Sustainability reporting is no longer a proactive measure for businesses committed to transparency and accountability, it is now a licence to operate, regardless of size. This underscores the need for a robust sustainability strategy that is embedded into an organisation’s operations.
In 2022, 96% of the world’s top 250 companies issued a sustainability report. Climate risk reporting is due to be introduced in Australia on 1 July 2024. So, with less than a year to go, how prepared is corporate Australia to respond to the greatest corporate disclosure challenge of our time? RSM reviewed the sustainability reporting practices of over 1500 Australian companies to answer just that question. With this first-of-its-kind research across the public and private sectors to assess the readiness of corporate Australia for the imminent climate-reporting standards. RSM found that less than 40% of mandatory reporters are prepared.
Whilst sustainability reporting has long been a priority for big businesses, a PwC study reveals that only 33% of Australian family businesses identify ESG as a priority and smaller businesses are still catching up. The growing emphasis on sustainability won’t just affect the corporate sector, not-for-profits too will experience heightened scrutiny as their suppliers and partners are expected to demonstrate greater transparency about their operations.
Whether it be investor, consumer or regulatory demand, there is increasing pressure for businesses to incorporate sustainability into their strategy and operations, to stay relevant and competitive.
Stakeholder & regulatory pressure is increasing
Stakeholders are demanding that businesses act transparently and take accountability for their impact in the world. In 2021, Gartner research found that 85% of investors considered environmental, social and governance (ESG) factors in their investment decisions. This is also true for consumers, as 60% of consumers base their purchasing behaviour on sustainability and ethical criteria, and this figure is growing by 10% each year.
In addition, a recent IBM study found that 7 in 10 people would be more willing to apply for a job with a company they consider environmentally sustainable or socially responsible. More than 40% even say they would be willing to accept a lower salary to work for an employer that meets this criteria.
These demands are accompanied by growing regulatory pressure. Earlier this year, the Australian government announced plans to implement mandatory climate-related financial disclosure requirements for companies and financial institutions. These requirements may affect big businesses as soon as 2024, and smaller companies through a phased approach over the next three years.
Start with a Sustainability Strategy
Although 90% of executives think sustainability is important, only 60% of companies have a sustainability strategy. To effectively deliver on sustainability, it is crucial for organisations to embed these principles throughout their business and this involves developing a sustainability strategy as a first step.
Developing a sustainability strategy is about aligning your business with your purpose, and establishing clear objectives and a well-defined roadmap for continuous improvement. It allows your business to look beyond short-term financial goals and embrace a holistic, long-term approach to improving and measuring performance.
Furthermore, it provides a foundation for building value within your organisation and in the eyes of external stakeholders. It also enhances your reputation among your customers, employees and partners, while equipping you to identify risks and vulnerabilities that may affect your business.
For SMEs, getting started on the sustainability journey can be daunting, but it doesn’t have to be. There are businesses of all sizes implementing ambitious, innovative and impactful sustainability initiatives.
Wallis Social Research is an Australian agency that has recently become B Corp certified. Their impact is closely aligned with the business’ purpose and strategy. They help to create positive outcomes for communities by providing social research to government to help improve their performance, such as supporting educational institutions to improve their leadership and training programs and investigating the health and wellbeing of young people in Victoria. This is considered an ‘Impact improvement’ business model under the B Corp framework because it delivers positive outcomes through its services, rather than as part of the company’s business operations. Find out more about Wallis’ impact here.
T2 is an Australian tea shop and certified B Corp. Their business operations are all guided by a holistic approach to sustainability that impacts every pillar of their business. As part of this commitment, 100% of T2’s teas are sustainably sourced. Their packaging is also sustainable, using plant-based polybags and FSC cardboard boxes. This commitment extends to their stores as well, as T2 uses locally sourced, sustainable materials in all of their stores. This includes using recycled timbers, collaborating with local Indigenous artists to create new lighting features and upgrading equipment to more energy-efficient and eco-friendly models. Find out more about how T2 is implementing sustainability across their business here.
Social Change Headquarters works with clients of all sizes, at all stages of their sustainability journey, to help them take the first steps.
What’s important is getting started in the right way. This involves identifying what matters most to your business and prioritising and developing impact improvements in the areas that best align with your purpose. Once you’ve started, you can then commit to a process of continued improvement.
Tips for creating a sustainability strategy
Here are some tips to help you embark on the process.
Creating a robust sustainability strategy involves understanding the key issues that matter to your business and stakeholders, determining your current position in your sustainability journey, defining your objectives and goals, and outlining the path to get there.
Clarify your purpose
Your strategy should clearly connect with your organisation’s purpose to create a lasting impact. This means that the first step is to clearly define your purpose. Think about why your organisation exists and the impact you want to have in the world.
Identify what matters most
This process begins with a materiality assessment. A materiality assessment is an effective tool to identify and prioritise the specific and most significant (material) issues relevant to your business and stakeholders. By engaging with internal and external stakeholders, the assessment will help identify areas for focus and will shape the development and direction of your strategy.
Do an ESG health check for your business
It is important to conduct an ESG health check to evaluate how your business is performing across ESG principles, and where the gaps and opportunities are.
Set key priorities and roadmap
By analysing the outcomes of the materiality assessment and ESG health check, you can develop your sustainability strategy – identifying the key priorities for the next 12, 24 or 36 months. Then you can develop a roadmap to guide your actions. This roadmap will provide a structured and strategic approach to sustainability and identify impact improvements to enhance impact across focus areas, improve resilience and create internal and external value for the business.
Assign targets and metrics
So that you can understand what success looks like, and how you are progressing with the execution of your strategy, you need to set targets and a clear idea of how you can measure your performance against these targets.
Remember, it’s a continual process of improvement, so there’s nothing wrong with starting small and continuing to set more ambitious targets once you have got the initiatives underway.
How can the Business Impact Assessment help get you started?
Creating a robust strategy that integrates sustainability into your business operations can be challenging without a clear starting point. We like to use B Lab’s Business Impact Assessment (BIA). This tool enables businesses to measure and track their performance using the B Corp framework, across five key impact areas of governance, workers, community, environment and customers.
Regardless of what stage you are currently at, the BIA will help you identify how you are currently performing across these five key impact areas. This powerful (and free) tool allows a business to benchmark its performance against thousands of other businesses globally that have undertaken the assessment, and compare how your business stacks up by size, industry and region.
It also makes it easy to identify and prioritise areas of improvement, set goals and track performance against your goals. For businesses that are looking to understand their current impact but are not yet sure how or what areas they want to pursue, this is also a useful resource.
If your business is ready to get started on your sustainability journey, remember the key is to take the first step. Starting off on the right foot is crucial, and from there you can commit to a process of continued improvement.
If you need support with your sustainability efforts, contact Social Change Headquarters. We work with businesses of all sizes, across a range of industries, no matter where they are on your sustainability journey, to help them improve their impact.
Get in touch with Social Change Headquarters. Click here for a complimentary 30 min meeting to see how we can help you.
Watch out for our next blog on tips for how to successfully embed your sustainability into your business.