Sustainability is increasingly becoming central to all activities in various spheres across the world. Companies of all sizes and types are now focusing on sustainable business models and they are also being encouraged by public demand for more sustainable solutions and products. And along with this the approach of companies to corporate social responsibility (CSR) is also undergoing transition with the focus slowly shifting to their economic, environmental and social governance performance in CSR reporting. International and regional CSR experts share their thoughts with Swaliha Shanavas, providing insights on the growing trends as well as the major challenges in CSR reporting, and how the profile of waste and secondary raw materials in sustainability reporting is set to become stronger in the coming years.
Trends in sustainability reporting
Sustainable business is moving very rapidly from the sidelines to the mainstream, among companies of all sizes and sectors, says Judy Kuszewski Chief Executive, Sancroft International (a London-based sustainability consultancy) and Chair, Global Sustainability Standards Board (GSSB), the independent board responsible for setting sustainability reporting standards under the GRI. “They are driven by public demand for more sustainable products, more information to help them make empowered choices, but also by investors that recognise the value in sustainable performance, as well as peers in industry that want to ensure their own products and services hold up to these changing expectations.” In particular, the practice of environmental, social and governance (ESG) reporting is spreading and deepening, and increasingly used by mainstream investors and asset managers, says Kuszewski. “The focus of these disclosures is clearly on risk and opportunity for business in relation to sustainability factors, well beyond the traditional definition of CSR.”
For larger corporations, she says ESG reporting and disclosure is very much the norm. Among the 250 largest corporations, 93 percent report ESG data, of which three-quarters are using the Global Reporting Initiative (GRI) reporting framework. “A driving force behind the rise in sustainability disclosure is the strong demand for this data, which incentivises companies to report. That demand comes from consumers, governments, civil society, and increasingly the investment community. Recent research concluded that four out of five mainstream investors use ESG data to inform their investment decisions.”
Another emerging trend is the increase in national regulations that encourage or require companies to report on ESG, because of the value it brings to companies and other stakeholders, says Kuszewski adding that “this process started in developed nations but, increasingly, emerging economies are also introducing policies in this area – over 60 countries have already introduced policies in which the use of the GRI Standards for reporting is referenced or required.”
Globally, there is a lot of emphasis on environmental and labour issues in the supply chain, ethical sourcing, sustainable innovation and CSR reporting, says Dr. Kamel Mellahi, Senior Manager, Centre for Responsible Business (CRB), Dubai Chamber. New CSR issues that are gaining momentum include artificial intelligence (AI) and employment of millennial. “In the Middle East, the CSR landscape is very heterogeneous, but overall businesses tend to focus on philanthropy, environmental issues, labour issues and corporate citizenship,” he notes.
At present, “CSR is on everyone’s lips,” says Habiba Al Mar’ashi, President & CEO, Arabia CSR Network. Corporates of all types as well as governmental entities across the Emirates are busy making an effort to integrate CSR into strategy and daily practices. All the angles of sustainability – economic, environmental, governance and social, are being understood much more clearly, she notes. “This has enabled companies to make sense of social responsibilities and to align with both macro and micro level sustainability issues.”
Strategic approach to CSR
“Companies that are given the Dubai Chamber CSR label demonstrate a systematic approach and alignment of their CSR initiatives with their strategies, objectives and performance goals in four CSR areas namely: Workplace, Marketplace, Environment and Community,” says Dr. Mellahi. The winners or champions of Arabia CSR Awards also have demonstrated a strategic approach towards CSR. “They have linked non-financial performance with improved operations and better business outcomes. Therefore, they have developed a structure of responsibility that involves everyone within the company, with clear roles and responsibilities,” says Al Mar’ashi. Objectives, targets and KPIs are monitored and evaluated and the impacts of their activities on stakeholders are managed in a systematic manner, benchmarking with global standards and best practices, she adds.
So, has the concept of CSR moved beyond the charity angle to other areas such as environmental sustainability that benefit business and society?
“Yes,” says Dr. Mallehi. “A significant number of companies have adopted the triple bottom line framework and have CSR strategies that benefit the business, environment and the society. That said, philanthropy is part of the social and corporate DNA in the region and is widespread in the Middle East business community.” Overall, while philanthropy is still the dominant aspect of CSR in the Region, a significant number of organisations have moved beyond this aspect and have CSR practices on par with global best practices, he explains. “For instance, businesses that applied for and obtained the Advanced Dubai Chamber CSR Label demonstrate practices of the highest standard of CSR.”
Al Mar’ashi says charity and social responsibility have traditionally been “quintessential elements of institutional practice in the Region due to its strong religious and cultural underpinnings.” So, some organisations continue to be driven by their conscience, while there are others who use charity as a strategic activity to support sustainability initiatives in sectors such as education, health, women, youth, sports, special needs, she adds. “Then there are those that see CSR as a management strategy to enhance business value by building responsive relationships with stakeholders over time and gaining reputation, loyalty and competitive advantage out of it.”
Key challenges in sustainability reporting
In this Region, there seem to be many issues related to sustainability reporting. Dr. Mellahi identifies five key barriers to CSR reporting: First, companies may not see the potential advantage of reporting their CSR initiatives and achievements. Second, peer pressure is low as they do not see their competitors publishing their CSR reports (why me!). Third, a perception that key stakeholders do not pay attention to CSR reports and therefore these reports have little effect on customers and others key stakeholders. Fourth, lack of knowledge and capability to produce formal CSR reports and are too expensive to outsource them to consultancy firms. Fifth, CSR reports are considered time consuming and data are often lacking, he enumerates, adding that raising awareness, making the business case and training CSR managers on CSR reporting would help overcome barriers.
Al Mar’ashi highlights various challenges: Resources and time are among them for most companies and very much so in the case of SMEs; Financial commitments, human resource and capability, and the integration of different kinds of data under a unified structure often becomes an obstacle.
One of the solutions she puts forth is that of training a team within the organisation, who would be responsible for all sustainability reporting related activities. “This would reduce and eventually eliminate the need to outsource such activities, therefore making it an efficient and managed process just like any other. The top management buy-in and support is a crucial driver, as well as a culture of transparency and accountability steered by them,” she remarks.
From a global perspective, Judy Kuszewski says there are various challenges that companies tend to face in producing sustainability reports. The first, and perhaps the most fundamental, is to identify what is most important to report on, she points out. “It is not possible for any company to report comprehensively on every possible ESG topic, nor would such a report be meaningful to readers. So, the process of identifying material topics is essential to creating a report that influences understanding and helps companies make decisions about managing their performance,” she comments.
A second challenge is related to gathering data from across the company, which “almost certainly involves working with many different colleagues who may be spread out in different locations, who may not use consistent measurement tools, and who are busy with many responsibilities, of which sustainability reporting is only one,” Kuszewski emphasises, also explaining that it’s vital to work on systems and processes to make this data gathering exercise efficient, consistent over time and useful for colleagues.
In her view, the issues faced by reporting companies are very similar regardless of whether they are in developing countries or more advanced economies – lack of time, budget and expertise, competing stakeholders’ expectations, and pressures within the business, all affect large and small companies, state-owned enterprises, multinationals and startups around the world.
Approach in sustainability reporting, particularly related to waste reduction and recycling
“CSR reporting is in its infancy in the region,” says Dr. Mellahi. The number of companies publishing formal CSR reports is increasing, but relatively low, he comments. “Businesses that consider waste reduction and recycling as key elements of their CSR initiatives tend to report on it, but it is not very common for service companies and SMEs to report on these aspects.” Companies that do address waste, effluents and emission related issues within their business, are open and transparent in stating the reason and measures being undertaken by them to manage the issues, Al Mar’ashi comments. “But this practice has not managed to become a norm yet,” she adds.
New GRI Waste Standard
Waste recycling has never been a bigger, more urgent issue globally than it is now, “and the general public are driving this in an unprecedented way – the problem of plastic pollution, especially in oceans and waterways, and the mountains of non-recyclable rubbish generated by individuals, households and businesses are more visible than ever before,” states Judy Kuszewski.
She also underlines the fact that this is in turn spurring a new wave of regulations in regions and countries around the world, “from banning plastic carrier bags to taxing packaging, and from imposing deposits on bottles to mandating recycled content in packaging. Businesses are rapidly examining how they are affected by this agenda, and what they can do to reduce costs, reduce risks and generate opportunity as a result.” Due to all these reasons, Kuszewski says the profile of waste and materials in sustainability reporting – already strong – is set to become stronger still. “The revised GRI Waste Standard we are developing will support a fundamental shift in how businesses perceive waste, from an unwanted burden to a source of valuable materials. The new Standard is important as it will underline the critical importance – for companies, communities and the environment – of accelerating the transition to a circular economy.”
The Standard will aim to do this through reporting that encourages companies to consider how their procurement and use of materials leads to waste generation, and the steps they can take to minimise that, she elaborates. It will also help them understand and take responsibility for waste that is created throughout their value chain. The draft Waste Standard has just concluded a public comment period, during which they sought feedback on the proposals. “Next steps will see those responses considered before we finalise the Standard for release early next year,” Kuszewski notes. “I am very confident that the new Waste Standard – as part of the overall trend toward sustainability reporting globally – will help shed new light on this area in a way that is reliable, meaningful, measurable and drives action. Not only do consumers (and regulators, investors and others) want to see this action, the benefits to companies can be great,” she concludes.