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For the past few years, the challenge that climate change represents at a global scale is seldom omitted from the starting paragraph of any sustainability-related article. Arguably already falling into this same stereotype, this blog aims to turn the table around and focus instead on the encouraging trends that have been identified in this year’s Sustainability Reporting Performance study, evidencing the ever-striking capacity that humans – and as a by-product businesses – have to not only adapt, but to seek the maximum benefit out of any given challenge.
Although our study focuses on the ways companies report about sustainability, the conceptual fluidity of the latter means it is also a great opportunity to gain valuable insights on the ever-changing notion of best practices.
Every year, in the very initial steps of the study, the metrics used to evaluate companies’ reporting performance are reviewed to ensure they are up to date with the variety of existing tools that improve companies’ environmental strategies and consequent reporting to the different stakeholders.
Having undertaken this annual exercise for the last eight years allows us to reflect on the way the rapidly increasing exposure of companies to climate change has transformed their engagement with these tools, and in more general terms with their role in the global climate debate.
- For instance, whereas the responsibility of achieving the Millennium Development Goals, predecessors of the Sustainable Development Goals, fell strictly on governments’ shoulders, the inclusion of businesses as key players in the achievement of the SDGs has translated into almost 70% of the companies across all indices evaluated currently mentioning in their reports how their operations can contribute to these global aims.
- The influence of international agreements on the involvement of the private sector is also applicable to pre-existing initiatives. Our study of the IBEX35 and FTSE100 indices evidences how the number of companies using renewable energy since the Paris Agreement came into place has gone from 63% to 77% in just two years.
- In a similar fashion, the use of frameworks to report on sustainability matters has gradually become mainstream practice across all indices, with 100% of the IBEX35, 90% of the CAC40 and 87% of the DOW30 now using recognised sustainability reporting frameworks to communicate the materiality of their external impacts. Although the FTSE100 trails behind in this regard with 63%, arguably due to the larger number of companies included in the index, this percentage still represents a 21% increase compared with last year.
- This greater level of engagement is visible not only through the increased uptake of sustainability best practices, but also in the speed at which these practices are integrated into companies’ strategies. The most prominent example of this is the alignment of companies to the recommendations set forth by the TCFD since the final version of these was published in June 2017. In only one year, over 40 companies of the FTSE100 have committed or are already aligning their environmental risk reporting with the TCFD recommendations. With similar percentages in the French and Spanish indices it is clear that the leading companies, regardless of the sector they belong to, now see the wide range of environmental initiatives as a device that not only contributes to the continuation of their operations, but also improves their reputation and financial prospects for the years to come.
Whereas the number of sustainability tools has grown significantly in the last few years, both in number and level of ambition required, our study demonstrates that they have been matched with an equally ambitious response on the companies’ side. For this reason, this blog wants to congratulate and show its appreciation to the genuine engagement of all those involved in the promotion and implementation of sustainable practices across the private sector. Their continuous efforts have put sustainability at the forefront of the companies’ strategies, integrating it in a way that not only makes sense environmentally, but also strategically.
If you would like to know more about the different trends identified both globally and at a country level in this year’s SRP study, please click here.