Sustainability Reporting: Earth in the Balance Sheet

Sustainability reports offer plenty of eye candy, but can they actually help managers make better decisions?

Changing as well is the role of audit firms. Increasingly, they are being asked to provide third-party assurance regarding at least a portion of the data contained in sustainability reports. Suncor Energy Inc., for example, says that more than 80 data points in its voluminous 2007 sustainability report (which weighs more than a pound and, while containing photos of lakes and windmills, also has five years’ worth of data on a wide range of performance indicators) were verified by an outside auditor.

But Suncor’s data-rich and externally verified report is hardly a product of automation. While the company does pull some data from its ERP system, it painstakingly assembles the bulk of its report from spreadsheet data. “We have to tap about 50 to 100 people internally to get everything we need,” says Suncor spokeswoman Darcie Park. “It’s a fairly labor-intensive process.”

Yet that hasn’t prevented Suncor from being listed on the Dow Jones Sustainability World Index, which tracks approximately 300 global companies deemed to be at the forefront of sustainability efforts. In fact, companies can make that list without producing a sustainability report at all. Health-care giant Humana, a recent addition, is only now beginning to assemble what David Noltemeyer, governance manager for its Workplace Solutions team, says will be “a very comprehensive reporting package.” Noltemeyer says that Humana has been focused for years on what is often termed the “triple bottom line” (a management philosophy that seeks to balance economic, environmental, and social concerns), and he believes that better reporting will “provide a more comprehensive picture for managers to base decisions on.”

Humana has even talked to its IT department about the issue — but not in the way that software vendors might hope. “Our discussions with IT so far have focused on energy consumption and the recycling of IT equipment,” Noltemeyer says, “but not data collection.” That’s not to say that as the company ramps up its efforts it won’t look to automate the process where it can, but with sustainability encompassing so many departments and so many facets of operations, a focus on the means of data collection and analysis does not seem to be top of mind for all companies.

For those ready to take sustainability reporting to the next level, however, the evolving maturation of the GRI model, the addition of an XBRL taxonomy, the push for global standards, the increasing pressure for companies to report on climate data, and an extension of current software capabilities may provide plenty of incentives to adopt a more automated approach. “Expectations for sustainability reporting are evolving quickly,” says KPMG’s Israel. “Companies that continue to view it as merely a PR exercise will hurt themselves.”

Last month, New York Times columnist Thomas Friedman suggested that the need for data-crunching on energy consumption, CO2 emissions, and related environmental metrics could trigger a fresh wave of outsourcing to India. Others believe that such reporting is too critical to farm out.

“If this is something that’s truly important to your business,” says Oracle’s O’Rourke, “you should set goals, establish metrics, and monitor your progress against them.” For that to happen, companies will need to focus less on the report and more on the reporting, conceiving of it as a continuous activity that is as critical to running the business as it is to selling the business.

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