The spectacular implosion of Carillion has prompted a series of strongly opinionated media responses – some offering a disappointingly antiquated, but all too common, view of sustainability.

 

“Corporate social responsibility” has been derided by many as a series of tick-boxes championed by government. It is often insinuated that sustainability communications are nothing but irrelevant PR puff designed to placate stakeholders and proffer a softer, more caring side of business.

While this viewpoint represents the mindset of less progressive businesses, times have changed. It’s taken a few hard-hitting headlines over the years, but despite its identity crisis, even cynics can’t ignore the fact that corporate sustainability reflects a multitude of business-critical issues that are intertwined with commercial success. Tesco is estimated to have lost £300m in market value following the 2013 horse meat outrage and the Volkswagen emissions scandal is expected to cost around $30bn.

Since the Modern Slavery Act came into force in 2015, there’s been a 425 per cent increase in the number of prosecutions for slavery, catching companies like Sports Direct in the crossfire. Uber’s future in the UK hangs in the balance on account of its questionable ethics, and the BBC’s Carrie Gracie has just resigned after the gender pay gap reporting legislation revealed vast inequality between men and women.

 

Sustainability issues and financial issues cannot be traded off against each other

Arguably, some companies successfully address individual sustainability issues, while at the same time failing to manage critical risks. For example, RBS achieved 100 per cent clean energy just three months prior to its collapse, and Carillion has been criticised for emphasising its condemnation of modern slavery, while misjudging a series of contracts that led to the company’s demise.

In these cases, sustainability and financial success were traded off against each other. But instead of acknowledging this failure, some of the articles published in the wake of Carillion’s collapse point the finger at the laws and systems designed to accelerate business’ grasp of sustainability, rather than at Carillion’s response to these laws and systems.

Business must find a way to make sustainability work for commercial success – and vice versa. Recognising the complexity and interconnectedness of sustainability issues is crucial.

Who’s leading the way?

Progressive business bosses are realising the commercial opportunity from managing sustainability issues as they do financial. Unilever’s sustainable brands have grown 50 per cent faster than the rest of its business and Pret a Manger’s new vegetarian stores have contributed to a sales boom. Only last week, Syngenta announced its new chief sustainability officer – a nod to the importance of championing sustainable agriculture in order to safeguard its own future.

Reporting plays a pivotal role in driving this change

The Modern Slavery Act is forcing companies to face up to the ambiguity of supply chains. Meanwhile, the gender pay reporting legislation requires companies to bare all, which should spur action to improve diversity and equality. The most sophisticated companies approach these directives with bold transparency and a genuine plan of action. Shareholders increasingly want answers.

This approach should transcend broader corporate reporting, too. The most effective reports tell an accurate and compelling account of the company’s approach to managing non-financial issues in the context of the broader business. This is why the IIRC’s Integrated Reporting Framework should be welcomed, rather than feared. In reality, integrated reporting is just good reporting. It allows stakeholders to make informed decisions about a company’s risks and opportunities, based on performance and the context in which the business operates.

Sustainable Development Goals (SDGs) should be welcomed

Carillion boasts that it can make “specific contributions to at least nine of the SDGs”. Its approach to addressing them does indeed come across as generic. However, the UN has signalled to business the significant role it must play in achieving the 17 Goals. The SDGs provide much-needed context, by framing important trends affecting our world, their impact on business, and crucially, the role of business in accelerating positive change.

Carillion’s approach is not uncommon. Radley Yeldar’s Reporting Matters research, in partnership with the World Business Council for Sustainable Development, shows that while 79 per cent of companies mention SDGs in reports, only 45 per cent align them to sustainability strategies. Just six per cent measure any contribution to meeting particular SDGs.

If stakeholders are to understand the value and meaning of companies’ alignment to the SDGs, they need to see the business’ tangible contribution and progress, as well as shortcomings and challenges. A more balanced, measurable approach is critical to win trust.

Companies can’t – and won’t – change overnight. Nobody said this approach would be easy. But rather than pointing the finger at sustainability as being irrelevant in the face of poor business performance, let’s champion the power of sustainability to boost commercial success.

 

Louise Ayling is Senior Sustainability Consultant at Radley Yeldar

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