Proposed legislation would widen reporting requirements and provide better tools for companies.
By Stefan Crets
A united front on corporate sustainability will be essential in the coming months, not the least because of a proposed EU legislative proposal to boost corporate reporting on Economic, Social and Governance. The goal of the proposal is to increase the number of companies reporting and to enhance overall business transparency.
Beyond the debate on the usefulness and impact of obligatory reporting, there is an even bigger challenge: do we have the capability inside our companies to manage the impact of business operations and to turn global and local sustainability challenges into business growth opportunities? Are we ready? Are we providing the management, innovation and solutions needed for smart, sustainable and inclusive growth?
Sustainability – Glass Half Empty or Half Full?
The answer to such questions is a typically a “glass half empty or half full” response. Especially in times of economic crisis in Europe, the capability to manage sustainability is a key issue. In CSR Europe’s own work with leading companies on Valuing Non-Financial Performance, we see that the maturity of sustainability management in companies, including their supply chains, reaches a level of 46% while the level of integration of sustainability into business is 61%. As a CSR practitioner myself, I see this as a ‘glass half full’ situation.
The UN Global Compact Accenture CEO Study on Sustainability 2013 published for the UN Global Compact Leaders’ Summit, shows that CEOs have their doubts and frustrations about progress and results. They are looking at the glass half empty.
1,000 CEOs Surveyed on Sustainability
The survey of 1,000 CEOs across 103 countries and 27 industries gives insight into business leaders’ views on the pathway towards a sustainable economy.
Only 32% of the CEOs surveyed believe the global economy is on track to meet the targets of sustainable growth, and only the same proportion believe business is doing enough. On the other hand, 63% of these business leaders believe sustainability will transform their industry within the next five years. If company leadership is unable to locate and quantify the business value of sustainability, especially in the short term, sustainability gets caught in what the report calls a “pilot paralysis.”
Markets Sending Mixed Signals, Government Must Act
CSR Europe’s first summary report of collaborative projects under Enterprise 2020, The Power of Collaboration, emphasizes the need for collaboration and innovation to enhance impact. The challenge of showing the direct business value of sustainability is not helped by the fact that consumers specifically, and markets in general, are giving mixed signals about the premium they are willing to pay. The fact is that, individual businesses are not able to forge systemic changes in the market on their own.
The Accenture/UNGC report concludes that active intervention by government will be required in order to align public policy and to step up efforts to provide an enabling environment for the private sector to advance sustainability. To this end, CSR Europe is focused on actively working with the EU to link European public policy to the sustainability agenda.
Role for Mandatory Reporting
The real CSR debate in the EU is not about mandatory reporting as such, it is about how reporting can help to improve business performance and how smart public policies in different areas can create the right framework conditions and eco-systems for sustainable business growth.
Central to this effort is CSR Europe's joint appeal with GRI, IIRC and WBCSD to the European Union to improve sustainable performance of European business with the establishment of a European Centre of Excellence to accelerate the awareness and capacity building of companies, sectors, investors and governments on integrated value creation and reporting.
Barriers to Action, Call for Tools
The energy and commitment of middle management in multinational companies is evident from our daily work in CSR Europe. However, this dynamism is also coupled with the struggle faced by many to move the CSR agenda upward inside their companies.
As their CEOs (and CFOs) are doubtful about the link between sustainability and traditional metrics like revenue growth and shareholder value, they express a strong need for tools and instruments to be able to benchmark and assess business processes with the ones of their peers. If the direct causality between non-financial and financial performance cannot be easily established, the benchmark and process language is probably the most compelling language inside a company.
What Gets Measured Gets Managed – Assessment Tools for Better Performance
Luckily, the CEO survey also confirms “what gets measured gets managed.” Determining the value of more sustainable business models is indicated as a key element to the agenda for action.
That is why over the past three years CSR Europe has invested many resources in the development and testing of benchmark and assessment tools and creation of joint learning networks.
Strengthening the focus on assessment and benchmarking with CSR Europe members and our CSR partners is best approach to bring together the shared frustration of middle management and their CEOs to enable the creation of transformational change.