustainability report may already contain third party accreditations anyway. For example, the report may contain an independently audited carbon footprint or the social section may report on activities that have a DV or Rainbow Tick, Living Wage accreditation or Fair Trade certification. All of these require robust third-party processes and verification.
A case study featuring a social initiative may include a quote from a credible third party who may not give a glowing reference but will share honestly where they think the company is making progress.
So long as the firm is up-front about targets and performance against targets, honesty and transparency will likely be received favourably and will set the company up for a future of positive sustainability reporting.
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