Companies of all types and sizes are increasingly being asked to produce non-financial (sustainability, corporate social responsibility, or called else) reports. Despite that this is not yet a legal requirement, it will be so in the European Union starting 2018. According to a new EU Non Financial Reporting Directive, all companies of more than 500 employees will be required to disclose ‘relevant and useful’ information about environmental, social, employment, human rights, anti-corruption and Board-level diversity topics as of 2018 (for 2017). (Source: https://www.ab-reporting.com/blog/got-teeth-eu-non-financial-reporting-directive/)
And even if not yet a legal requirement to disclose non-financial information, investors are clearly more and more interested in the non-financial aspects of company performance being reported, rather than only company financial information. Investors know and increasingly favour non-financial reporting frameworks like the Global Reporting Initiative (GRI) and Integrated Reporting Framework (IRF). This is because non-financial information about sustainability and corporate social responsibility is a much stronger predictor of future performance whereas financial information, as much as it is important, captures only the present and communicates nothing about the future.
If companies want to be taken seriously, and inspire confidence and trust about their future direction, they need to invest time and resources in the preparation of non-financial, or the usually called corporate sustainability (so called henceforth) or corporate social responsibility reports.
However it may not always be obvious to stakeholders what the value of such reports and the activities that go with them may be. Are companies getting the full benefit of their efforts?
Because, there is one extra mile that companies of all kinds and sizes do not yet walk with regards to corporate sustainability reporting: the CHANGE mile.
In other words, corporate sustainability reports are not only there for investors to judge about the potential of the company to remain profitable and stay in business for the long-term. These reports are – also – not only there for company management to reflect on past performance and strategise about future direction.
Corporate sustainability reports are importantly also there to be leveraged as a change management tool, through internal communications, business process redesign and content marketing directed at internal and external stakeholders.
And, what makes corporate sustainability reports particularly attractive with regards to being used as a change management tool is that the additional investment needed to leverage them as tools for change is small compared to the investment required to create them.
Take, for example, the 2014/15 Sustainability Report of the Danish company BESTSELLER – ranked as the best CSR report for 2015 by CSR Reporting.
One reason why it is indeed an excellent report according to CSR Reporting is because it not only presents a range of non-financial information (such as employee engagement, customer satisfaction, etc), but it does so in a way that appeals to a wide range of stakeholders. And, by doing so, it gives the reader a clear sense that BESTSELLER is on a ‘journey of sustainability’, that is constant change and adaptation in order to remain relevant as a business, use resources sustainably and yet ensure profitability and growth.
In other words, when a business communicates non-financial information in an Authentic, Material and Impactful (AIM criteria used by CSR Reporting to select best reports for 2015) way, it actually positions the report into a tool that can be used to market the need for change, internally and externally.
This makes for the Corporate Sustainability report to reach to all stakeholders and creates pertinence and urgency for BESTSELLER to realise the full value of their business.
And yet, is this all? It is a good start, but no, it is not all. A nicely written report does not do the change trick, and it does not yet take companies on a journey of sustainability.
What companies need is a system, guided by a framework, that allows companies to drive sustainability change throughout the company by using information and KPIs defined in the Corporate Sustainability Report.
We (myself and Albor360) are developing a Corporate Sustainability Reporting change management framework to meet this need. I will explore this in future posts … Meanwhile, please stay tuned and feel free to contact me for more information.