As consumer and investor demand for sustainability information grows, the process of reporting environmental and social responsibility is becoming more complex and challenging.
During a Sourcing Journal webinar on Dec. 16, panelists weighed in on the state of sustainability disclosures. Given the wide range of information that can be of interest to stakeholders, information gathering can be tricky, time consuming, costly and overwhelming. Additionally, to avoid skepticism or accusations of greenwashing, firms need to verify the data that they are collecting. But the current significant amounts of data are nearly impossible to verify at scale, leading most companies to only assure portions of their claims.
“Right now, we’re essentially boiling the ocean with lots and lots of sustainability information,” said Jason Kibbey, CEO of Higg Co. “And the more information that you have, the harder and more expensive it is to verify, which is the bigger essentially deterrent at doing it at all.”
Kibbey sees the opportunity for more streamlined, standardized questionnaires that focus on fewer, more critical impact points. The Sustainability Accounting Standards Board (SASB) has made a move toward this, and an average SASB standard has six topics and 13 metrics, which are based on information that is most helpful for investor decision making.
Another move that could help simplify the reporting process is collaboration between assessment organizations. For instance, SASB uses some metrics from the Higg Index to share sustainability information with investors, and it also works to align its own reporting to certifications and standards. Higg also recently entered into a partnership with Sedex to bring together environmental and social data.
Related Stories
As companies take targeted approaches to avoid reporting fatigue while also sharing valuable information, one hurdle is appealing to different types of consumers and investors. With varying levels of sophistication and interest in detailed data and differences in how they consider and use the information, it can be difficult to meet these unique needs.
From an investor perspective, Taylor Reed, analyst, sector lead – consumer goods at SASB, generalized that most are interested in the outcome of a company’s granular approach, even if they are not investigating each and every certification that goes into a wider rating on a topic, such as material sourcing. Some that are more experienced in considering environmental, social and corporate governance (ESG) for decision making might undergo dialogues with companies, while others could be using environmental or social data as part of their metrics for analyzing a particular company.
Compared to investors’ exploration of companies, consumer decision making is even faster, with shoppers taking mere seconds to determine whether to buy from a certain brand or retailer. At the same time, consumers are skeptical about claims that aren’t verified. With this need for easily digestible yet certified information, Higg Co is working with some of the Sustainable Apparel Coalition’s larger brand members to develop a simple sustainable claim that is backed by deeper data. Within the next year, SAC plans to launch an “open data portal” that would house the data behind sustainability claims, allowing consumers to dig further into companies’ assertions. Kibbey made a comparison between the Sustainable Apparel Coalition’s work and the government’s Energy Star symbol, which allows consumers to easily trust that a product is energy efficient.
According to Jesse Daystar, vice president and chief sustainability officer at Cotton Incorporated, building truly trustworthy data requires a scientific process and third-party review. Bringing in outside experts to look over study methodology helps to ensure that there was no impact or influence from the company and that data isn’t taken out of context.
The panelists also stressed that rather than being an endpoint, the concept of sustainability is constantly changing, and reporting as well as assessments need to reflect this evolution.
“What’s sustainable is a forever moving target, so we have to really focus on what are we looking towards, how do we measure that, and maybe creating goals to continually improve and report against those goals with lifecycle assessment data,” said Daystar. “And clearly communicate to consumers it’s not just an endpoint, but this is the data, and you can make a decision based upon that.”
Sustainability also means different things to different people. Daystar noted that at the moment, some of the hot topics in environmental sustainability are reducing a company’s carbon footprint and studying the impact of microfibers on water systems. Per Kibbey, a key social issue right now is the forced labor reported in China’s Xinjiang Uyghur Autonomous Region. However, there will be new issues that crop up and take precedence in the future courtesy of the news cycle.
While new issues should be incorporated into the picture, companies also need to guard against having short attention spans.
“Consistency and commitment to some of these sustainability initiatives is key into understanding a company’s sustainability performance,” said Reed. “And what we hear consistently from investors is that they want those consistent metrics over time, because they recognize that some of these initiatives take quite some time to come to fruition.”
Watch the webinar, part of Sourcing Journal’s Sustaining Voices program in partnership with Cotton Incorporated, to learn:
- How sustainability assessments are keeping up with science
- Which sustainable information investors and consumers are seeking out
- How firms can address the disparate needs and wants of different stakeholders
- What efforts are being made to simplify and consolidate sustainability data
- How companies can start to build holistic, better sustainability reporting
- The outlook for sustainability in the Covid era
Click here to watch the webinar now.