Your Business Sustainability Partner

Know more about Sustainability reporting

What is sustainability?

Sustainability, by definition, is about the future.

 

The United Nations defines sustainable development thus:

 

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Is it mandatory to make sustainability reporting?

It is mandatory in a few countries, but not in all markets. However, voluntary reporting provides credibility to the organization

What drives sustainability?

Investors, who are major economic stakeholders  are  forward-looking people. Investors today read beyond financial statements to understand that there are other stakeholders. These, not so visible stakeholders, may not suddenly change the business course, but over a long term, changes made by other stakeholders will far exceed the economic factors.

 

That is why, today most companies talk about not just the bottom line, but “Triple bottom Line”. Economic, Environment and Social

 

Investors are now evaluating triple bottom line, but do we report on these lines?

 

That is why sustainability reporting is more important.

How to understand sustainability?

To understand it more clearly, here are some cases and scenario.

 

Let us understand environmental impact – Oil scenario

 

Oil Reserves-to-production ratios for non Middle East Countries is about 15 years, for Middle East Producers  it is about 80 years. Whether we use oil substantially or not, this fact will hit every business in some years from now.

 

Just imagine a world where oil costs Rs. 1500/litre.  Or water being bought at  Rs.10,000/ truck load (10KL). 

How will this affect our business? How will diminishing resources impact on our ability to operate profitably?

                      

Such questions might seem like distant prospects, but 10 years is not too distant for an organization, if one were to look 10 years back on where they were.

 

A social scenario:

 

On the social side, local community issues dominate and overlap with many organization. Governments find alternate mechanism other than tax to serve communities effectively. They are slowly making corporate be mandatorily socially accountable. Most governments/ economies have limitation to increase taxes beyond the highest levels.

 

A global supply chain scenario:

 

One of the largest beverages multinational did an audit on its supplier of food ingredient and found a number of sustainability issues. This audit shows supplier a “yellow card” to put sustainability systems in place. Failure may lead to loss of business.

 

When an organization deals with global stakeholders, sustainability reporting by supplier helps align with the needs of customer’s reporting systems.

 

Legal implications

 

Legislation is already in place for annual reports in France and the UK, and guidelines established in other geographies on disclosing economic, environment and social performance. Future prospects suggest this is clearly on the global agenda.

 

Stock exchange and insurance firms have started to scrutinize sustainability risks

 

The investor community is already waking up to this need for more transparency on how companies see themselves operating within such constraints.

 

A growing number of stock exchanges are urging listed companies to report on environmental and social issues. In India too, SEBI has brought a new clause applicable to top companies listed in stock exchange.  Clause 55, to its Listing Agreements reads as: “Listed entities shall submit, as part of their Annual Reports, Business Responsibility Reports, describing the initiatives taken by them from an environmental, social and governance perspective”.

 

The prescribed Business Responsibility reporting format shows, it is based on all 10 UNGC principles.

What is the meaning of stake holder?

Stakeholders can include those who have invested in the organization (e.g., employees, shareholders, suppliers) as well as those who are external to the organization (e.g., communities, regulators, media).

 

Identification of these stakeholders, evaluating their importance to the organization and defining and documenting the process of engagement with them will be an essential part of the sustainability report

How relevant Sustainability to business objectives?

Sustainability is more than an environmental or social philosophy. It’s a platform to drive growth, build value and stay ahead of competition.

 

Embracing sustainability opens up admirabale possibilities for an organization. Through this exercise an organization will gain:

  • fresh insights into streamlining processes for greater efficiency,
  • better and more acceptable service delivery, so they are most cost-effective and
  • better employee strategies that will build on what is best for our operations, culture and mission.

 

In short, sustainability practices make great organizations even greater.

Where to find comprehensive information about sustainability?

Several multilateral forums have provided comprehensive principles on sustainability. The most prominent amongst them are as follows:

 

  1. The UN Global Compact's ten principles in the areas of human rights, labor, the environment and anti-corruption enjoy universal consensus

 

  1. GRI G4 Sustainability Reporting Guidelines – enabling all organizations to report the sustainability information that matters.

 

  1. Ministry of corporate affairs, GOI, has come up with a National Voluntary guidelines on Social, Environmental and Economic responsibilities of business

 

All the above are more or less similar

What is Precautionary Principle?

The precautionary principle, or precautionary approach, has emerged over recent decades as a widely and increasingly accepted general principle of policy, law, and management. It is an approach to uncertainty, and provides for action to avoid serious or irreversible harm in advance of scientific certainty of such harm. While an important and intuitively sensible principle, the acceptance of the precautionary principle into law and policy and its implementation in practice have been marked by controversy and confusion

 

The precautionary principle has three specific principles:

 

1.     the fullest possible scientific evaluation, the determination, as far as possible, of the degree of scientific uncertainty;

2.     a risk evaluation and an evaluation of the potential consequences of inaction;

3.     the participation of all interested parties in the study of precautionary measures, once the results of the scientific evaluation and/or the risk evaluation are available.

 

In addition, the 5 general principles of risk management remain applicable when the precautionary principle is invoked:

1.     proportionality between the measures taken and the chosen level of protection;

2.     non-discrimination in application of the measures;

3.     consistency of the measures with similar measures already taken in similar situations or using similar approaches;

4.     examination of the benefits and costs of action or lack of action;

5.     review of the measures in the light of scientific developments.

 

 

In the Organizational sustainability context, Precautionary Principle applies to Hazardous areas ventured by an organization where scientific evidence is not fully understood.

 

Examples in the areas of Product & Process Responsibility could be:-

 

Product responsibility 

 

·         GM Crop - Limited field trials may not have established ill effects 

·         Drugs      - Limited clinical trials may not have established side effects

·         Client data - Security systems vulnerability may not have been fully assessed

 

Process Control

 

·         Use of Hazardous materials

 

Precautionary approach to the above can cover

 

Systems and infrastructure in place for

 

·         Rapid detection and response

·         Product recall ability planning

·         Disaster recovery planning

·         Emergency preparedness & response planning etc.

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Detailed Guide line can be understood by the Guide line approved by the IUCN Council 67th meeting 

What are the comptencies a Sustainability Officer must possess?

The qualification would depend on the sector and domain as the aspects of Economic, Social and Environment would be less dominant in some areas / sector and more dominant in some areas / sector
 
Generally speaking
 
Sustainability Officer must have exposure to:
 
  1. EHS Systems management and audit
  2. Social science awareness (If the organization largely deals with labour)
  3. GHG and climate change awareness
  4. Project Management skills
  5. Exposure / Training on CSR, Sustainability Reporting Principles
 

Know the meaning of terms used in sustainability

Corporate

Despite not being human beings, corporations, as far as the law is concerned, are legal persons, and have many of the same rights and responsibilities as natural people do.

Sustainability

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Boundary

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Responsibility

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Business regulation

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Legislation

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Market requirement

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Accountability

An organization can be considered as accountable when it accounts to its stakeholders regarding material issues (transparency), responds to stakeholders regarding these issues (responsiveness) on an ongoing basis, and complies with standards to which it is voluntarily committed, and with rules and regulations that it must comply with for statutory reasons (compliance)

Communication

Any manner of information sharing with stakeholders, generally through  one-way, non-iterative processesss

Consultation

The process of gathering information or advice from stakeholders and taking those views into consideration to amend plans, make decisions or set directions

Photo used under Creative Commons from Doug Scortegagna, ustung