Sustainability reporting is a hot trend among large corporations that want to demonstrate their commitment to greening their organization. But it’s not just for the big boys anymore.
Now smaller businesses are beginning to join the ranks, according to Jane Madden, executive vice-president and director of the corporate social responsibility and sustainability practice at Edelman, the global public relations firm based in Chicago. In many instances, though, smaller companies are coming up with less intense versions of the formal reports that large corporations are creating.
Many of these companies, both large and small, are attempting to boost the transparency and credibility of their reporting by getting an outside party to independently verify the environmental and social data they share in these reports, Ms. Madden explains.
Ms. Madden has been engaged in sustainability reporting and much more for a long time. She spent most of her career at the World Bank advising governments around the world on environmental, social and governance issues. She’s a sustainable development expert and ran her own firm advising corporations, non-governmental organizations and multilateral agencies on those issues before joining Edelman.
These days, she’s also leading Edelman’s partnership with the Global Reporting Initiative, a non-profit that offers guidelines to companies interested in developing sustainability reports.
Even though Ms. Madden works mostly with Fortune 100 companies at Edelman, she has her finger on the global pulse of sustainability reporting for companies of all sizes. Crain’s recently asked her to share some thoughts on why the sustainability reporting trend is so hot in Europe and is now spreading throughout the U.S.
Crain’s: How would you describe the current status of sustainability reporting among Chicago-based companies?
Ms. Madden: We’re doing OK here, but we need to do more. (Edelman) just did the Northern Trust report, which is great for a company that is in the financial sector, although they’re a bit more conservative because of the industry that they’re in and because that’s their culture. They reported on 35 GRI indicators, so they are taking this very seriously.
Many are using the GRI framework or using the guidelines for reporting out on some of their indicators. Some companies now are also asking GRI to verify that they followed the process. We’re also seeing a trend, and Northern did this, where they had their accountants certify it, just as you would certify an annual financial report. It brings more credibility to this space.
A framework like GRI is good because it’s comprehensive and it’s multi-stakeholder. It’s also a global framework so you can compare a bank in the U.S. to a bank in Germany or South Africa. The Carbon Disclosure Project is good, too, but more limited (in its scope).
Crain’s: Are these sustainability reports stand-alone projects or is anyone blending them with other reports for better context?
Ms. Madden: Another big trend is integrated reporting. Companies are now reporting out not only on their financial data but also the non-financial data and combining financial and sustainability reports. The key is you’re showing the connections between the data. The U.S. is a bit behind on that, but we’re seeing more sustainability reporting, as well as integrated reports. Europe is ahead, in part because countries like Denmark and France are mandating it. Even South Africa has mandated any company on its stock exchange must do an integrated report.
Crain’s: Do you think some companies use sustainability reporting primarily as a marketing tool?
Ms. Madden: I think companies used to see it as a marketing tool, especially on the philanthropic side. Going back to metrics, it’s a really important tool for identifying goals, commitments and targets and measuring them along the way. There’s increased demand for transparency and the metrics behind them, but we’re also seeing companies are better run because of it. They’re reducing their risk because they’re measuring.
We talk about the triple bottom line of people, profit, planet being equal. I would argue if you look after the people and the planet, your profits are going to be better. And not necessarily because you’re doing more good or you’re selling more products, but because you’re a better-run company.
Right now it’s more of a business decision to do this, especially if you’re a company that responds to (requests for proposals). Companies are asking for sustainability reports and they can easily say: “Here’s a link to our reporting.” Plus there’s also a lot of (sustainability) business awards coming out. There’s the Dow Jones Sustainability Index, the Financial Times’ Index, and Newsweek’s green business rankings are coming out for the third time.
Crain’s: Are small businesses paying attention to sustainability reporting?
Ms. Madden: In general, I think they are, but it’s one more thing they have to do. If you’re promoting yourself as a green company, your clients or future clients are going to ask how you walk the walk. We’re seeing some smaller companies actually do the reporting.
We see companies are looking at reporting and trying to figure out which certifications to pursue. I don’t think small enterprises need to do the full blown reports like a Fortune 100 company, but they are tracking that data. It could be an independent contractor and it’s easy for them to do that tracking.
Crain’s: Are there other reasons why businesses should consider sustainability reporting?
Ms. Madden: It’s also important for talent acquisition and retention, regardless of company size. There are lots of millennials (born between 1980 and 1995) who want to work for a company that shares their values. That’s especially important if you’re a small company because there’s more risk when you have turnover and it has more impact on your bottom line, so you want to attract people who are going to stay with you for a while.
Crain’s: What trends do you see that could encourage small businesses to take sustainability reporting more seriously?
Ms. Madden: There is increased scrutiny and concern about the supply chain regarding both environmental and social issues. From a small-business point of view, these businesses are often part of somebody else’s supply chain and they’re getting demands for transparency and reporting, so they have to be able to supply their own information, too.
