Tracing the Trend: Sustainability Reporting
Did you happen to hear about Coldplay’s sustainability report that has been headlining notable publications worldwide? Electric graphics accompany statistics and information on how the band fared in its carbon footprint while it was touring the world.
Sustainability reporting is not new, but its traction in recent years indicates a systemic change that demands accountability and transparency from companies worldwide. Conducting business comes at a cost to the environment and society—whether it be CO2 emissions from factories or power consumption in popular bands doing concerts worldwide. Each instance of consumption and emission adds up, so taking responsibility has become the mark of an ethical organization.
But first, let’s define what sustainability reporting means.
As the name suggests, it is a form of non-financial reporting detailing a company’s progress towards achieving sustainability goals, including environmental, social, and governance (ESG) metrics.
These metrics involve the relationships a company builds with the different elements of society:
- Environmental criteria: includes the energy a company takes in and the waste it discharges, encompassing carbon emissions and climate change.
- Social criteria: address the relationships a company has and the reputation it fosters with people and institutions in the communities where business takes place, encompassing labor relations and diversity and inclusion
- Governance criteria: the internal system of practices, controls, and procedures a company adopts to govern itself, make effective decisions, comply with the law, and meet the needs of external stakeholders
These ESG metrics, therefore, provide the opportunity for companies to evaluate how they comply with environmental laws and broader concerns about sustainability.
Is sustainability reporting mandatory?
Some countries have mandated ESG reporting to promote social responsibility among business leaders. Globally, different countries follow different directives.
For example, in Europe, Corporate Sustainability Report Directive (CSRD) requires all large companies to report on sustainability policy and performance based on factors that can be found here.
The Indian context is an interesting study, especially since it was the first country to mandate CSR with the Companies Act of 2013. Currently, the top 1000 listed companies by market capitalization are required to report their ESG parameters and sustainability risks. Over the years, multiple models have frameworks have come into place to establish a consistent model for companies to follow to achieve greater transparency and better alignment with international standards such as:
- UN Guiding Principles on Business and Human Rights,
- UN Sustainable Development Goals,
- Paris Agreement, and
- International Labor Organization (ILO) Core Conventions.
What are the effects of sustainability reporting?
The trickle-down effect of these policies has greatly impacted how we see sustainability in our everyday life. Earlier, sustainability may have meant using paper straws instead of plastic ones for individuals, but with these metrics in place, sustainability has become an important indicator against which a company’s value is calculated. Investors and executives have come to realize that a strong ESG proposition can safeguard a company’s long-term success.
Coldplay’s sustainability report is a telling example of the effects such efforts can have globally. Following the band’s pledge not to tour until they could do so more sustainably is a critical moment in the entertainment business wherein carbon footprints are often hidden behind the guise of cultural milieu and fanfare. To that end, the band’s sustainability report of their tour reveals the many indicators against which they have taken concrete steps to decrease the ill effects their business produced.
Why is this relevant?
The importance of sustainability cannot be overstated, especially now that even slowing climate change is becoming increasingly difficult. Popular culture in the public imagination is often sidelined as irrelevant and unimportant, but the artists that are part of this culture have significantly impacted the way generations take up responsibilities. If a globally popular band with a dedicated following deliver on their promise of a sustainable tour and reports on ESG metrics that define the actions taken to reduce their carbon emission, the spillover effects are bound to be massive.
Witnessing such accountability and transparency will establish the importance of reducing carbon emissions produced during business, thereby generating awareness about the need for immediate action and accountability from other businesses.
ESG is a clearly advantageous concept, and we can stand to gain a lot once we begin to implement these reporting strategies for businesses. However, some difficulties in the concept have emerged over the years, which we will explore in the second article of this series and explore the larger goals that the world aspires to achieve to protect the environment and its resources.
Aishwarya Bhatia, Sambodhi
