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VIEWPOINT: On your marks, get set – go for sustainability

“The result – watered-down ‘integrated reports’ and ‘sustainability reports’ that were full of disclosure gaps.”

The penny has finally dropped. To survive and thrive, companies are embedding sustainability into management reporting

For corporate South Africa, sustainability became real in 2010, when the King III Code became effective for JSE-listed companies. Managements now needed to ‘comply or explain’ in terms of a new set of principles that went beyond the narrow financial focus to include social, environmental and governance aspects.

Initially most regarded this as an irritant, simply a new set of ‘do-good’ recommendations to be massaged into the regulation annual report.

Since 2010, however, King III was followed by a dizzying spate of new regulations and standards: GRI 3.1 and the current G4 (Global Reporting Guidelines), the new Companies Act of 2008 which was finally promulgated on 1 May 2011, and various integrated reporting drafts that culminate in the International Integrated Reporting Council (IIRC) Integrated Report Framework 1.0 released on 5 December 2013.

Authentic compliance with these requires major reorganising of how listed companies collect and format their management information, so only those corporations with early insight – or significant investor relations capacity – tried to stay the pace. Most opted for a holding tactic of incremental adoption or ‘tick box’ exercises to show compliance, but these actions had little or no impact on management thinking regarding company value creation or sustainability.

My own experience in 2011 and 2012 was that my proposals to listed companies for their sustainability and integrated reports would be welcomed, but as we got into collating these reports, their reporting systems weren’t geared to produce data in the required formats.  The result – watered-down ‘integrated reports’ and ‘sustainability reports’ that were full of disclosure gaps. And managements weren’t that interested, as long as the reports were out on time.

As 2013 dawned I was rather despondent about this state of corporate reporting, but as the year progressed it became apparent that in boardrooms around the country the sustainability ‘light bulb’ is switching on. Boards and executives are realising that sustainability isn’t just about social responsibility – it’s fundamental to ‘future-proofing’ companies. In this modern era of quick moving markets that can sink industries overnight, sustainability practices offer quantifiable benefits in early trend spotting and finding unnecessary costs.

Where before I would be kept at arm’s length and diplomatically (or more explicitly …) instructed to get on with the annual report (gaps and all), now I’m conducting workshops to embed sustainability indicators into all levels of company reporting.

On 5 December 2013 the constant updating of the pivotal IIRC and GRI reporting guidelines ended. Companies now have certainty as to what their reporting formats should deliver and how this information can be leveraged internally for value creation and sustainability, while telling the real story to investors and stakeholders.

Roll on 2014 and the spread of corporate sustainability …

Clive Lotter is an integrated reporting consultant and writer of annual reports