The capability of a company to positively affect social and environmental change has, over the years, turned out to be a massive thought for several businesses. Several factors, such as environmental, governance, and social factors, encapsulate a panoply of problems that covers everything ranging from company culture, employee compensation, the effect of climate, and sourcing standards.
Of course, we can blame bigger companies for excluding themselves from financial reporting, but these companies still note the immense influence that ESG has on the relation of investors, market behaviour, and financial achievement. In fact, a huge percentage of the Fortune Global 500 companies make use of a well-known framework in sustainability reporting. About 80% of the biggest companies in the world make use of the Global Reporting Initiative (GRI) standards. The Global Reporting Initiative standard provides openness to investors, clients, including other stakeholders.
While for several years, public companies have embraced the act of sustainability reporting; but historically, it has been restricted (to some extent) to smaller businesses that don’t have the necessary resources to invest in analysis and reporting initiatives.
Sustainability reports are often prepared by accountants. Peradventure, you reside in Malaysia, and you need to know more about sustainability reporting, or you wish to get one for your business, you can contact an Accounting firm in Malaysia. An accounting firm in Malaysia boasts of accountants with the relevant skills and expertise, and they are all capable of providing you with whatever you need regarding sustainability reporting.
Irrespective of how big the company is, the following are some reasons why sustainability reporting is important to every business.
1. It is greater than the environment
While climate change was surprisingly a reason for the increase in ESG reporting, governance and social factor are turning out to be very significant. ESG reporting is quite potent; it has the ability to impact change faster than either the government or nonprofits, including the younger race after seeing their dollar investment as another extension of individual value.
According to a US SIF foundation, in the year 2008, investors retained $11.6 trillion in assets associated with the criteria of ESG, an increase from the $8.1 trillion that was retained in the year 2016. It was displayed by a TD Ameritrade survey that 19% of investors (ESG investors) view human rights as one of the most significant factors whenever they choose to make a decision.
2. More success less profit
A significant indicator of the long-term achievement of a company is non-financial performance.
With ESG metrics, a business can recognize when its adopted tactics need a complete renovation; it also assists in determining the practice that is connected with certain upcoming risks, even if it is effective at the moment.
For instance, is the manufacturing duty of the company being outsourced to countries that are prone to change in traffic or inflating the cost of labor? Does the hiring strategy of the management help in the retention of e employees? Indeed, traditional financial reporting doesn’t tackle so many important issues.
3. Individuals are significant
The workforce of today tends to hold their employers at a very high standard compared to that of several years ago when working conditions, the morale of employees, health initiatives, and general culture were considered as being very significant.
With sustainability reporting, these issues can be taken care of; it does this by offering the best understanding into the relative compensation of a company, its diversity, and retention rate. This isn’t just important for reeling in customers but for recruiting and maintaining talent as well.
4. The key is openness
According to a TD Ameritrade survey, it was noted that 67% of ESG investors are primarily after
advancing social and environmental causes rather than an investment rate of return. Millennials who make up about a quarter of the U.S population, portray a certain possibility of striking a connection with companies that boast of a rigid purpose and ethical governance standards. Based on a 2005 Nielsen survey, which was conducted on 30,000 customers in 60 countries, it was observed that there were about 73% of millennials that were keen on paying more for sustainable goods and products.
5. There exist some cheap tools
ESG reporting is quite expensive, but upon the inception of B Lab, that trend has been altered.
To make use of the B Lab assessment, you don’t have to be a B Corp. The B Lab assessment offers its users the best knowledge into significant and crucial ideas normally missing from the financial performance interaction. These ideas can be used to set a standard and scrutinize how a business can adjust the values of the business alongside that of its stakeholders.
In a Nutshell
Aside from market differentiation and satisfying customer needs, by reporting on ESG consistently, the enterprise value of such a business will skyrocket, and it will turn out to be more accessible than it ever was. Aside from preparing sustainability reports, accounting firm in Malaysia also offer payroll and HR services. Although other professionals also offerpayroll and HR services, accountants are in fact, more skilled in that aspect. For more information on sustainability reporting or accounting and auditing, get in touch with us.