One common challenge organisations should avoid is separating sustainability-related information from strategy-related performance reporting.
When organisations carefully and successfully integrate sustainability with their purpose, the outcome should be a single comprehensive report for monitoring and managing strategy execution. It ensures that the organisation is focused on financial and non-financial topics that affect its strategy execution.
A poorly implemented sustainability integration, disconnected from strategy, will result in silo reporting, as it does not speak to the business realities on the ground but is simply compliance-focused or a mere tick box.
Having a compliance-only mindset is why organisations fail to apply proportionality and context when implementing sustainability. For instance, some organisations have made sustainability-linked investments that add little or no value to their strategy execution and are not utilised for internal analysis, resulting in siloed sustainability reporting detached from the rest of the organisation.
To avoid a siloed reporting environment, organisations should consider the following.
A critical milestone in a sustainability implementation journey is the materiality and KPI-setting process. The materiality process should be conducted with the understanding that the identified material non-financial issues should support the organisation’s business growth strategy and not be identified in isolation from the organisation’s strategic objectives.
Organisations that fail to link sustainability to their business growth strategy will end up with siloed reporting, as sustainability is disconnected from their business growth and long-term viability agenda. When properly identified, sustainability material topics will be those linked to financial viability and growth, with one comprehensive reporting across the entire organisation.
In addition, the KPI setting process needs to be aligned with an organisation’s strategy. KPIs can be either mandatory or management-defined.
Mandatory KPIs must be complied with in accordance with laws and regulations, and management-defined KPIs require organisations to look beyond compliance to ensure they select non-financial sustainability KPIs that link to the organisation’s overall business growth strategy.
For example, to grow a customer base, organisations may need to focus on non-financial KPIs to monitor any dilution in customer service quality. This will ensure that sustainability-linked metrics track what matters to stakeholders and form part of a single report to monitor performance.