The Competitive Advantage of Sustainability Reporting
Over the last few decades, the demands for environmental, social, and governance (ESG) developments and reporting have dramatically increased in business. Currently, the majority of the S&P 500 Index is providing sustainability reports. Corporations are now investing efforts in internal improvement and proper reporting in order to stay competitive, yet do these efforts provide any business benefit? This study looks into the influence of sustainability reporting on business performance and profit return. Business will traditionally prioritize maximized profit over all other, yet this study looks at the long-term effects of GRI reporting as a significant investment strategy for overall business success. The Global Reporting Initiative (GRI) reporting framework is a globally recognized sustainability framework, helping companies get acknowledgment and recognition for effort in sustainable developments. Data from the Governance & Accountability Institute, a data partner for GRI, published a report on the value of GRI reporting in 2012, is used to determine the success of GRI reporters. Data was collected on Fortune 500 and the S&P 500 Index GRI reporters and analyzed. This study determines the influence of GRI reporting in two main categories: performance (recognition by other indices, rankings, and agencies) and profit (annualized and investment return). The data showed a strong correlation between the companies which provided sustainability reports using the GRI framework and performance. GRI reporters were consistently the highest percentage in categories provided by other top rankings, indices, and agencies, compared to GRI reference companies and non-reporters. There were some measurable trends found between GRI reporters and profit, but data was not extensive enough to make a concrete final conclusion regarding the direct influence of reporting and profit return. Overall, there are direct and indirect benefits, such as improved reputation, increased employee and customer loyalty and better business practices associated with sustainability reporting. The long-term effect of this can influence business success and profit margins when a business commits to provide sustainability reports, especially when using the GRI framework.