In the 21st century, there has been increased need to consider current generation sustainability without limiting future generations’ capability to satisfy their needs. Different drivers compel organizations to give their sustainability reports periodically; Irja Vormedal and Audun 2006 note, “While the first wave of reporting in the 1990s was characterized by the growth of ‘pure’ environmental disclosures, companies have increasingly expanded their focus to reporting on sustainability more broadly” (Irja and Audun 2006).
Irja Vormedal and Audun Ruud, further notes that one area that has taken centre stage in corporate social responsibility is steady increase in the volume and size of corporate non-financial disclosures over the past decades; when making the disclosures, firms communicate the efforts they have enacted to support sustainable development (Vormedal and Audun, 2009). This paper discusses why Australian organization should adopt sustainability reporting in the 21st century.
Literature review: the reasons for adopting sustainability reporting
According to Irja Vormedal and Audun Ruud, 2006, in the article “Sustainability Reporting in Norway – an Assessment of Performance in the Context of Legal Demands and Socio-Political Drivers,” published in Business Strategy and the Environment journal states that the need to have sustainable reporting is driven by a number of economic and social drivers depending with the nation and the market that a company operates.
Market mechanisms have affected the growth of ethical, social, and environmental investments, with advancement in technological knowledge and education, customers have learnt the role that organizations play on sustainability. With the information, customers through social drivers have placed pressure on organization to disclose information on their social, environmental and ethical performance from stakeholder groups.
Irja Vormedal and Audun Ruud seems to have concentrated on the pressure that customers have on organizations to report their sustainable policies; according to customer relation management strategy, customers need to perceive organizations in a positive manner if they are to continue trading with them.
According to Lena Geraghty, Network Manager, Focal Point Australia, Global Reporting Initiative, when organizations adopt sustainable reporting, it can be benchmarked with its peers. The writer is of the opinion that when an organization has adopted sustainable reporting, then the company becomes competitive among its peers.
Sustainable reporting thus is a competitive tool that organizations should adopt; it focuses on developing a healthy relationship between an organization and its target customers. Customers are the backbone of an organization, any effort that is likely to improve the relationship between an organization and its customers should always be welcomed.
Organizations that have attained good relationship with their customers led to customer loyalty. Good customer/organization relationship is a strong marketing and competitive tool that organizations should adopt (Slater and Glibert ,2004).
Ans Kolk in the article, “Sustainability, Accountability and Corporate Governance: Exploring Multinationals’ Reporting Practices’” is of the view that global financial crisis in different parts of the globe, accounting and remuneration scandals, and suspicion about the social and environmental implications have exerted pressure on organizations to report their suitability levels in the efforts to develop good relationships with their target market.
The writers note “Largely separate from the (more traditional) approach to accountability in the context of corporate governance, sustainability reporting has developed,” (Ans, 2008). The writer further sends light to the demand that shareholders and other stakeholders in different markets and varying regulations and governance systems have placed on multinationals in the efforts of making them compliant with sustainability reporting requirements.
Ans Kolk observes that demand to report ones sustainable level is a way to make organizations accountable of their actions either in production, manufacturing, or the nature and system they use to sell commodities. When sustainable reports have been produced by organizations, it becomes easy for the government to devise mechanisms and policies to facilitate the growth of good corporate governance and sustainable development measures (Ans, 2008).
In the words of Isenmann, Christoph & Welter, 2007 “Reporting makes it possible for companies to obtain in-depth information on the target groups heterogeneous information needs” (Isenmann, Christoph & Welter, 2007). The writers are outlining the benefits that organizations derive when they report their sustainability accountability level. The said benefits can be beneficial to Australian organizations.
How organizations approach the planning and implementation of sustainability reporting
According to Perogo, P. ,2009 “ An increasing number of companies disclose information about their social and environmental performance in, so-called, sustainability reports to demonstrate a commitment to corporate responsibility” (Perogo, 2009). The challenge that organizations are facing is looking at the right approach, which they can use to report their sustainability reports.
To report effectively, there is need for some level of uniformity among organizations, industries, and nations; The Global Reporting Initiative (GRI) has made great progress in developing a common framework of sustainable reporting.
The Global Reporting Initiative (GRI) framework seeks to address internal and external environment/matters to address issues at hand (Owen, 2006). The Global Reporting Initiative (GRI) reporting advice mechanism identifies five main steps that need to be adopted when planning and implementing sustainable reporting in an organization, they are:
Preparation: the stage involves undertaking an internal analysis of business processes and operations and their effect to the environment; the effect may be negative or positive. The internal analysis offers a deep insight of the business level strategy that an organization should implement.
Connection: this second stage involves seeking stakeholders inputs on the best strategy that they feel would work for the benefit of the company; at this stage a draft of final report is made considering the driving parameters that will be included in the final report (Tregidga and Milne, 2006)
Definition: the stage involves a further polishing of factors/parameters that have been given by management in the first stage and those that stakeholders have shown interest in the second stage. At this point the structure and direction of the report has already been shaped.
Monitoring: this involves undertaking massive reports, information, and data then relating it to the level of business operation for the final report. According to GRI, organizations should ensure they have quality reporting principles to develop a concrete and reliable report.
Communication: with the data and information on the main principle in stage four at hand, the management goes further and gives an account of level of sustainability of a company; the stage involves the preparation and writing of the final report and seeking the best method to communicate the same to the community (Lena, 2009).
Australian organizations that have adopted sustainability reporting
Although sustainability reporting is a developing field in Australian companies, there are some companies that have already adopted the methodology, they include Abigroup Construction limited and Lend-Lease Limited (both are in the construction industry). At every end of financial year, Abigroup Construction limited ensures that alongside its financial report it has given an account of how it has affected the environment as wells as the efforts that it had undertaken to improve the operating environment.
The company’s management is keen to note the changes its operations have on the operating environment may it being customers, employees, the environment, and stakeholders in general. In the company’s history of 50 years, it only made its first sustainability report in 2009 and the second one in 2010. According to David Jurd, the company has entered into various collaborations with international and domestic companies to guide them on the way forward on sustainable reporting.
Lend-Lease Limited has embraced the spirit of sustainable development reporting and ensures that all its operations looks into environmental, social, ethical and financial dimensions of the business. The company has enacted different community based activities that aims at looking into the general welfare of the society and ensuring that they have compensated for their damage of the environment. The company’s sustainability reports are posted in the internet for easy access and comparability (Perogo, 2009).
Comparison and contrast of Abigroup Construction limited and Lend-Lease Limited approaches to sustainability reporting
According to Abigroup Construction Limited sustainability policy, the main objective of the company is to balance growth and long term business success with social and environmental responsibilities; when making the report, the company gives an account of the efforts to promote sustainability that it has adopted.
When adopting policies, the company ensures that it has done so in light with reviews and feedbacks from stakeholders from previous year’s report. The company ensures that it has structured its reporting approach to be in line with the specifications of Global Reporting Initiative. The areas that the company look into when reporting its sustainability include people/leadership, the society, business, our people and the environment (Sinclair and Walton, 2003).
On the other hand, sustainability policy is aimed at ensuring that environmental, social, ethical and financial impacts of every decision we made has been analyzed. The approach aims at doing business in a way that would not have a negative impact on the people or the company.
According to the company’s sustainability reporting approach, the company enacts into some projects that range from independently green-rated buildings to creating long-term job opportunities for local communities, construction of the so called “green houses”, constructing carbon-zero, and enacting the benchmarks of sustainable reporting that can be adopted internationally (Solomon and Lewis, 2002).
The main similarity between Abigroup Construction limited and Lend-Lease Limited is that both encompass the concept of stewardship in sustainable development. Both companies are guided by frameworks set out by The Global Reporting Initiative (GRI); when preparing current period sustainability reports, the companies’ business leaders review responses/feedbacks by stakeholders on the previous report.
Ans, K. ,2008. Sustainability, Accountability and Corporate Governance: Exploring Multinationals’ Reporting Practices. Business Strategy and the Environment, 2(1), pp. 18, 1–15.
Lena, G. ,2009. Sustainability reporting— measure to manage, manage to change. Key Issues Applied Corporate Governance, 1(2),pp. 135-145.
Owen, D. ,2006. Emerging issues in sustainability reporting. Business Strategy and the Environment ,15(1),pp. 217–218.
Perogo, P. ,2009. Causes and Consequences of Choosing Different Assurance Providers: An International Study of Sustainability Reporting. International Journal of Management, 26 (3),pp. 412-425.
Sinclair, P. and Walton, J., 2003. Environmental reporting within the forest and paper industry. Business Strategy and the Environment 12(1),pp. 326–337.
Slater, A. and Glibert, S. ,2004. The evolution of business reporting: make room for sustainability disclosure. Environmental Quality Management, 2(1),pp. 41–48.
Solomon, A. and Lewis, L. ,2002. Incentives and disincentives for corporate environmental disclosure. Business Strategy and the Environment, 11(2),pp. 154–169.
Isenmann, R., Christoph, B.,& Welter, M. ,2007. Online Reporting for Sustainability Issues. Business Strategy and the Environment, 16(1),pp. 487–501.
Tregidga, H. and Milne, M. J. ,2006. From sustainable management to sustainable development: a longitudinal analysis of a leading New Zealand environmental reporter. Business Strategy and the Environment, 15(1),pp. 219–241.
Vormedal, I. and Audun, R.,2009. Sustainability Reporting in Norway – an Assessment of Performance in the Context of Legal Demands and Socio-Political Drivers. Business Strategy and the Environment, 18(1), pp. 207–222.