Soul Economy

With increasing pressure on companies to prepare sustainability reports, Soul Economy asked Ulrike Schuermann from Momentum International Partnerships about the benefits of reporting. Ulrike’s response is as follows.

The benefits of sustainability reporting as a management tool - not just an accountability tool - for businesses can be significant and benefits include:

• Improved financial performance — there is a growing body of evidence which links financial and social performance of companies (According a CPA Australia report there is a correlation between sustainability reporting and low probability of corporate distress).
• Improved stakeholder relationships - the continuing engagement with various interest groups builds trust and improves communication.
• Improved risk management — this is a very important benefit brought about by a better understanding of non-financial material risks. Understanding risks and dealing with those risks appropriately saves companies time, money and avoids loss of reputation.
• Improved investor relationships — due to the growing demand for ethical investment funds, particularly but not limited to, by superannuation funds.
• Identification of new markets and/or business opportunities — this is a particular welcomed side effect of improved relationships with interest groups.

The value for regulators (governments) includes that business contributes effectively to sustainable development goals and that it is much easier to benchmark and monitor business activities within and across industries.

The primary value for the general public of sustainability reporting is the transparency of all business transaction it provides. It provides the consumer and other interest groups with all the relevant information to make informed choices.

Barriers have consistently been identified as:

• Resources and costs involved in this type of reporting are often perceived as inhibitive. The investment required for the 1st time reporter can be high, once systems have been set up; the reporting process becomes increasingly cost effective. This affects SME’s more than large corporations and how-to-tools have been developed aiming to deal with this issue.
• The absence of a readily available, well tested, universally and nationally agreed to framework which allows benchmarking of information or in other words prevents the current fragmentation and proliferation of frameworks.
• Lack of commitment from the top floor is often brought up by sustainability professionals as inhibiting factor and lastly but not least:
• Short-term thinking of financial analysts and here I would like to quote Mr Francis Grey from Sustainable Asset Management Research (SAM) who gave a colourful account of the lack of interest and engagement of mainstream financial markets to the Joint Parliamentary Committee on Corporations and Financial Services:

”The financial markets are not just not tuned in; they are not turned on, and they are not even plugged in. The radio is not even in the house. It is somewhere else, down at the shop. They have not gone down and bought it yet. They do not know where the shop is and they do not know it exists. If they went past it, they would think it was a baby-wear shop. So they are seriously not involved.”

Tags: ethical shopper, ethical shopping, Momentum International Partnerships, soul economy, sustainability reporting, sustainability reports, Ulrike Schuermann