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Corporate Governance and Sustainability Reporting
Why companies undertake sustainability reporting
Companies undertake sustainability reporting in order to earn trust from the public and stakeholders. Sustainability reporting can also be used to manage the lost reputation of a firm. Managers, team leaders and employees in an organization can only be made accountable when sustainability reporting is done. Hence, organizations that participate in this type of reporting often seek to track their sustainability performance. The increasing demand for sustainability reporting has also compelled business organizations to be proactive in the process.
Sustainability reporting also assists organizations to obtain valuable feedback from customers and stakeholders. The same information can be used to improve the overall performance of a company.
Why some companies do not undertake sustainability reporting
Companies that do not undertake sustainability reporting argue that it is not a legal requirement. Since the process can be complicated and also demand additional workforce, it is not included as part and parcel of a companys core operations.
Negative information can be part of a sustainability report. Some companies have a notion that competitors may take advantage of the missing links and eventually outwit them in market competition. There are also business entities that lack the ability to gather information required to prepare a comprehensive report.
Response or feedback from stakeholders who are the consumers of the financial report has been deemed to be inefficient. Therefore, some companies do not find a good reason to engage in sustainability reporting. There are organizations that also fail to participate because they fear to provide sensitive information to the general public.
Large scale companies that have regional or continental presence may find it difficult to undertake sustainability reporting on a regular basis. Moreover, not all governance, environmental and social issues within an organization can be reported in broad multinational companies. This challenge has compelled certain companies to avoid sustainability reporting.
It requires an immense organizational commitment and resource utilization to compile comprehensive sustainability reports. This explains why some companies ignore the process. Besides, it is an engaging and time consuming procedure to obtain and synthesize reports from different units of an organization. Harmonizing the fragmented data is a difficult task. Some managers argue that allocating time and other resources to sustainability reporting are not commensurate to the expected benefits.
Wider Implications of non-reporting
In order to restore the confidence of stakeholders and clients in the operations of a business, it is vital to carry out sustainability reporting. Companies that do not undertake sustainability reporting cannot gain this opportunity. Lost confidence can only be regained when a rigorous sustainability reporting is carried out.
Second, it is easy to hold companies accountable when sustainability reporting is undertaken. When the managements of companies take the full responsibility of running their organizations, value creation opportunities can be easily created. Therefore, the latter opportunity is missed out in the absence of regular sustainability reporting.
The input of stakeholders can also dissipate where there is lack of robust data that vividly indicates the performance metrics against the stated goals and objectives. It is pertinent to mention that the track record of a company and the future prospects are vital to stakeholders. The latter can continue to support the given business organization if the trust level is sufficient. Worse still, the adopted business strategy and sustainability should have a clear correlation. Lack of such data may compel some stakeholders to withdraw their financial interests from an organization.
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