We can say that sustainability today is the protagonist in strategies and business models of companies. Organizations have realized that they must work on an integrated thinking that contemplates a strategic business vision linked to sustainability and with which they not only create lasting value for their shareholders, but also develop successful and lasting relationships with all their stakeholders.
This has also led to the financial, social and environmental aspects being analyzed and managed from a holistic perspective. This new strategic thinking has also led to moving away from the Sustainability Report format to Integrated Reporting. However, this transition to integrated reporting has been gradual. Currently in Chile, 86% of the 29 companies listed on the IPSA index - Chile's main stock market index - include sustainability criteria in their annual reports - of which 10% make separate sustainability reports.
From Financial Report to Integrated Report
The evolution towards Integrated Reporting seeks to generate a holistic view of what is happening within each company. For companies to be sustainable and increase their value, they depend on more than their financial and manufactured capital; they must rely on a broad set of resources and relationships that include intellectual, human, social and natural capital. That is why they must address issues that are of clear material concern to companies, investors and all their stakeholders in order to build trust and above all create long-term value. For companies, this means making their information transparent in a rigorous manner and telling it like it is.
Metrics as key players
As they say, "what is not measured cannot be improved", and the requirements regarding the information included in the Integrated Reports have increased thanks to new regulations that have been appearing throughout the Americas and Europe. A higher level of detail and transparency (auditable data) is now expected for companies' ESG performance to be rigorously reflected. But beyond the requirements, creating long-term value and building trust with all stakeholders cannot be achieved without transparency and accountability. "Being able to articulate your strategy and business model, as well as linking metrics to them, is critical for organizations to build trust."
As expected, organizations need to rely on software solutions when reporting requirements increase. M-Risk's software solution allows working collaboratively and recording data from the source of origin, organizing and supporting all the necessary information and metrics for the analysis and drafting of the report, complying with the aspects required by the Global Reporting Initiative (GRI). In this way, all the information that is dispersed is unified and standardized according to international standards, providing traceability of data to support statements and build a quality report.
Publicly traded companies are already incorporating ESG metrics to track their sustainable progress, leading the way for the rest of the business world. In a preliminary study of S&P 500 companies, consulting firm Mercer noted that the use of ESG metrics increased from 35% to 46% in executive incentive plans. Another 9% of companies revealed that they intend to use an ESG metric by 2023.
Investors and stakeholders demand organizations know their environmental, social, and governance (ESG) performance, pushing for financial and non-financial information to be transformed into ESG "auditable disclosures." The right technology will simplify the data collection process and generate reliable integrated reports.
In this context, it is logical that organizations seek ESG management software as an ally for its contribution to methodology, consistency, and traceability of information. Cloud solutions deliver value and save time and effort while preparing complete and quality reports that will help identify areas of opportunity and growth in terms of sustainability. Some of the benefits include:
- They record, organize and support all necessary information
- Standardize the delivery of information
- Consolidate information into a single database in the cloud
- Enable collaborative and distributed work
- Follow international guidelines