Sustainability reporting on the rise

by 22 Jan 2008

COMPANIES SHOULD consider reporting on environmental and social factors and disclose health and safety policy and performance in their annual reports.

A recent CPA Australia study, which took in nearly 1,000 people including CEOs, CFOs, financial analysts, fund managers, shareholders and members of the public, found that there was strong support for “triple bottom-line”reporting, which covers sustainability as well as financial results.

It found that 75 per cent of respondents favoured mandated sustainability reporting, while 82 per cent believed that social policy statements should be included in a sustainability report.

The impact that a company’s poor environmental reputation can have on recruitment was also of interest, with 87 per cent of respondents indicating that they would be discouraged from working for a company with an unfavourable environmental reputation.

“With the skills shortage already beginning to hit home in Australia and internationally, these findings tell us that a company that ignores sustainability issues does so at its peril,” said Geoff Rankin, CEO of CPA Australia.

There are a variety of reasons why employers should consider reporting sustainability information, he said.

“First and foremost, sustainability reporting provides shareholders and other stakeholders such as employees and customers with an invaluable insight into how well a company is dealing with material non-financial and financial risks. It also creates transparency around the social and environmental impacts of a company’s performance.”

When done well, Rankin said sustainability reporting also has the added benefit of enabling companies to benchmark their performance against competitors, identify areas for improvement, improve their reputation and enhance their ability to recruit and retain staff. There is a strong correlation between sustainability reporting and low probability of corporate distress, according to CPA Australia research.

Rankin said this relationship may suggest that companies that issue sustainability reports are more aware of the wider range of risks that may impact on the business.

“It also further demonstrates that taking a longer-term and more holistic approach to risk management rewards shareholders as well as other stakeholders,”he said.

Australian companies are at varying levels of sophistication in their approach to sustainability reporting, he added. “While some of Australia’s larger companies are quite advanced, many smaller businesses are still coming to grips with what it all means for them and the way they do business.”

However, Rankin said sustainability reporting is rapidly evolving. “Virtually unheard of 30 years ago, sustainability type information is now recognised by many as being crucial to business decision-making. While there is undoubtedly more work to be done to improve the quality and usefulness of sustainability information, there is no doubt that sustainability will be part of the future landscape.”


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