The CBI’s Sustainability Community members share key areas of focus and best practice on adapting to a changing regulatory landscape.
In a recent CBI Sustainability Community’s focus group, the Community members delved into the transition reporting as set out by the Transition Planning Taskforce ('TPT') and how businesses are overcoming the challenges regarding sustainability reporting. The key takeaways from the focus group were:
1. Don’t forget about the SMEs!
Engaging your supply chains is crucial in transitioning to net zero. Many businesses are putting off prioritising their scope 3 emissions. Instead, the best practice among the Community members is for the larger firms to be educating their supply chains and trying to get them to come on the net zero journey together.
Business also believes there is an opportunity for the trade bodies to play an important role in accelerating the SMEs’ decarbonisation. For example, for the transition planning reporting to run smoother, trade associations should be understanding and educating how these reporting requirements translate to the SMEs and what they should be preparing for.
Nonetheless, the Community’s SME members are hoping for a light touch approach regarding the transition planning reporting, especially those who cannot afford to hire big consultancies. There should be a threshold set for SMEs around transition planning disclosures, as well as appropriate exemptions and SME-specific guidance.
2. Data is a barrier
People who are responsible for signing off the sustainability disclosures need to have access to full and accurate data. However, members of the Community stressed that data quality and collection was a major challenge in preparing for the transition reporting for the big corporates.
Companies understand that reporting should be the end result and that it is crucial to get the sustainability strategy right first. However, the data required for reporting is often spread through organisations and hard to collect – people may not even know where the gaps are. The collection of the data is also so all-consuming that for sustainability professionals it is hard to find time or headspace to think about the business change needed to solve any of those issues longer-term.
Similarly, there is a great deal of confusion about what needs to be reported in a material way, or from a best practice perspective. There is also a lack of experience or skills needed to scrutinise data, which carries a risk of signing off guestimates and the accountability that comes with it.
3. A need for standardisation
Businesses are drowning in the plethora of sustainability reporting requirements. The ESG ‘alphabet soup’ and a lack of agreed definitions make it even harder. The Community members questioned - what does sustainability even mean? There isn’t a consistent definition.
However, even with an agreed definition, it will mean something different to different people and different organisations. Here, businesses have a role to play in simplifying and bringing more consistency into how they communicate their sustainability message and report on the progress. Having some agreed definitions would not solve all the problems but would help too.
When it comes to reporting, despite the plethora of different requirements and frameworks, there are still some standards that work well as baseline, particularly the Global Reporting Initiative ('GRI'). The Community members agreed that a comparability between reporting frameworks was key.
4. Sustainability is everybody’s business
The best practice among the Community members is for the sustainability message to be shared with all the employees. This increases a commitment from staff which is essential to deliver on a business’s sustainability targets; generates employee feedback; and encourages championing the best practice. Furthermore, the gathering of data needed for sustainability reporting gets easier too if there is an internal buy-in for a business transition.
Despite its challenges, reporting can create internal mechanisms and drivers for change. For example, boards might find some things uncomfortable to address, so having a requirement to do so, pushes past this, and allows for more transparency both internally and eternally.
5. Progress over perfection
The Community members agreed that there was a need for businesses to be transparent, especially if they wanted to avoid being accused of greenwashing. It is a journey; and firms should communicate where they are on that journey.
It was reflected that green hushing was a dangerous trend. Therefore, the growing sustainability reporting requirements and the public statements that are released as a result, are valuable for holding companies to account on their targets and ambitions. it was noted that any sustainability reporting would work best if they were put on the same level or process as the financial reporting.
6. Handling the trade-offs
Among the challenges with sustainability disclosures, members of the Community were particularly concerned that the technology was not there for every sector to set realistic decarbonisation targets. The question was raised as to how the different starting points of different sectors can be reflected in the disclosure requirements.
Furthermore, from a commercial point of view, there is still no price incentive or a strong commercial driver to decarbonise. Businesses are also concerned about being held strictly to what they say, and this leads to green hushing. Therefore, there needs to be a sense of flexibility and growth built in the sustainability disclosures.
Finally, members reflected on a fine line between the reporting and the doing. There was an agreement that the reporting was good for accountability but if it was too onerous it could take away from activities that went towards meeting the sustainability strategic objectives.
