Companies have shown that the return on investment from focusing on sustainability can be impressive. So why aren’t all companies following suit and reaping the same benefits?
Household names like M&S with its Plan A, Unilever with its Sustainable Living Plan and GE with Ecomagination have used sustainability to drive competitive advantage. Schemes such as these go further than clever marketing and deliver real value to the business. M&S’s Plan A delivered a net benefit to the bottom line of £70m in its last financial year and GE’s Ecomagination products generated $85billion from an investment of $1.8bn in R&D.
The question has led some quarters to consider increasing the pressure on businesses to act on sustainability. This June world leaders, governments, the private sector, NGOs and other groups, will come together at Rio+20, the UN Conference on Sustainable Development , to shape how we create a sustainable future on an ever more crowded planet. Paragraph 24 of the Rio+20 zero draft is getting a lot of attention at the moment.
“We call for a global policy framework requiring all listed and large private companies to consider sustainability issues and to integrate sustainability information within the reporting cycle.”
For some, this does not go far enough. A group of institutional investors lead by Aviva with $2 trillion under management is calling for an international commitment from Rio+20 to develop national regulations which mandate the integration of material sustainability issues in the Annual Report & Accounts on a ‘comply or explain’ basis. Also, the WBCSD (a CEO-led organisation of forward thinking companies) and the IUCN (the world’s oldest and largest global environmental organisation) have sent an open letter to the Heads of Delegations attending Rio+20 urging governments to strengthen paragraph 24 by including the explicit requirement for companies to adopt standardised, rules-based sustainability reporting.
If the UK Government’s consultation on mandating carbon reporting is anything to go by, it seems that business is not averse to a more prescriptive approach to reporting. WWF-UK claims unreleased submissions to the government’s consultation, obtained through freedom of information requests, show that some 61 per cent of organisations are in favour of full mandatory carbon reporting for all large companies.
The delay announced recently by the UK Government to the decision on mandating carbon reporting may be more about its commitment to a ‘one in one out’ approach to business regulation and wanting to look at what to do with the Carbon Reduction Commitment and businesses desire for this policy to be simplified. But if the benefits from sustainability reporting are so great, as evidenced by the GE and M&S stories, why has a more prescriptive approach to reporting not already happened?
One argument is that a prescriptive approach stifles innovation and moves everyone towards the lowest common denominator. If we are to respond to the threats posed by sustainability then we need more innovation not less.
What is the best way forward? More companies doing a little, driven by ‘comply or explain’ type regulation? Or is it a case of some businesses breaking new ground because they see the commercial benefits and, in the words of Richard Branson, “screw business as usual”? The answer is not as straightforward as it might at first appear, but one thing seems clear – sustainability reporting is going to continue to rise up the political and business agenda.
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