Go beyond compliance to profit from sustainability reporting
From a social perspective, ESG in real estate could range from providing affordable housing and remodelling public spaces and public housing to new investments in green buildings.
As sustainability reporting becomes a mainstay of the corporate reporting landscape, organisations must ensure that this highly demanded information is useful.
It is pertinent that those who prepare of these reports avoid a compliance-only mindset. Too often, organisations complain about the financial costs of compliance without considering the cost of non-compliance and the use of boilerplate disclosures.
Compared to financial reporting, sustainability reporting is an outcome, and therefore, organisations can only report what they have done regarding material sustainability topics.
Hence, an organisation's context for sustainability is what matters to stakeholders to appreciate and understand the framework for decision-making and assessing tradeoffs.
For example, two entities in the same industry and market could have very different sustainability material topics based on their future growth ambitions, risk appetite, stakeholder demands and operational efficiency. Each individual entity context guides investors when assessing and analysing the prospects of each entity.
Going beyond compliance enables an organisation to adopt a more robust approach to the sustainability discussion, embedding and reporting.
For example, some organisations have incorporated requirements from multiple standards and frameworks when preparing their sustainability report to promote best practices.
Applying requirements from various frameworks and standards allows such organisations to embrace leading practices. The ISSB (International Sustainability Standards Board), for example, encourages interoperability among standards and frameworks.
Aspects where organisations could consider multiple frameworks for best practices include materiality assessment, stakeholder engagement, industry and topic-specific disclosures, metrics and targets.
A beyond-compliance mindset for sustainability reporting also ensures that information is provided from the viewpoint of the reports' users. It is critical to consider users' information needs when preparing reports rather than just the compliance requirements because users will find the reports relevant, enhancing the organisation's reputation and brand and building trust.
Another important reason why organisations must go beyond compliance is to avoid greenwashing, which damages an organisation's credibility with stakeholders when it comes to the use of green labels on products, frequent changes to ESG targets, obscure sustainability credentials and failure to provide a balanced view or report on sustainability efforts.
Akinyemi Awodumila is a partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics
