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Written by Matthew Ayearst, Sustainability Management Consultant


Benjamin Franklin said, “there is nothing certain in this world except death and taxes.” Regulation could be added to that list, and that is not always a bad thing.  The question of whether sustainability reporting matters has already been answered: it does; and organizations bold enough to embrace it, will witness its transformative impact.  It’s not a trend that will go away as it matters to consumers, investors, insurers, and others.  While interest has waned slightly it is here to stay and is still a top three C-suite concern and spend. So, the question now is when it will matter, and the answer is: now!  Most jurisdictions have regulations that are under consultation, in the progress of being implemented or in the case of UK and Europe have already implemented. For those companies, both public and private, that are still not convinced, there are several benefits to starting your sustainability journey and begin voluntary reporting.  


A pay to play system is developing


A pay to play system is now developing across the sustainability ecosystem.  What this comes down to is that you will pay with your ability to substantiate your company’s sustainability performance to continue to play within your industry’s ecosystem. To ensure your company is not left out you need to start demonstrating progress.  Your company does not operate in isolation, it is part of another company’s value chain, so it matters.


To understand potential future exposure


If your company interacts in more than one jurisdiction then it is in your company’s best interest to stay on top of potential sustainability regulations and reporting requirements across the jurisdictions for which you operate.  Understanding and becoming knowledgeable of incoming regulations will allow you to pre-assess the impacts on your global business operations and its stakeholders. In the case of pending legislation, it will enable you to engage with the respective regulators to make sure they address issues that may have a material impact on your business. It gives your company a seat at the table and a voice, and it is simply prudent management and good governance.


Improves risk management


Understanding, implementing, and integrating sustainability reporting on a voluntary basis allows a company to test drive frameworks and reporting expectations ahead of mandatory requirements. This will not only set a company up for success once the regulation is in place, but it will help to safeguard against future regulatory risk.  Furthermore, many of the sustainability reporting frameworks are designed to provide enhanced understanding to stakeholders on how a company is mitigating various risks such as: climate risk, transition risk, social risk, reputation risk and financial risk. Companies that report will look better managed than companies that chose not to.  


Your stakeholders are demanding it or they soon will be


If you are a publicly traded company, then you already have shareholders asking for sustainability data. Asset owners have agendas and good ones have sustainability roadmaps and score cards to track engagement with assets and their voting.  These stakeholders will be asking questions about sustainability associated risks, your sustainability plans and they will be tracking and measuring your performance. If you are a private company then your stakeholders may be bondholders, private equity, or other companies you do business with. Their sustainable demands will ultimately drive your sustainability program.  So, if you think you can avoid compliance think again as it will be thrust upon you.  Is it better to be caught unawares or is it better to have an informed response?


Gain first move advantage


There is a first mover advantage to thoroughly understanding incoming regulation and adopting or at least considering it early on.  It allows a company to prepare strategically rather than having to react tactically. By moving first your company can assess exposures and explore positive business opportunities.  A strategic approach can give you a leading edge with your stakeholder group while meeting your regulatory obligations. If there is a return on a sustainable investment to be made, then for many opportunities it will be realized by leading not lagging.


Reduces costs in the long run


It is generally an accepted fact that time spent in inaction makes action more expensive in the future.  This statement argues in favour of spending time, money, and resources earlier to address a business challenge rather than later to reduce overall costs and risk.  While this is not always the case it is most often the case.  Value extraction from a business exercise is higher and more successful when time, money and resources are deployed early on.  Regulatory reporting is first and foremost a cost or a tax on business therefore, companies should always avoid increasing expenses and risk. 


These are just seven reasons why companies should start voluntarily reporting and there are others. Avoidance only increases risk – it is better to act now and prepare your business for success.


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