Making a positive impact on the right ESG-issues can lead to 4.83% higher shareholder return according to Harvard Business School research. Good performance on immaterial issues, however; leads to only 1.5% increase, whereas poor performance results in a decreased shareholder return between 0.38% to 2.2%. 

Assess sector materialities is just a first step

A very useful tool to use in the first phase of deciding which issues to report on is The Reporting Exchange, initiated by the World Business Council for Sustainable Development. It brings together the contents of nine different frameworks and policies in a content-rich website. The Reporting Exchange is a very comprehensive source of information on sustainability reporting requirements and resources available today. At current, the tool includes a total of no less than 1,424 ESG indicators. Making it very relevant for sustainability practitioners, investors, academics, and regulators to navigate the world of corporate reporting by bringing detailed information together. 

Creating focus: not all materialities are equal

The extent of reporting requirements produces the necessity for companies to better align their sustainability approach with their business strategy. Sustainability topics that prove to have a (future) impact on the success of the business are the ones to focus on. A useful starting point for selecting those can be the Reporting Exchange.

To apply focus, it is essential to look beyond what is important from industry-wide perspective trickling further down, to business specifics, geographical differences and company DNA. Unquestionably, there are many topics that can be identified as relevant from a stakeholders’ perspective, but they are not necessarily key materialities. Those should not be discarded but treated as regular business drivers or hygiene factors that need to be reported on by the different business functions. Following the same route as the financial reporting development did over the past decades. 

In the ESG Disclosure Handbook (refer to download) that was published last April by the WBCSD, the disclosure judgement process is summarized as follows: 

1. Evaluate options that:  
   • Support the objectives and purpose of reporting
   • Have business value
   • Meet the needs of the primary intended audience(s)
   • Are supportable
   • Can be clearly communicated  
2. Rely on a solid process, including the subjective judgement of management and experts
3. Document the process and decision making including the choices made along the way

Driving change to increase real positive impact

Companies embrace sustainability in order to mitigate risks, reap business opportunities and “doing well by doing good”. Reporting is a tool to create transparency and ensures that progress is managed, the main goal however is to maximize positive impact for both the company and the communities in which they operate. After deciding on a limited set of key sustainability topics, remember from the Harvard research “less is more”, the next step is to integrate them in the business strategy.

Analyzing how they align with the current strategic framework, the company’s Enterprise Risk Management, and a company’s current approach on the Sustainable Development Goals is the next step. Clear insights on where performance gaps currently occur, deliver input for building and strengthening the sustainability program for the company and its roll-out. Basically, this is not a very different approach from other strategic initiatives that are being introduced in the business. The beauty of sustainability programs that have a business connect, clear vision and concrete targets, is that they will create purpose and engages both internal and external stakeholders.

Want to increase the impact of your non-financial reporting efforts?

If reporting and benchmarking is increasingly restraining your calendar, we can help you create more focus and get more value out of your non-financial reporting efforts. Download our Materiality Map and contact us at hello@finchandbeak.com for more information.