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Building the commitment


Both external and internal drivers are behind the development of a sustainable development report. As a result of these forces, a company can identify its own business case for sustainable development and for reporting.

Yet, just embracing the general concept of sustainable development is not enough. A company should first appraise its situation, determine its strategic objectives, define its stakeholders, and clarify its vision and values. Based on this, it can then define its own business case for sustainable development.

A company’s commitment to sustainable development will not be effective unless it is made operational. In order for this to happen, top management has to communicate its commitment internally and externally. Without top-level commitment, the risk increases that sustainability concerns will not be fully integrated into the daily operations of a company.

Internally, this often means developing incentives to get business managers and employees involved in the issues. In that case, sustainable development performance needs to be integrated into the overall management reward system. Externally, a sustainable development report is an important tool to provide a periodic status report on achievements.

How to express the commitment
Different companies express their commitment to sustainable development in different ways. This commitment can be integrated into an organization through:

  • Senior management decisions, statements and leadership styles
  • Business ideas, business models, overall business objectives and strategies
  • Policy documents
  • Management systems
  • Training programs

This commitment should be articulated in some of the company’s key documents, such as:

  • Corporate values (ethics, values and principles)
  • Management and business principles
  • Codes of conduct, pledges and charters

The public commitment by senior management is important to drive sustainable development throughout the company. Leadership helps to steer strategies and policies to meet this commitment and is crucial for transforming commitment into action.

Approach

When the commitment to sustainable development has been made, the real work begins. Companies usually start working on either the management process so that it incorporates sustainable development issues or the reporting process to communicate with internal and external stakeholders.

The approach depends upon what a company wants to achieve and how to achieve it, in relation to the sustainable development issues it faces. It also depends on the internal and external pressure it is confronted to.

Experiences from WBCSD members demonstrate that roughly the same number of companies start with either the management process or the reporting process. A smaller group of companies chooses to simultaneously develop one integrated management and reporting process.

Some companies need to be in total control of their sustainable development information and data before externally communicating their sustainable development objectives, performance and value creation. Other companies use external reporting to drive internal transformation. Companies choose different ways to start working based on their culture and business environment.

Technically-oriented companies tend to start working on the management process by creating management and information systems. Communication-oriented companies usually begin with the reporting process, detailing their direction and how to achieve their objectives. In some cases, the external stakeholder pressure is so strong that companies feel compelled to start focusing on reporting before they even build management systems to collect the necessary data. In these cases, extreme care should be given to avoid projecting an external image of hollowness and inappropriate internal focus.

With regard to the external business environment, there are two factors that influence companies’ willingness to start reporting. The first factor is related to the origin of a company or where it performs its primary operations. In some countries, like in northern Europe for instance, companies are expected to report on sustainable development while elsewhere, very few produce such reports. Yet, global companies with major operations in developing countries are increasingly asked to report on how they manage their complex business environment with regard to sustainable development.

The second factor is related to legislation and informational needs from some stock exchanges. Listed companies might fear damages in stock prices when reporting on certain sustainable development issues. These companies might thus prefer to focus on developing their management process first and embark on reporting at a later stage.

Whatever the starting point, the end-result should be an integrated management and reporting process as this integration will create real value. Information in itself does not lead to action or a change of behavior unless it is relevant and connected to management systems. The quality of the reporting process increases in companies with a well-developed management process.

Establishing the management process

The management process should be based on the company’s specific business case, i.e. be in line with its vision, values and business objectives. It should be backed up by strategies and policies to guide future activities.

It includes five key steps:

Defining the objectives

The first step in the management process is to establish the overall objectives for sustainable development activities. These should be based on the company’s business case, as well as on its specific situation, vision, values and strategies.

The overall objectives are achieved by developing sustainable development strategies and policies to guide future activities.

Planning the activities

The planning determines which activities are needed to fulfill overall sustainable development objectives, strategies and policies. This stage is also used to ensure that adequate resources and structures are in place to perform the planned activities. It should thus include targets and indicators for follow-up.

Generally, it is not expedient to decide on all targets at top level. The key is to set targets at site, entity, corporate and group level. This can help to develop awareness across functions and create enabling conditions for initiative and creativity. There is also a need to set up monitoring systems to track indicators and performance that have not been recorded before.

Carrying out the activities

After the operational planning is completed, the actual activities must be carried out.

Some companies may choose to have external bodies certify their management systems to ensure that activities are performed in accordance with a given standard, for example, ISO 14001 and SA 8000. This can be a powerful driver for improvement.

Follow-up and appraisal

Follow-up and appraisal of planned activities aimed at improving the company’s performance should be in line with its stated objectives, targets and key indicators. Reporting on sustainable development should be conducted at regular intervals just as financial reporting, for instance. The purpose is to integrate sustainable development activities into the company’s normal operations and management processes.

The follow-up and appraisal phase allows the company’s management to assess the results of its sustainable development activities based on internal indicators formulated during the planning phase. The results should be incorporated into the reporting process.

Review and learning

Review and learning is based on the outcome of the follow-up process, including feedback received on the report. Management should ask the following questions:

  • What went right?
  • What went wrong?
  • Where is immediate or further action needed?
  • What changes are needed in the management process (i.e. objectives, strategies, planning and follow-up) to further enhance performance?

Answers to these questions will help develop and continuously fine-tune the management process in order to achieve the overall objectives and targets related to sustainable development.

Establishing the reporting process

Reporting may seem like a simple exercise in transparency but it is more than that. In fact, it gives management an additional opportunity for improvement, through readers’ reactions, criticisms and suggestions. Considering stakeholder views also helps to shape strategy, goals and objectives. All the inputs from direct stakeholders should be carefully reviewed as part of a management learning process to adapt and fine-tune the company’s sustainable development objectives.

The reporting process comprises five main steps:

At each of these steps, several questions should be considered and the reporting organization should develop its own answers.

Defining the reporting objectives

The first step in the reporting process is for the company to determine reporting objectives. These should form a strategic base that will guide the company’s future work in developing its report.

In particular, the objectives should define:

  • The report’s overall purpose and ambition level
  • The report’s target audience(s)
  • The accounting principles that will support the credibility, transparency and accountability of the report

Planning the report

The planning phase begins when the sustainable development report team starts refining the details of the final report.

The planning phase requires decisions on the following areas:

  • Production related issues
  • Objective of the report
  • Information to disclose
  • Gathering and collecting information
  • Quality assurance of information and data

Constructing the report

It is important to consider writing, layout and third-party assessment when constructing the report. The report will be better if it is begun sooner and more time is spent drafting it. The development phase starts when the actual work on the sustainable development report begins. This phase can be divided into four different activities that are usually performed in parallel:

  • Collection, aggregation and analysis of data
  • Writing and layout
  • Internal quality assurance
  • Third-party assessment

A sustainable development report will benefit from being released at the same as the company’s annual report. One of the problems this presents is that relevant sustainable development data often comes late in the process. This data must then be analyzed and quickly integrated into the final report.

The report becomes qualitatively better when relevant data has been aggregated early on. The more time is spent analyzing performance, the higher the quality of the final report. A detailed analysis is also perceived as important in the follow up and appraisal as well as in the review and learning part.

Distributing the report

Distribution must be in line with the report’s original purpose and the identified target users and audience(s).

The report should be promoted both internally, among employees, and externally, among important stakeholders, NGOs and financial analysts.

Collecting and analyzing feedback

Collecting and analyzing feedback includes benchmarking and planning future improvements to the report’s content and readability.

As a result of the overall reporting process, a crucial feedback loop has been established. All of the inputs from key stakeholders and report users, both internal and external, should be carefully reviewed. Lessons learned should be fed into the management loop to improve and fine-tune the company’s sustainable development objectives and overall performance.