Why do US companies report sustainability data?
Tennaxia conducted a study to understand what motivates US companies to report sustainability data. The study has identified seven main reasons that drive companies to report. It has also found that companies’ motives evolve through time.
The study is based on 15 interviews with US sustainability practionners (10 Sustainability Directors of global companies, 3 consulting firms and 2 standardization organizations).
The interviews started with a set of questions regarding the reasons for reporting sustainability data. What goals and objectives did they want to achieve with their sustainability reporting? Here is a summary of their answers :
We noticed a clear difference between companies that are just starting reporting and companies that have been reporting for more than four years. The main reason companies start reporting is to engage with stakeholders, either internally (employees) or externally (investors/customers). There is a will to communicate the right message about positive initiatives and good actions. However, companies that have gained more sustainability reporting experience (more than four years) find that the reporting process enabled them to better understand what the company was doing (or not doing). All agreed it can be a painful and labor intensive process especially at the beginning. After learning each year about their mistakes and communicating the sustainability report they noticed a shift in the process. The fourth year seems to be a tipping point where the reporting change from a purely communication tool to a more strategic tool. A tool that can assess sustainability performance and be used as a compass for the company’s sustainability strategy.
All participants mentioned the reporting process as a learning journey. It always takes time before the Sustainability department can prove to the top management (and sometimes other department as well) that sustainability reporting has a real added value.
Engagement with various stakeholders (employees, clients, shareholders) is always a key motive whether a company is a beginner or experimented with reporting. The three reasons driving companies to communicate more on sustainability that have been the more mentioned are; attract or maintain talents, client expectations/competitive differentiator and stakeholder request.
Reporting on sustainability data is a process that is continuously evolving. Drivers, goals and expectations from internal and external stakeholders are changing overtime. It is an exciting process for those who ‘speak the sustainability’ language.
Once companies decide to report, one of the first challenges we noticed both with this study and with Tennaxia’s clients, is that it’s often difficult for companies to access reliable data. This requires the appropriate sustainability reporting software: a system that facilitates data collection ensures data reliability and enables multidimensional analysis.