Why reporting is good for business

In January we welcomed Simon Humphrey to the Impact Sustainability team as Managing Director of the UK and Europe.

 

To coincide with this event, we explore the UK’s mandatory carbon reporting laws and discuss how they are good for business. Companies that view this law simply as a burden are likely to miss the opportunity it presents.

 

We believe that sustainability offers enormous strategic opportunities to businesses, however in order to unlock that value companies must look to operationalize and systemize environmental and social performance in the same way they do for financial performance.


New legislation

New regulations will be introduced in the United Kingdom in April 2013 requiring all UK companies listed on the Main Market of the London Stock Exchange to measure and report greenhouse gas (GHG) emissions. Whilst this legislation offers some exclusions It represents a significant step towards mandatory disclosure for all limited companies on their carbon emissions, which itself is a step towards a more regulated approach to how companies report on their broader environmental and social sustainability performance.

 

The history of financial reporting
The third dimension of sustainability is something all businesses are used to measuring; their economic performance. Making businesses ‘accountable’ for honest data collection, recording and reporting is something that can be traced back to the Assyrians around 4000-3500BC!

 

It is widely acknowledged that the practice of accounting has been good for business and society. Accountants themselves have been credited with inventing writing, enabling the development of money and banking, fuelling the Italian Renaissance and saved many from bankruptcy throughout the ages.

 

In 1854 the first Royal Charter was issued to the Institute of Chartered Accountants of Scotland, the worlds first professional body of accountants. In 1973 a global consensus was achieved through the issuance of International Accounting Standards (IAS), which later evolved into International Financial Reporting Standards (IFRS). Legislation was passed by the European Union in 2005 requiring all listed businesses to abide by the same version of IFRS.

 

An appreciation of the evolution of economic accountability is important to put into context the UK’s mandatory reporting program.

 

We have now reached a point in history where it is becoming vital to account our environmental and social impacts with equal importance as our economic performance.

 

Mandatory carbon reporting is symbolic of a level of transparency and accountability that will quickly become the norm and recognized as important as financial reporting.

 

The importance of information technology in reporting

The use of information technology to systemize process has expanded rapidly since the first commercially available desktop computers emerged out of mainframe environments in the 1980’s and 1990’s. Initially they were only used by wealthy companies for financial accounting, but became critical for running an effective business during the 1990’s as computing moved into the mainstream. Their application grew rapidly whilst their size and cost reduced. Similarly, human resources has now begun to receive the same attention, with forward thinking businesses managing their HR in a highly strategic, and systematic approach.

 

With any type of disclosure, there is a need for it to have integrity, completeness and be consistent.

 

The only way to achieve this is to formalize and systemize the process for data collection, analysis and reporting. Impact Sustainability exists to help businesses of all sizes to achieve this, and by doing so, become better, more efficient and more investable businesses.