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VIEWPOINT: Integrated budgeting for sustainable organisations

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Translating the social and environmental aspects of our business into numbers is a challenge – but it’s a challenge that some people are rising to magnificently.”

Translating business sustainability into numbers is a challenge some are rising to magnificently

Integrated reporting is a motherhood-and-apple-pie kind of issue. It’s an obviously good thing that nobody with any sense argues against. But it also attracts a lot of lip service: We all agree we like it, but actually changing the way we act because of this commitment is more challenging.

Sure, we can all produce lovely reports that track in expensively illustrated detail how many light bulbs we’ve replaced, how many air miles we flew and how marvellously we recycle. But those numbers mean nothing in isolation. The real questions are: Have we set targets for managing the non-financial factors that will influence the long-term sustainability of our company? And how did we perform against those targets?

It is, admittedly, not easy to find the right metrics.  Financial accounting has had several centuries to develop the standards we all report by today, compared to the few years we’ve been thinking about reporting on wider issues. Translating the social and environmental aspects of our business into numbers is a challenge – but it’s a challenge that some people are rising to magnificently.

If you need some examples of best practice, take a look at Sasol. ReportWatch, which produces an annual survey and ranking of annual reports, recently named Sasol’s 2012 integrated report the best in the world (it shared the top spot with Norway’s Statoil). The award is well deserved – the report is a beautiful example of rigour, clarity and transparency.

Sasol’s key performance indicators are especially noteworthy: improved safety and an 80% reduction in emissions of volatile organic compounds are right up there with earnings growth and return on invested capital. The report clearly shows actual performance against targets for the past three years.

For organisations looking to emulate this kind of best practice, one obvious place to start is with your budgets, which should be as integrated as reports. If you don’t have a line item in your budget for, say, air miles or kilowatt hours, how can you manage your performance?

Choosing what to include in an integrated budget is not an easy task, and right now everyone is making it up as they go along. But the sooner you start, the sooner you’ll learn – and the further ahead of the curve you will be. Reporting requirements are only going to get more stringent.

Kevin Phillips CA(SA)

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