The Changing Landscape of Sustainability Transparency & DisclosureNovember 15, 2018 | BIER
Complex. Crowded. Overwhelming. Disparate. Inconsistent. Obligatory. Evolving. Important.
When it comes to reporting and disclosure, sustainability leaders at beverage companies are feeling mounting pressure to meet changing reporting requirements and intensifying stakeholder expectations.
Of course, many beverage companies want to disclose and are more than happy to share their sustainability story; they understand its importance. But every passing year brings new and more detailed reporting asks—and delivering data and maintaining transparency are no easy tasks. They take immense time, effort, resources, and budget.
So, while beverage companies want to participate, many wonder how to strike the perfect balance between what’s material to stakeholders and what’s material to the business. They want to tell their story in terms that relate to their business as well as resonate with a diverse audience of stakeholders. Furthermore, they want to get ahead of the change, so they can proactively plan for what’s to come.
For more than a decade, the Beverage Industry Environmental Roundtable (BIER) has brought sustainability leaders from global beverage companies and organizations together to share best practices, discuss trends, and create actionable frameworks to tackle issues like transparency and disclosure.
Recently, several members of our Transparency & Disclosure Working Group came together to discuss emerging trends, metrics that matter, and what companies should do now to prepare for the next reporting evolution. Those members include: Laura Nelson of Antea Group, Jamal Booker of The Coca-Cola Company, Julie Lejard of Pernod Ricard, and Suzette Carty of Brown-Forman. See what they had to say below.
What’s on the Horizon
Q: What emerging trends or topics will fuel future changes in reporting standards? And what are the present and future business implications?
Jamal (The Coca-Cola Company): I think the continuous and increasing investor interest is going to fuel more changes. A lot of different stakeholder groups are interested in sustainability reporting, but I think as organizations get more and more inquiries from investors, that’s really going to move the needle.
When investors, as well as other stakeholders, see what companies are dealing with and doing well or poorly on from a sustainability perspective it helps them analyze other companies they invest in. And really, I think we’re only at the tip of the iceberg for investor interest in this space.
As for the current and future business implications, this will force sustainability to be integrated across business operations—and at the end of the day, this is definitely a positive thing.
Suzette (Brown-Forman): I absolutely agree with Jamal that integration of sustainability in business will influence reporting. This will mean more opportunities for integrated reporting and we’ll have to make decisions on what sustainability content to include since it will likely sit alongside traditional financial reporting. Of course, the sustainability information a company decides to include in an integrated report will vary by organization depending on what reporting standards the company follows, stakeholder expectations, and legal requirements. Furthermore, I think including environmental disclosures into integrated reports will require us to have increased verification of environmental data.
As Jamal mentioned, with increased interest in understanding our industry performance from investors and other stakeholders, we also expect increased interest in comparing performance across the sector. However, our BIER member companies are unique with varying products, sizes, and strategies. When people look at our metrics, they aren’t apples to apples, so there will be a need for us to work on defining metrics that are more comparable to one another.
We want to tell be able to disclose information that is useful in assessing and comparing performance but also be able to share what is unique to our company.
Julie (Pernod Ricard): I see a greater need to focus on global harmonization and standardization of reporting standards on the horizon. There has been a proliferation of sustainability rankings making data not easily comparable between peer companies. There are also different means of communicating data and sustainability stories. Right now, it feels like there is an increased volume of information being provided without linkage to a company’s core strategy. I hope the discussion around this continues and it turns from an emerging trend to reality.
The other trend I see is digital; there are more interactive and personalized reporting “experiences” emerging. Pernod Ricard is moving toward more active, digital formats. For example, we’re committed to fighting against alcohol misuse, and for the last five years we’ve had a tool (https://smartbarometer.pernod-ricard.com/) that tracks the results and progress we’re seeing across the globe and can be broken down by region, country, and commitment.
In terms of business implications, I see three things. First, sustainability leaders need to make a concerted effort to stay informed and take part in discussions across the business—and make sure things in our line of business are heard. Second, there needs to be global collaboration to harmonize metrics and frameworks to achieve greater consistency and comparability, much like the work BIER is doing. Third, I believe we need to move away from informing and towards engaging in more attractive formats to share our stories.
Laura (Antea Group): For me, the biggest emerging trend right now is the need to look beyond your four walls to engage and understand the broader value chain. In the beverage industry, we do see this happening, but it’s becoming more of a core focus.
Within CDP (formerly known as the Carbon Disclosure Project), as well as the Dow Jones Sustainability Index (DJSI) and EcoVadis, we’re starting to see more of a focus on providing proof of management strategies in place. So, it’s not as simple as saying: “Yeah, we engage with our suppliers.” It’s going beyond that now, and they’re asking questions like: “Do you have a risk management strategy in place? If so, please upload proof.”
In addition, there are added layers of complexity as more stakeholder focus has been placed on management of broader corporate social responsibility issues and risks within the supply chain, such as human trafficking and conflict minerals. As a result, organizations like the Global Reporting Initiative (GRI) are trying to put together more formal recommendations for reporting on these issues to help companies minimize risk and capitalize on their opportunities.
Finding a Balance
Q: From your perspective, what metrics really matter to deliver high levels of transparency and maximize the business value of an organization’s reporting initiatives? How do you determine what to share?
Jamal (The Coca-Cola Company): The metrics that really matter are the understandable metrics. I say it that way because there are so many different audiences and stakeholders with different types of requests. Some are more interested in environmental metrics because that’s what their organization is focused on. Some might be more interested in human rights information.
But regardless of the audience, the metrics that matter are the understandable ones. The way it’s presented matters. In the landscape of reporting, if there are no numbers, there are no relevant reports. The ones that are contextualized for the different stakeholder audiences are the most important.
The way we determine what to share is based on what our stakeholders have told us through constant dialogue. The Coca-Cola Company is a member of communities all around the world, and the stakeholders within those communities are very different. But we put a lot of effort into partnering with them and sharing metrics that help people understand our impact and outcomes.
Suzette (Brown-Forman): The metrics that matter are those that are environmentally material the business and allow us to make meaningful decisions that impact environment and business. But it all comes down to context. I think context-based metrics are extremely important to help address the levels of transparency and business value.
It’s one thing to report on the metrics that stakeholders are asking for, but it is even more important to report on metrics that help you and others understand what’s really happening within your organization and how the organization is (or isn’t’) making progress.
When we think about the sustainability information Brown-Forman wants to share, we think in terms of significance. We share performance against the goals we set in our key environmental areas. Now that we are transitioning to integrated reporting, we’re reviewing these metrics to see if they best tell the story of what we are working to achieve. We also consider if the data is reliable, and if it isn’t reliable or verifiable, are hesitant to share it.
Julie (Pernod Ricard): Environmental indicators are very important, and we are starting to get more questions surrounding human rights. We’re looking at what global frameworks are asking us to provide— CHRB, GRI, rating agencies, and guidance such as the report on “Business Reporting on the SDGs: An Analysis of the Goals and Targets” — to guide our reporting and disclosure strategy. And we’re also taking into account what our stakeholders are asking for us to provide.
Laura (Antea Group): My answer to this is two-fold. First, you always need to report what makes sense for your organization. Whether you’ve conducted a formal materiality assessment or you’re just getting your feet wet and talking internally, you need that cross-functional understanding of what’s important to report to internal and external stakeholders. Who are they? What are they asking for? How do you report on metrics in a way that matters? Of course, there is no silver bullet or magic answer.
Now saying that, there’s undeniable value in taking a look at some of the guidance and tools that are out there on sector specifics. For example, the Sustainability Accounting Standards Board (SASB), has established a series of standards, which BIER has provided feedback on over the last few years. Essentially, if you’re reporting publicly, SASB recommends that companies incorporate these metrics in their financial reporting. Even if a company is just starting out in this space, the SASB standards provide a good test to see what is applicable to their unique organization.
In addition, through our benchmarking study initiative, we’ve reported on important environmental performance metrics for the past 10 years. Collaborating with peer companies is also useful for finding out what to report on, which is something we talk about in our Transparency & Disclosure Working Group.
Taking Proactive Action
Q: What’s one thing organizations can do now to prepare for what comes next?
Jamal (The Coca-Cola Company): The main thing is to take inventory—and that should be done in two different ways. Number one: Look at the different issues of importance to your organization and the communities you do business in and what you’re doing from a sustainability perspective. Number two: Take stock of how the organization is communicating your efforts and reporting on results. Whether that is in your annual reports or on-going website updates, you need to understand how the story is being told and look for opportunities to do it in the most transparent way.
Lastly, be humble. A lot of organizations are working on great initiatives, but there is often a lot more work to do that we collectively strive to accomplish. Make it less about patting yourself on the back and more about looking for areas to improve and where you can partner to have a bigger impact.
Suzette (Brown-Forman): Early engagement across functional teams prepares the company for integrated reporting. We’ve brought together a team from finance, sustainability, communications, legal and investor relations to work together on our first integrated report. Learning, contributing, and collaborating across the organization is key. It’s also important to get senior level buy-in and support from the CEO, CFO, and others – not only on what you plan to do but why it is important.
Julie (Pernod Ricard): Make an effort to streamline reporting for clearer ownership and to improve the level and the quality of our disclosure – reporting on the issues that really matter to your organization and its stakeholders. The goal here is to make reporting less of a tick the-the-box exercise and to stop duplicating efforts. At Pernod Ricard, we’re aligning this with our 2030 roadmap, which we plan to publish next year.
We’re hoping that this will help us integrate throughout the company and enable us to more effectively communicate the positive impact we’re making. Like I said, we need to move from informing to engaging and be thinking of new ways to share our story.
Laura (Antea Group): My best advice is that it’s never too early to start thinking about the next phase of your disclosures. There used to be a “reporting season,” but now it’s become a year-round job. However, I’d suggest that companies take the month or so after their next reports and disclosures are released to reflect on the process, document lessons learned, and map next steps. This includes looking at what and where you’ll report.
The other thing that I would suggest is that it’s really time to focus on your value chain to get a better understanding of your suppliers and your suppliers’ suppliers—I really think that’s the direction that stakeholder requests are going.
The Future is Now
Calls for more transparency and more detailed disclosures are getting louder. Now is the time to take stock of what truly matters to your core stakeholders and your business and make a concerted effort to collaborate internally and externally to meaningfully tell your story.
BIER can be one of those external partners. Our organization is rooted in collaboration, and we’re working together to drive meaningful change for our businesses, industry, and communities in which we operate.
For more information about membership and partnership opportunities, get in touch with us.
The Beverage Industry Environmental Roundtable (BIER) is a technical coalition of leading global beverage companies working together to advance environmental sustainability within the beverage sector.