Ask not what you can do for your company, but what your company can do for you

This week’s Luminous spotlight shines on sustainability, an increasingly important consideration as stakeholders question the private sector’s precise role in society.

Sustainability reporting has been pushed to the top of the corporate reporting agenda with the UK implementation of the EU Non-Financial Reporting Directive, which makes it more important than ever to acknowledge the role of sustainability in a company’s long-term value-creation story.

Businesses that fail to sufficiently address sustainability issues are unlikely to be granted licence to operate in the long term, so must use the annual report, along with wider stakeholder engagement channels, to communicate how they work to reduce the impact of their activities on the world around them and contribute towards a better society.

How to achieve best practice

Sustainability begins ‘at home’, in your business. To move towards best practice reporting of your own sustainability work, follow the steps below:

– Focus on what’s material to the business and wider stakeholders.

– Address how sustainability links to risk, executive remuneration, strategy and the business model.

– Outline your business’s purpose and its role in society.

– Acknowledge aspects of your company’s activities that may impact its corporate reputation.

– Provide sustainability targets and discuss performance against the previous year’s targets.

– Describe the employee contribution to business success and align targets with global goals.

– Outline how the business identifies, engages with, and creates value for, key stakeholders.

– Provide disclosure of your company’s governance structure and explain how the Board facilitates sustainability.

– Use sustainability information as a platform to engage wider stakeholders, particularly employees.

The Luminous view

Authenticity and transparency are desirable attributes of all corporate communications and are vital for sustainability messaging. Insincere disclosures can be hugely detrimental to a business’s long-term viability and cause significant reputational damage. So Boards must prioritise the sustainability areas that are key to their company’s operations and make clear disclosures that are consistent with the business’s actions and values.

We have found that businesses often struggle when it comes to providing consistently high-quality sustainability disclosures, sometimes due to not deciding on the aspects of sustainability that are material to success. Luminous recommends taking a three-step approach to the problem: look within, to ensure you understand your business drivers; examine the main external influences acting on your work; and engage with stakeholder groups to uncover their key areas of focus.

Luminous best-practice clients

Luminous’clients, Britvic and Kindred, both offer commendably effective sustainability disclosures.

Britvic outlines targets for the following year and longer-term goals, discusses the previous year’s performance and discloses who manages each area from a governance perspective. Integration with other sections of the report is strong, with the business model including linkage to Britvic’s programme, ‘A healthier everyday’. There are also pull-out boxes detailing how Britvic is innovating with healthier products throughout the strategic report.

Kindred details the most material aspects of the business. The report has strong linkage between sustainability and strategic pillars and expands on these disclosures through integration with other aspects of the report, such as values, strategic intent and purpose. Kindred details how it determines sustainability material to the business and discusses the results in three key areas; environmental, social and governance.The ‘Responsible Gambling’ priority provides an understanding of how Kindred seeks to mitigate the impact of business operations, and the inclusion of a sustainability matrix implies high-level understanding of the societal impact.

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Connor Lundy

As Investor Insight Executive, Connor works closely with Stephen Butler, Luminous' Director of Stakeholder Engagement to research the latest best practice regulations and trends across narrative reporting, digital, investor events, sustainability and integrated reporting.