"Comply or explain" may sound either harsh or lenient depending on the way the message is delivered. Publicly-listed companies, to which the 2019 Securities and Exchange Commission memo on sustainability reporting guidelines were directed, most likely took it with a grain of salt. It is, after all, a regulatory mechanism: One either has to comply with a recommendation or—if one plans not to—give reasons for the deviation. If it were "Comply or else," it would probably be a different story.
But is it really that simple? Tick the boxes, fill out the blanks, and that's that?
Companies will do well to go beyond mere compliance in their sustainability reports. Embedding sustainability practices in their business (1) is cost-efficient; (2) has positive impact on brand equity; (3) raises employee satisfaction and retention (studies have shown that sustainability-conscious companies have been better able to retain staff); and (4) builds a reliable supply-chain ecosystem—by taking the lead in sustainability, companies will be conscious in selecting, guiding and managing supply-chain partners.
A sustainability report is, after all, not a mere compilation of data. The goal is—or should be—to take something abstract and make it tangible as it helps configure an organization's strategy, making it easier to set goals, measure performance and, ultimately, manage the change towards a sustainable business model.
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