Sustainability information needs sharper focus
January 21, 2008
What is the core of the problem? The research methods are not fit for purpose and the questionnaires are of questionable quality. But the companies like to keep the researchers happy, because a top ranking in the sustainability league tables can boost their reputation. So companies dutifully provide as much information as possible, whether it is relevant or not. This is what Michael Porter calls “The ratings game” (Harvard Business Review, December 2006).
The result is a spate of sustainability reports where the preference for quantity over quality leads to a muddled picture bereft of focus and vision. Rather than setting clear priorities, companies seem to want to address every sustainability issue all at once. Most users (analysts, professional parties) seem unconcerned about this lack of strategy and direction. They see the report as a ‘qualifier’: the mere fact that the company publishes a report is more important than the actual contents. The upshot is that reports are rarely read and elicit few reactions from readers. Bluntly put, they serve no real purpose and are a waste of time, money and resources.
This situation cannot continue and I anticipate a move towards a more rational approach, which will become visible in two major changes. First of all, companies will seek to concentrate more on sustainability aspects that are material to the continuity of their business, while also focusing more sharply on specific target groups. A beer brewer, for instance, will provide information on its water consumption and its access to this scarce resource, but will spare us the details of its paper use. As a result, good sustainability reports will become thinner. A second development is that sustainability reports will soon become an integral part of financial annual reports. And this is as it should be. Because sustainability aspects that are genuinely relevant have a material impact on the company’s overall health and wealth and, as such, belong nowhere else.
This sounds logical enough, but there is one snag. Companies who adopt this sharper focus will no longer be able or willing to answer the endless questionnaires presented to them by sustainability rating agencies – and their sustainability ratings may be downgraded as a consequence. That’s a high price to pay, but it’s necessary to promote the healthy development of sustainable entrepreneurship. Wouldn’t you agree?
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