Expert Views On Environmental,
Social And Governance Topics
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This blog combines articles from ADEC ESG Solutions, as well as FirstCarbon Solutions (FCS), an ADEC Innovation.
Materiality: Putting Value in Sustainability Reporting
Posted by Chet Chaffee on Jul 23, 2013 7:50:00 AM
The increasing demands for transparency on environmental, social and governance (ESG) disclosure is putting pressure on companies to prepare sustainability reports that can capture and present all the essential information to their stakeholders. More than ever, businesses need to be able to prove they are integrating sustainability into their core business strategies. This has become a new determinant of bottom line value, where sustainability underscores all the other benefits to stakeholders, including investors and the general public.
However, many organizations are still hampered by the many, and seemingly varied, reporting requirements of regulatory bodies, making it difficult to spend the time and resources necessary for producing a sustainability report. Sustainability reports are generally prepared for transparency purposes, and do not necessarily add any tangible value to the company.
Recognizing the current dilemma of most businesses in preparing sustainability reports, as well as the myriad requirements of various reporting programs such as the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI), GRI undertook a comprehensive review of its reporting format and came up with G4, the fourth generation of sustainability reporting. The result of a long process of review and consultative discussions with various stakeholders, G4 is based on the principle of materiality, and encourages companies to report only on those parameters that are important to the company economically, socially and environmentally. This is a significant improvement from previous versions which required reporting on all key performance indicators (KPIs) which may not be relevant to the company.
How Materiality Works for Sustainability Reporting
Aside from addressing the difficulties of sustainability reporting, G4 is ultimately aimed at helping companies derive added value from these reports, including improved business performance and compliance to various global and local sustainability regulations. G4 also provides transparency, which is highly valuable to external programs like the Dow Jones Sustainability Index, in monitoring companies' sustainability performance, and to capital markets which need to assess how sustainability impacts a company's return on investment (ROI) and bottom line value. It also provides an opportunity for internal visibility as to how sustainability can help companies increase their ROI, create better bottom line value and encourage more sustainable practices.
In the G4 reporting format businesses are given the freedom to choose from two formats:
1.) Core: Requires reporting on at least one major indicator for every identified material aspect.
2.) Comprehensive: Builds on the ‘core’ and requires additional reporting on strategy and analysis, governance, and ethics and integrity.
To ensure the quality and reliability of the reports, GRI also requires that these be sent to them for prior review, and be declared "in accordance" before being made public.
FCS: Helping Companies with Sustainability Reporting
Parallel to the flexibility allowed by GRI's G4, FirstCarbon Solutions provides tailor-fit products and services that can help businesses accurately and cost-efficiently gather, aggregate and integrate all of the sustainability data that is material to their business. Our team offers services for energy, environmental and emissions aspects (as listed in the GRI guidelines), in addition to the generally required disclosure on supply chains. With extensive experience in providing data processing, software and consultative services our team helps businesses worldwide generate sustainability reports compliant to GRI standards. For more information, simply click below: