How organisations show resilience through sustainability reporting

Sustainability reporting provides investors insights into an organisation’s resilience level. PHOTO | SHUTTERSTOCK    

By AKINYEMI AWODUMILA More by this Author

Investors globally demand more information and disclosures on sustainability from organisations for several reasons.

One reason is the increased attention to impact investing, which has resulted in investment and portfolio managers seeking sustainability reports or ESG reports about the impact organisations are having not just from a financial perspective but also from a social and environmental perspective.

However, investors today also seek information on the resilience of organisations in the face of the many challenges and uncertainties they face in their operating environment. Navigating a fiercely competitive environment, with rapid technological advancements in an unstable macroeconomic environment of high inflation and commodity prices coupled with geopolitical conflicts, requires organisations to adopt a holistic approach to risk management.

This approach to risk management is where focusing on a broad range of risks in the operating environment through an ESG or sustainability lens becomes essential. Therefore, as organisations integrate ESG risks into their business risk assessment and management, they must also focus on disclosing how they navigate these challenges through reporting.

The resilience of organisations is a critical success factor today, which is why investors are paying attention.

Sustainability reporting can help stakeholders understand the ESG integration risks in managing the overall business risk to increase resilience. Through a double materiality assessment, organisations can provide information on evaluating material matters for strategy execution.

This information is helpful for investors to appreciate and understand the adaptability of an organisation in the face of challenges in a highly uncertain and rapidly changing operating environment. Therefore, when organisations consider aspects like talent strategy, digital transformation, the impact of climate change, regulatory actions, access to sustainable finance, increased macroeconomic volatility, and brand reputation, it becomes apparent that the traditional approach to reporting would need to be improved.

Making this required improvement is where sustainability reporting can help address the disclosure gaps.

Sustainability reporting provides investors insights into an organisation’s resilience level through the disclosure of information on an organisation’s business model, its sustainability risk and opportunities universe, as well as the outcomes, targets and benchmarks set, including timelines, helping investors obtain the much-needed understanding of its ability not only to withstand the turbulence in the operating environment but also thrive.

Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics.