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Should Sustainability Reporting Be Made Mandatory?

Green Energy
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We all want to fit in and be liked. The same goes for companies. That’s why companies haven’t been jumping on the voluntary sustainability reporting bandwagon.
 
It’s like putting all of your dirty (or sustainably cleaned) laundry out there and waiting to see what the public thinks about you. I imagine it’s quite a vulnerable feeling.
 
To see the failing plan of voluntary sustainability reporting in place, you can check out systems such as fracfocus.org which is a directory where oil and gas companies can publically disclose the chemicals used in their fracking processes.
 
According to Harvard Law, the website falls far short in promoting transparency of the fracking chemicals and methods used by companies.
 
The problem with voluntary sustainability reporting is that a lot of companies don’t do it. Mandatory sustainability reporting on the other hand forces everyone to put all their laundry out there in one big bag. That way no one is embarrassed when judgement day comes, because they are all in the journey together.
 
Who agrees?
 
Singapore recently enforced mandatory sustainability reporting for the Singapore Exchange.
 
The Association of Chartered Accountants (ACCA) held a sustainability roundtable dialogue to discuss the benefits of mandatory sustainability reporting for the Singapore Exchange. The roundtable believed that mandatory sustainability reporting would:

  1. Help companies think about and define their long term visions and raise awareness of sustainable practices in their organizations
  2. Lead to cost reduction for companies on several aspects of operations, particularly in increasing efficiency
  3. Increase ability for companies to communicate with investors regarding its social impact and KPIs

Is it successful?
 
A report written for Harvard Business School supports the positive effects of mandatory sustainability reporting. Assistant professors George Serafeim and Ioannis Ioannou concluded from their research that “the effect of the (mandatory sustainability) regulation on companies (from four countries) has been value-enhancing rather than value-destroying.”
 
Also, according to CGA Canada, “Countries with some form of mandatory reporting tend to have higher employee welfare, improved board supervision, greater prioritizing of environmental issues and less frequent cases of bribery and corruption across companies. “
 
The other side of the coin
 
So what is stopping companies from wanting to display sustainability data?
 
Well firstly many companies believe that mandatory sustainability reporting will be expensive, timely and complicated. Companies also may not believe in the value of sustainability as short-term profit is a large driving force behind their ambitions. They may also worry about the public’s response to them if their sustainability levels are not up to par.
 
I believe mandatory sustainability reporting could make a huge difference for companies, the public, and the environment in the US.
 
Do you agree? Send me a tweet @castagra.
 

0ba8618 Aisha Tejani
Aisha Tejani is a contributing writer of Castagra Products, a storage tank and wastewater coatings manufacturing company that is highly acclaimed for its sustainable coatings and cold weather coating applications. Castagra products are NSF-61 certified and are used by the world’s top water and wastewater contractors.