Take the initiative – embrace sustainability reporting

Take the initiative – embrace sustainability reporting

A rice farmer in Indonesia.

By Emma Marsden

This year’s Sustainability Report highlights the integration of sustainability into ADB investments and organizational activities in 2015.

ADB today published its sixth Sustainability Report, highlighting the integration of sustainability into its investments and organizational activities during 2015. Sustainability reporting as undertaken by ADB is now a well-established practice. It has even found its way—and rightly so—into the Sustainable Development Goals (SDGs) as a target for responsible consumption and production.

Organizations that commit to sustainability reporting must present their corporate values and business model, demonstrating the link between their strategy and commitment to sustainable development, and publish information about their economic, environmental, and social impact.

Being more transparent enables an organization’s stakeholders to better understand how it contributes—or will contribute in future—to the improvement or deterioration of economic, environmental, and social conditions at the local, regional, or global level. For example, stakeholders may be interested in how seriously an organization takes climate change risks in its business continuity plans. In particular, investors are increasingly demanding information on how organizations manage their sustainability-related risks, as ADB saw when it issued its $500 million inaugural Green Bond last year.  

Some people criticize sustainability reports arguing that organizations just produce them because they are required to, or to market their green credentials. On one hand this may be true, as corporate social responsibility (CSR) has often been employed as a token measure to direct attention away from harmful business practices, but corporate sustainability practices are slowly changing to become less about philanthropy or promoting a ‘do no harm’ culture, and more about how an organization manages its environmental and social responsibilities, including its own workforce, resource consumption, discharges and emissions, stakeholder grievances, corruption, and supply chain.

While CSR focuses on integrating these responsibilities into management systems and business models, sustainability reporting focuses more on disclosing an organization's impacts on the environment and society and how they are managed.

That can be a trigger for change. If management takes on board what is learnt through the reporting process rather than just using it as a passive tool for information transmittal, then sustainability performance can evolve within that organization. The focus should not be on producing the sustainability report itself, but how the reporting process can improve sustainability within an organization. For example, since ADB started sustainability reporting in 2007, it has been able to track its operational sustainability successes including increased support for inclusive, environmentally sustainable growth, and strengthening of its governance and safeguards oversight. It has also seen significant improvements in its in-house environmental footprint with the public disclosure of its greenhouse gas (GHG) emissions from its Manila headquarters, driving a switch to a geothermal energy supplier, and verifying its GHG inventory to comply with international standards.

ADB’s Sustainability Report was prepared according to reporting guidelines issued by the Global Reporting Initiative (GRI), an international not-profit founded in 1997 to promote sustainability reporting in the private sector. GRI pioneered and developed a comprehensive sustainability reporting framework that is now used by over two-thirds of reporting organizations. For-profit organizations that top the Dow Jones Sustainability Index—such as West Pac Banking, UBS Group, and Swiss Re in the financial sector—and multilateral financing institutions—including the World Bank, the Inter-American Development Bank, the European Bank for Reconstruction and Development, and the European Investment Bank—all regularly issue their own sustainability reports responding to the GRI guidelines. We welcome this.

Using an established framework such as the GRI enables an organization to report on and track progress on economic, environmental and social issues in an objective manner. It is not easy.

The latest version of the GRI’s reporting guidelines (G4) is the outcome of more than 15 years of a robust global multi-stakeholder development process. There are 58 general-standard disclosures applicable to all organizations, of which at least 38 must be reported on, including those on strategy and organization, stakeholder engagement, governance, ethics, and integrity. There are also specific-standard disclosures covering 46 economic, environmental and social topics like energy, GHG emissions, labor practices, human rights and impacts on society, plus sector-specific guidelines where only those disclosures of greatest importance to an organization or its stakeholders need be reported. For example, direct and indirect economic impacts and impacts on local communities were natural for ADB to disclose as they are key to ADB’s development mission.

Encouragingly, GRI’s reporting guidelines are referred to in government regulation (Bangladesh) and by stock exchanges (Singapore) that encourage or require listed companies to produce sustainability reports.

For governments, the GRI has created a tracker they can use to understand the status of sustainability reporting in their country, and track progress toward the respective consumption and production SDG target. The GRI also maps all disclosures against the SDGs. For example, GHG emissions and diversity and equal opportunities disclosures help a organization quantify its contributions to the climate action and gender goals, respectively. In addition and given that governments cannot achieve the SDGs on their own, embracing sustainability reporting is a way for the private sector to demonstrate its contribution to the 2030 agenda while also managing its sustainability-related risk, realizing cost and productivity efficiencies, and developing more sustainable products or services through innovation. It’s a win-win-win.