Six ways CFOs can take the pain out of sustainability reporting

Six ways to take the pain out of sustainability reporting

The reality is that sustainability reporting is new, not necessarily difficult. Like any reporting obligation, it becomes easier once you understand the requirements and establish the right processes from the outset. 

Here are six ways to take the pain out of sustainability reporting.

Understand how sustainability reporting works

Sustainability reporting only requires you to report on risk, not act on it. The goal is to assist stakeholders – from insurers to banks, customers and suppliers – to make informed decisions about the risk of doing business with you. 

Many of these disclosures are qualitative, not quantitative like financial reporting. They require organisations to explain their governance, decision making processes and approach to managing risk. For CFOs who prefer dealing in hard numbers, this can feel unnerving at first. However, once the first round of disclosures is complete, most CFOs find it wasn’t as difficult as they imagined it to be. 

Use the first year to create a repeatable process

Ideally, you want to use the first year to establish a quality reporting process grounded in best practice. That way, you can confidently repeat the process in subsequent years with significantly less time and effort. Working with an adviser is usually the best way to achieve this. 

Before long, sustainability reporting will simply become a routine part of the annual reporting cycle. 

Engage an auditor who understands both worlds

Sustainability reports that are lodged with ASIC must be audited first. This is a useful step because an auditor will be able to: 

• identify gaps, weaknesses and inconsistencies in your reporting
• assess whether sustainability disclosures align with the financial report 
• recommend ways to improve efficiency and reduce future effort
• strengthen confidence in the information provided to directors and stakeholders. 

Auditors who are both experienced accountants and sustainability specialists are particularly valuable in your first year.

Smaller organisations that sit outside the mandatory reporting regime can still choose to report on their climate-related risks and opportunities voluntarily. Because these reports are not required under the Corporations Act 2001, there is no statutory requirement for them to be audited or assured. Organisations typically choose to report voluntarily because they:

• expect to be required to report in future
• are experiencing rapid growth
• need to report within their supply chain
• want to provide assurance to stakeholders.

If this applies to your organisation, working with advisers who are familiar with sustainability reporting and sustainability audits provides an advantage. You can tap into their wealth of knowledge, ask them to benchmark your approach against similar organisations, and suggest improvements so you can find ways to achieve more with less.

Focus on foundations, not quick fixes

Be cautious of providers offering quick fixes such as off-the-shelf reporting templates, or automated reporting platforms that sound too good to be true. 

A lot of data goes into informing sustainability reports, and an inaccurate disclosure can carry penalties and reputational risks for the organisation and the directors who sign it. 

Bring your directors along for the journey

Because directors are ultimately responsible for signing the declaration, it’s a good idea to bring them along for the journey. 

When they know what has gone into the process, they will be better placed to understand what they are signing and why. 

Use the luxury of time (while you have it)

If your organisation will be required to report in the next few years, make the most of the lead time. There is far less stress when you're not racing against a reporting deadline, and starting earlier gives you space to refine your approach.

By the time reporting is mandatory, your reporting process could already be running like clockwork.