The evolution of business models is now interwoven with a broader commitment to sustainable practices, driven not only by ethical imperatives but also by a growing web of regulatory frameworks. At the heart of this transformation lies the concept of sustainability reporting, a catalyst that has ignited a profound cultural shift within companies worldwide.
In recent years, sustainability reporting regulations have emerged as a pivotal force reshaping the corporate landscape. No longer confined to mere financial metrics, these regulations compel organisations to divulge their environmental, social, and governance (ESG) performance transparently and comprehensively. The implications of such reporting requirements reverberate far beyond the confines of annual reports; they penetrate the core of organisational cultures, prompting a re-evaluation of values, priorities, and strategies. From the boardroom to the factory floor, a new paradigm is taking shape - one where sustainable practices are not just an addendum, but an integral facet of a company's DNA.
Joaquín Tribolo from BDO in Argentina and Benjamín Ayala Raineri, Sustainability Manager at BDO in Chile believes directors are responsible for regulatory compliance and should play a leading role in driving the cultural shift within their organisation - if not because they believe it is the right thing to do, then because it is what the competition is doing and what investors, clients and staff are demanding. However, cultural change should not undermine the identity of the organisation or those positive aspects of regulation, they say. Regulation sets the floor but should not act as a ceiling or constraint on best practice.
There is consensus that directors should set the tone from the top and ensure that ESG is embedded in the company's DNA. This means making ESG a priority in decision-making, investing in ESG training for employees, and communicating ESG progress to stakeholders.
Tessy Martens from BDO in Belgium believes that it is essential to ensure that the CSRD and EU Taxonomy are designed in a way that encourages companies to go beyond mere box-ticking exercises. The standards should encourage companies to adopt a holistic and comprehensive approach to sustainability, focusing on the integration of ESG considerations into the core business strategy, she says. Providing guidance on effective sustainability management, reporting, and communication can help companies view these initiatives as an opportunity to enhance their reputation, attract investors, and foster long-term business resilience. The impact will be to foster a culture of transparency and accountability and facilitate the transition to a more sustainable economy in Europe.
Ákos Veisz from BDO in Hungary often sees ESG work at clients starting as a ‘project’ and while this ‘project’ matures it becomes clear to the client that many different organisational areas must be included. He stresses that while directors should facilitate ESG integration, middle-managers must understand their task in reporting, data collection and risk assessment. This in turn will force cultural change as the cross-functional nature of reporting will mean departments and teams will need to collaborate better to provide the required information.
“The latest direction in sustainability reporting is also likely to shift the corporate culture to one in which stakeholders hold companies to the highest form of uprightness and professionalism.”
Josephine Tam, BDO in Singapore
In some countries such as Germany, companies are reluctant to go public with their sustainability information because it is not part of their culture to do so. The culture of mandatory sustainability reporting, requiring disclosure on so many additional indicators, is going to take some time to be embedded across these companies.
As the tides of regulation continue to surge, companies find themselves at a crossroads, where embracing sustainability reporting is no longer a mere compliance exercise, but a transformative journey toward a more conscientious, accountable, and resilient corporate ethos. While it will not be an easy journey, it is one that will be smoother if embraced by company directors with a focus on the positive outcomes rather than the inevitable challenges which will be met along the way.