Sustainability reporting: The role of financial data
As sustainability reporting transitions from voluntary to mandatory, companies can leverage their existing financial data to ensure compliance and provide transparency to key stakeholders.
Across the globe, sustainability reporting is quickly approaching an inflection point. Voluntary disclosure is giving way to more consistent, mandatory reporting standards, overseen and enforced by regulators.
Previously viewed as a “nice to have” function that largely helped to demonstrate corporate social responsibility and build trust with employees, the community and other stakeholders, sustainability reporting has shifted in response to demand from customer and investors, who are seeking assurance that companies have factored sustainability-related risks and opportunities into their longer-term financial and strategic planning.
Jurisdictions across the world are adopting mandatory reporting standards over the months and years to come – in Australia, we have the pending Australian Sustainability Reporting Standards – which is particularly significant for companies that have international operations, or have complex global supply chains, as they will need to demonstrate end-to-end visibility and compliance across operations.
Financial data: the key to getting it right
Most people understand the role of sustainability reporting in presenting a clear and accurate picture of how a company’s operations impact the environment and society, along with how it governs these aspects. What may be less understood is the vital role of financial data in sustainability reporting.
Financial data not only highlights the economic aspects of a company’s sustainability efforts but also ensures that environmental and social impacts are accurately represented in financial terms. S
ome examples of this include data related to environmental costs and investments (i.e. the financial resources used to manage environmental impacts, such as costs for pollution control equipment, renewable energy investments and waste management); and social capital and investments (i.e. resources dedicated to social responsibility, including employee training, community engagement initiatives and charitable contributions).
Importantly, financial data helps quantify the economic impact of climate-related risks and opportunities, such as potential carbon pricing and investments in climate-resilient infrastructure.
For companies with a supply chain, it also provides insight into the financial considerations related to ethical sourcing and labour practices, including costs associated with audits and supplier sustainability programmes.
Preparing for the sustainability reporting standards
The approaching sustainability reporting requirements represent a significant step-change and may be causing some apprehension in companies that feel underprepared. The good news is that you may actually have everything you need to support your sustainability reporting efforts, if you meet two essential conditions:
- You’re satisfied with the quality and of your financial and operational data, which are both foundational to effective sustainability reporting, and
- You’ve integrated your data in a centralised planning system (a Franken-System won’t do).
Accurate, consistent and reliable financial data ensures that sustainability claims are supported by verifiable evidence – creating transparency and granularity and avoiding the dreaded “greenwashing” trap. However, many organisations still face challenges in this area due to the reliance on disparate systems and manual data consolidation processes, which can lead to inefficiencies and inaccuracies.
On the other hand, a robust integrated planning platform helps to centralise the data collection and analysis process, enabling real-time tracking and insights into sustainability metrics and faster and more accurate analyses of potential environmental, social and economic trends.
What’s more, the right planning system with built-in scenario modelling capabilities will help you turn your sustainability reporting activities into proactive, strategic action. For example, the Finance team may be able to quickly determine the impact on the company’s overall carbon footprint if they selected an alternate electricity supplier or switched to LED lighting across the corporate footprint.
Sustainability reporting as a strategic tool
By prioritising data quality and integration, sustainability reporting can become a strategic tool that drives innovation, improves performance and builds investor confidence – rather than being a mere compliance exercise.
If you’re ready to get started or improve what you already have, it’s possible to drive steady improvement of your systems over time with small, manageable projects that will be kinder on your budget, minimise the risk of larger-scale transformation and manage disruption with your workforce.
