A rise in stakeholder interest, especially investors, in greater alignment between sustainability and financial transparency has spurred companies to more clearly communicate their purpose and how it creates long-term value across all their communication channels.
Corporate transparency has evolved and progressed considerably in the last three decades. Public expectations of the private sector have also shifted, with greater emphasis being placed on corporate purpose beyond profit. Investors in particular are increasingly requesting sustainability performance data.
Companies are responding to stakeholder demands by communicating how the company is generating long-term value. Better aligning sustainability and financial disclosure is a core part of this response. Many frameworks, ratings and standards have emerged in recent years to provide guidance and incentives for companies to ensure coherent and consistent financial and sustainability disclosures, but there is no unified or accepted common practice approach.
SustainAbility, a global think tank and advisory firm, recently conducted research to illuminate trends and best practices in corporate transparency. The new report, Art of Alignment: Sustainability and Financial Transparency, provides practical guidance to corporate sustainability practitioners. Our research led us to create a roadmap to better align sustainability and financial transparency. We outline the core elements of the roadmap below (see the report for details and case studies). Each presents opportunities and challenges to those seeking to advance their company’s approach to transparency.
Investors are the primary audience demanding greater alignment between financial and sustainability transparency. However, corporate reporting and communications must also serve other stakeholders. We recommend gaining insights on stakeholder needs via engagement. Best practices include requesting feedback via direct emails, surveys, facilitated discussions and direct conversations.
Although we see action from regulators on mandating non-financial disclosure, particularly in Europe, it is still largely up to companies to determine what they will disclose.
Hone in on the most material issues
Balance responsiveness with proactively owning your story
Address both the past and the future approach to transparency.
There are many decisions to be made on how best to communicate your material issues in an aligned way.
Craft the core narrative
Use just a few key reporting frameworks
Balance the positive and the negative
Focus on impacts and point to intersections with financial metrics
Use assurance for increased credibility.
Companies can better convey their aligned messaging by adjusting the timing, format and channels of communication.
Synchronize publication dates
Customize the information
Broadcast out to investors
Be selective with ratings agencies
Do not underestimate the power of direct engagement.
Case study: Olam — Communicating a cohesive message aligned around purpose
Olam, a food and agribusiness company headquartered in Singapore, has been publishing integrated reports since 2015 and recently reset its purpose to “Re-imagining Global Agriculture and Food Systems.” The company’s 2018 integrated annual report outlines how sustainability is integral to the business. One way it does this is by explaining how its new, six-year strategic plan is shaped by key stakeholder trends.
Olam has seen a rise in more explicit links between sustainability and financial indicators from a wide range of stakeholders. “Investors are interested, but so are other institutions like the World Bank,” shared Chris Brown, VP of Corporate Responsibility & Sustainability. “Customers and NGO interest in business relevance could also be on the rise. The indicators they request are getting more in-depth and therefore link to business relevance because you need to show the information is part of your business and publicly disclosed.“
Olam’s integrated report seeks to meet stakeholder expectations in terms of demonstrating impact. Nikki Barber, Group Head of Public Relations, advised: “Don’t just list a random bunch of numbers; it’s about providing context in your narrative. What are you doing about these things? You need to bring in a strong link to materiality and the business. Don’t just tell nice stories to shield yourself from the broader questions.”
Its integrated report is the key mechanism to report back to stakeholders on Olam’s business, but Olam also publishes sustainability standards, a GRI report and a website with stories; as well as reporting to CDP, to complement the integrated report. In addition, it integrates sustainability messaging into its investor roadshow and AGM.
Accelerating transparency alignment to drive impact
We are at an exciting inflection point in corporate transparency efforts. Many of us in the sustainability field have been calling for greater alignment between sustainability and financial transparency for years.
The rise in stakeholder interest, especially investors, in such alignment has provided a strong spur for companies to more clearly communicate business purpose and how it creates long-term value across all their communication channels.
SustainAbility is encouraged by the progress made by leaders and encourages all companies to continue their transparency-alignment journeys. By providing greater visibility into corporate strategy and performance, businesses can enable more informed stakeholder decision-making. Ultimately, those decisions have the power to reward businesses that do the most to drive sustainable development and support the construction of a future where the interests of the economy, society and the planet are all aligned.
Download the full report at SustainAbility.com. The report was produced as a part of the SustainAbility Transparency Network.