Sustainability reporting in Zim
As the global spotlight on environmental, social and governance (ESG) factors continues to intensify, the role of sustainability reporting in the business landscape has become increasingly prominent.
In the context of Zimbabwe, the question of whether companies need to prepare sustainability reports is both pertinent and timely.
This article seeks to shed light on this issue and provide a compelling justification for the integration of sustainability reporting within the Zimbabwean business community.
What is sustainability reporting?
Originally, financial reporting was the primary focus for businesses. Accountants were promoted by their ability to prepare the statement of profit and loss and the statement of financial position (the Balance sheet).
This was an emphasise in the old regime. Currently the rise in awareness of climate change, resource depletion, and social inequality has led to a paradigm shift.
Today, society expects organisations to consider the environmental and social consequences of their operations, and sustainability reporting has become instrumental in meeting these expectations.
Sustainability reporting is a process through which organisations communicate their economic, environmental and social impacts, risks and opportunities.
This type of reporting allows companies to transparently disclose their performance in relation to a wide range of sustainability issues, such as carbon emissions, energy use, waste management, social and community involvement, diversity and inclusion, human rights, and ethical business practices.
The goal of sustainability reporting is to provide stakeholders, including investors, customers, employees, and the public, with a comprehensive understanding of a company’s sustainability efforts and their impact on the planet and society.
By reporting on their sustainability initiatives, achievements and challenges, organisations can showcase their commitment to responsible and ethical business practices.
Sustainability reporting often follows established frameworks and standards, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), which provide guidelines for reporting on environmental, social, and governance (ESG) factors.
These frameworks help ensure that reported information is relevant, reliable, and comparable across different organisations, thereby aiding stakeholders in making informed decisions and comparisons. The Environmental, Social and Governance (ESG) factors involves the following:
Environmental Reporting: Environmental reporting covers an organisation’s impact on the environment, including its use of natural resources, energy consumption, greenhouse gas emissions, waste generation, and efforts to mitigate environmental harm.
The guidelines for environmental reporting often encompass disclosures related to carbon emissions, water usage, air and water quality, biodiversity, and environmental management systems. Frameworks such as the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD) provide specific guidelines for environmental reporting.
Social Reporting: Social reporting pertains to an organisation’s impact on society, including its relationships with employees, communities, and other stakeholders.
Key areas of social reporting include labour practices, human rights, diversity and inclusion, community engagement, philanthropy and supply chain responsibility.
The GRI Standards, the United Nations Global Compact and the Social Accounting Matrix (SAM) are examples of frameworks with guidelines for social reporting.
Governance Reporting: Governance reporting focuses on the structures, processes and practices by which an organisation is directed, controlled and held accountable.
This includes disclosures related to board composition, executive compensation, ethics and anti-corruption measures, risk management and shareholder rights. Guidelines for governance reporting are often outlined in the GRI Standards, the SASB standards, and various national and international corporate governance codes.
It’s important to note that organisations have a discretion to follow either one or more of these reporting frameworks based on their specific industry, size and stakeholder expectations.
The GRI standards are more popular than the Sustainability Accounting Standard Board (SASB) standards and other national codes such as the United Nations Sustainable Development Goals (SDGS) and other codes.
So when following the Global Reporting Initiative (GRI) framework, sustainability reporting should cover a company’s impacts, risks, and opportunities related to economic, environmental and social factors.
The GRI Standards are structured around a set of disclosures organised into topic-specific series, which cover areas such as governance, human rights, labour practices, environmental performance, and more.
The GRI Standards emphasise the importance of materiality, stakeholder inclusiveness and sustainability context when reporting.
Organisations are encouraged to identify the sustainability topics that significantly impact their business and their stakeholders, and to report on those issues in a comprehensive and transparent manner.
The Significance of Sustainability Reporting
Sustainability reporting serves as a vehicle for organisations to communicate their commitments, actions, and performance in areas such as environmental stewardship, social impact and corporate governance. By disclosing this information in a transparent and accountable manner, companies can demonstrate their dedication to sustainable and responsible business practices.
Moreover, such reporting enables stakeholders, including investors, customers, employees, and the public, to make informed decisions and hold businesses accountable for their societal and environmental impacts.
Sustainability reporting offers a myriad of benefits for both businesses and their stakeholders. For organisations, it provides an opportunity to strategically manage risks, improve operational efficiency, and drive innovation.
By identifying areas for improvement and setting targets for reducing their environmental footprint, companies can gain a competitive edge and future-proof their operations. Moreover, sustainability reporting can lead to cost savings, as it often uncovers opportunities for waste reduction and resource efficiency.
From a stakeholder perspective, sustainability reporting allows investors to make more informed decisions by assessing the long-term viability and ethical stance of a company.
Customers, on the other hand, are increasingly drawn to brands that demonstrate a commitment to sustainability, leading to enhanced brand reputation and customer loyalty.
Additionally, employees are more likely to be engaged and motivated when working for an organisation that prioritises sustainability and social responsibility.
Challenges and Opportunities
Despite its numerous advantages, sustainability reporting comes with its own set of challenges. One of the key obstacles is the lack of universally accepted standards and frameworks for reporting.
This often leads to inconsistencies in data reporting and makes it difficult for stakeholders to compare the sustainability performance of different companies.
However, efforts such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) are working to establish common reporting standards, thus bridging this gap.
Moreover, with the rapid advancement of technology, there is a growing opportunity to streamline sustainability reporting through the use of digital platforms and data analytics.
This can enable more accurate measurement and monitoring of sustainability metrics, while also improving the accessibility and transparency of the reported information.
In the global arena, sustainability reporting has gained considerable traction, with numerous frameworks and standards, such as the Global Reporting Initiative (GRI) and the United Nations Sustainable Development Goals (SDGs), providing comprehensive guidelines for reporting on ESG factors.
International investors and consumers are increasingly favouring companies that exhibit a strong commitment to sustainability and transparency, thereby highlighting the importance of sustainability reporting in gaining a competitive edge and fostering trust. This article therefore is urging the Zimbabwean business landscape not to lag behind.
The Pertinence to Zimbabwean Companies
Against this backdrop, the relevance of sustainability reporting for Zimbabwean companies becomes evident. As a nation with rich natural resources and a diverse social fabric, the impacts of businesses on the environment and society are significant.
The preparation of sustainability reports can offer a platform for Zimbabwean organisations to showcase their efforts in environmental conservation, community engagement, and ethical governance, thereby contributing to the collective progress of the nation towards a sustainable future.
Moreover, in light of the evolving global expectations and the increasing emphasis on ESG considerations in investment decisions, Zimbabwean companies can position themselves favourably in the eyes of international stakeholders by embracing sustainability reporting.
This can be particularly crucial in attracting foreign investment, strengthening relationships with international partners, and enhancing the global reputation of Zimbabwean businesses.
Justifying the Need for Sustainability Reporting
In considering whether Zimbabwean companies need to prepare sustainability reports, the rationale becomes clear.
Not only does sustainability reporting align with the growing global trends and expectations, but it also presents an opportunity for companies to differentiate themselves, build resilience, and contribute positively to Zimbabwe’s sustainable development aspirations.
By disclosing their ESG performance, companies can facilitate trust-building with local and international stakeholders, foster innovation, and drive long-term value creation.
The Zimbabwe’s strategic vision of becoming a middle income by 2030 can best be achieved if the business mindset is geared towards sustainable development
Furthermore, the preparation of sustainability reports can aid companies in identifying risks and opportunities, improving resource efficiency, and enhancing their license to operate within the Zimbabwean society.
It can also contribute to the nation’s efforts in meeting its 2030 vision and its international sustainability commitments and positioning its businesses on the global stage as responsible and accountable players.
As we move forward, the role of sustainability reporting is set to become even more prominent. With the continued focus on ESG factors and the growing demand for purpose-driven businesses, companies are expected to elevate their sustainability efforts and embrace more comprehensive reporting practices.
Furthermore, as regulatory bodies worldwide push for greater transparency and accountability, sustainability reporting is likely to become a legal requirement for businesses across various industries.
Conclusion
The imperative for sustainability reporting among Zimbabwean companies is clear. Embracing sustainability reporting not only aligns with global best practices and expectations but also presents an opportunity for businesses to play a proactive role in enhancing the nation’s sustainable development agenda.
As Zimbabwe progresses, the adoption of sustainability reporting can serve as a catalyst for promoting responsible corporate behaviour, fostering stakeholder trust, and ultimately contributing to a more sustainable and prosperous future for all.
By integrating sustainability reporting into their business practices, Zimbabwean companies can stand at the forefront of responsible and ethical business conduct, igniting a brighter path towards sustainable development and inclusive prosperity.
Rtd Major Silibaziso Zhou is a senior lecturer at Great Zimbabwe University and has the following academic accolades: (FACCA,FCGI,MBA,MCOM ACC.B.TECH ACC,FORENSIC AUDITOR and PAAB-ebusinessweekly
