The vast amounts of data now available means the traditional sustainability report is fast losing relevance
The days of the sustainability report as we know it may be numbered. The past 20 years has seen corporate social responsibility reports go from box-ticking exercises and PR stunts to an essential tool that enables organisations to consider and communicate their social and environmental impacts.
When the global financial crisis hit, we saw the bar for corporate disclosure standards rise and with it the uptake of integrated reporting, which presented stakeholders with a holistic view of a company's operations and impacts. Integrated reporting merges different pools of information – namely financial, governance, social and environmental sustainability – into one comprehensive document. According to KPMG, close to 60% of the world's largest companies had adopted integrated reporting by 2015.
Enter big data, the apex of advances in data gathering, computing power and connectivity. According to the Global Reporting Initiative (GRI), the most widely used sustainability reporting standard in the world, digitisation is bringing a tsunami of data, presenting an immense potential driver of change.
The use of big data has the capacity to give companies useful insights, very often in real time, to improve sustainability and efficiency – helping to cut costs and increase revenue.
The GRI is one of several organisations working to bring the sustainability movement into the digital age, and with it, sustainability reporting. GRI believes the new era of corporate disclosure is going to be digital, responsible and interactive, with new and innovative approaches to disclosure focused on the data in the reporting process rather than the reports themselves.
As it stands, most companies prepare one sustainability report per year, with the finished product the culmination of a year’s effort in goal setting, data collecting, interpreting the data against previous years, drawing conclusions and communicating the results to stakeholders, most commonly in a static document in print and/or online.
"The information presented in sustainability reports should be used for making better-informed decisions. But this valuable information is currently locked-up in sustainability reports and often it is not used to its full potential, because it cannot easily be shared," says Dr Nelmara Arbex, GRI’s chief adviser on innovation in reporting.
John Hsu, sustainability reporting data specialist at the Carbon Trust, agrees that data from sustainability reports remains unstructured and contextual. "The data from different reports do not easily connect with each other. Nor can they be easily aggregated in order for society and businesses to make informed decisions," he says.
Big data has the potential to improve such limitations and fundamentally change current practices. "With big data, it is potentially possible to analyse every facet of a company’s sustainability performance in real time, which gives companies the opportunity not only to react in real time, but also to predict and pre-emptively counteract potential sustainability risks across the full breadth of its business, before it even occurs," says Hsu.
As big data gains more prominence, we may see an increase in “on the spot” reporting, as companies receive actionable information regarding issues that impact their stakeholders and operations.
While large pools of data becoming instantly available presents huge opportunities, it isn't without challenges. Big data sets have the potential to send even the most analytic of minds down the rabbit hole. It could become daunting for companies to sift through vast amounts of unstructured information in search of patterns, trends and associations, extract valuable insights, and decide what information to focus on and communicate.
"Companies will need to build internal expertise in analysing big data,” says Lance Pierce, president for North America at CDP, which helps companies report on their climate-related impacts. “There will likely be a plethora of new sustainability software tools coming to market, and companies may need a bit of trial and error to work out which are best for their sector or needs."
Pierce also advises companies to make the most of existing framework tools such as the Climate Disclosure Standards Board (CDSB) to determine which aspects are most material and to integrate these into a company's statutory filings.
By using existing standards such as the GRI's G4 reporting guidelines, which are designed to be applicable to organisations of all types and sectors, large and small, across the world, companies can generate reliable information. "The G4 Guidelines provide useful guidance for companies," says Arbex. She advises companies that want to go deeper in their sustainability reporting to first go deeper in its stakeholder analysis to truly grasp who its stakeholders are, their needs and concerns. Second, she recommends conducting a robust sustainability context analysis, which she says is an "important means of determining the critical matters that need to be addressed," and finally, increase efforts to understand the impact of relevant topics on the business’ short, medium and long-term financial and reputational results.
It’s a materiality world
Hsu of the Carbon Trust agrees that an area of major potential for the use of big data is in materiality assessments – using live data feeds internally and externally, including tweets, complaints, emails and customer reviews – to understand what sustainability issues are important to different stakeholder groups. "This could become very powerful in shaping the direction of a sustainability report,” says Hsu. “For example, we are currently working with corporates to interpret data on a wide range of sustainability issues to determine which are the most material and therefore need to be reported."
In addition to issues that present reputational risks, materiality issues that will appeal to corporations will be the ones that could most improve a company's revenue stream, reduce operational costs and mitigate adverse social and environmental impacts. These will naturally vary from sector to sector.
"A beverage company may leverage big data to understand the level of water stress at site level, across all manufacturing sites of its business. A manufacturer of industrial equipment may use big data and adopt KPIs on the precision of machines used to manufacture the equipment to optimise efficiency and reduce wastage,” says Hsu.
“In addition to the obvious business benefit, such KPIs will also have environmental benefits as the more optimised the machines are, the less energy and materials are wasted. A logistics service provider can use the power of big data to optimise supply chains or delivery routes through the integration of live data on variables such as live traffic, geographic positioning and weather."
But data gathering and analysis techniques remain in their infancy when it comes to looking at companies’ real impacts further down supply chains, Arbex believes. "Most of the reporters are very good at gathering and publishing data about impacts related to the core operation sites,” he says. “But when the boundaries are expanded to include subsidiaries or logistical partners, data gathering on impacts is less sophisticated. Very few businesses have built the capacity to do a good job of gathering and analysing information about impact across their sprawling supply chains."
In May the GRI announced its new Digital Reporting Alliance, which it hopes will address what it perceives as two key challenges in bringing sustainability reporting into the digital age: the lack of structured data and the lack of demand for digital reporting. The GRI will work to gather momentum behind stakeholder demand for digital reports from corporations. "Mainly, the Digital Reporting Alliance will gather financial and other resources to develop the technical infrastructure to enable the exchange of digital sustainability information and to disseminate the business case of digitising sustainability data and reports’ data," says Arbex.
Adding big data to sustainability reporting will transform it into an interactive digital tool, allowing stakeholders to witness a company's sustainability in action. Companies and suppliers will become increasingly accustomed to working together and sharing information through digital platforms, which will be open to the public and provide up-to-date information.
"Sustainability reporting is set not only to become more integrated with financial reporting, but to become much more sophisticated as companies are able to locate real stress points in real time anywhere in the world, to disclose how those impacts will manifest, and how they are managing them," says Pierce. And now that tools to access the data are becoming less expensive and more widely available, it’s no surprise that companies are actively experimenting with big data to solve business problems.
For smaller companies, or those that are just starting in this area, Hsu recommends the use of inexpensive specialist software, such as the Carbon Trust's Footprint Manager, a cloud-based reporting tool that helps measure, manage and reduce an organisation's carbon footprint.
For companies great and small, sustainability reports in their current form are set to become a thing of the past. "Companies will start to move away from a centralised model of annual reporting, to a more decentralised and distributed form of real-time reporting through more interactive and conversational channels,” says Hsu. “This could actually prove more effective in stakeholder management and building reputation with key customer segments."Big data CSR sustainability GRI innovation stakeholder carbon footprint