It’s true that with 73 percent of the population living on below US$ 2 a day and 17 percent of the population living on less than US$ 1 a day (UNDP), the sustainability performance of Pakistani businesses is not the primary concern of the majority of the country’s population.
But it should be a concern of the business community, especially those who want to compete on the international market or tempt multinationals to choose them as suppliers boosting the economic development of the country. At the same time it should also be the concern of those who want fairer, more sustainable development both within Pakistan and throughout the wider world.
Awareness of sustainability has significantly changed in recent years. Sustainability is rightly now high on the international agenda. It is in part due to the dawning reality of climate change but also as a result of unprecedented economic growth of emerging economies such as China and India. Driven by the desire to alleviate poverty, this amazing growth has successfully reduced poverty levels but resulted in severe unintended consequences. This has caused the global community to sit up and address the tension between the need for development and its negative impacts.
In this context, there is a growing understanding among the international community that a different approach to development is needed, a sustainable approach, an approach that allows the needs of the present to be met, without compromising the ability of future generations to meet their own needs. As such, financial performance is no longer the exclusive driver for businesses. Economic, environmental and social factors are now recognized as also playing important roles.
Consequently the competitive international marketplace increasingly rewards those that go beyond the legal requirements in terms of managing their economic, environmental and social impacts. This recognition has led to companies being encouraged by internal and external stakeholders to demonstrate their performance in these areas, which has resulted in the emergence of sustainability reporting.
Internal forces (such as employees, investors, senior management) within organizations have also begun to recognize the value of sustainability reporting and the business case behind communicating their progress towards reducing their social, economic and environmental impacts, and innovating around new opportunities provided by a commitment to a more sustainable future.
Sustainability reporting is sometimes also called triple bottom-line, non-financial, or corporate social responsibility reporting and it refers to organizations formally disclosing information on their social, environmental and economic impacts. For example disclosing how much water they use as part of their operations, whether they respect the human rights of their employees, and if they pay them fairly.
It is about a company making clear the positive and negative effects of its operations on the local community and environment, how it intends to enhance those positive aspects, and how it will endeavour to eradicate or improve on the negative aspects of its business on the community in which it operates. In essence, it’s about reporting on how the organization is contributing to sustainable development.
Within Pakistan, sustainability reporting is in its infancy but steadily growing. Current Pakistani reporters include the likes of Engro Chemical Pakistan Limited (winner of the ACCA-WWF Best Sustainability Reporting Company in 2007), the Pakistan Tobacco Company and the Pakistan Refinery Limited. The question is what is the benefit of reporting for companies like these?
Besides reducing the organization’s sustainability footprint, there are many reasons for reporting. Already touched on is the competitive advantage in the international marketplace, whether that be Pakistani companies investing overseas, directly selling their products abroad or supplying multinational companies. Customers, particularly those in European markets, increasingly reward companies which disclose their sustainability impacts. Consumers buying from Pakistani companies want to be sure that they do not contribute in exacerbating the widespread poverty and instead contribute to eradicating it.
Reporting using a standardized framework is a way to show that a company is transparent and accountable and so can build trust between the customer and the business or the purchasing company and the supplier. If companies disclose information following a standardized approach, it enables the comparability between organizations both within Pakistan and internationally. Customers can use this information to evaluate the performance of one company against another with respect to certain indicators, such as the total number of employees by age which shows a company is not relying on child labour. They can also use this sustainability information to benchmark organizations’ performance with respect to laws, norms, codes, performance standards and voluntary initiatives. Disclosure can also improve a company’s access to capital because the investment community trusts companies who openly present sustainability information.
A sustainable approach to business can also enhance the brand value of the company. It develops an association with good virtues and values, attracting customers in whatever shape or form, as well as talented employees. A study conducted by PricewaterhouseCoopers of 3000 graduates in the UK, US and China found that 87 percent of respondents said that they would deliberately seek to work for employers whose corporate responsibility reflect their own ethics and values.
There are also internal benefits as the process of gathering sustainability data is a useful internal management tool. The process of producing reports enables businesses to internally identify operational inefficiencies, cut waste and save money for the company. For listed companies this helps deliver shareholder value. Just as an external stakeholder can benchmark company performance from the information disclosed in these reports; this benchmarking information can also be helpful for the internal management of a company and driving improved performance.
But sustainability disclosures are only useful for all parties in as far as companies disclose information that is relevant to the organization and their stakeholders. If companies, based in Pakistan or elsewhere, fail to present comprehensive and comparable information about their economic, environmental and social impacts, and gloss over the material issues, then it’s not much use to internal as well as external stakeholders.
What is needed is a global standardized framework for disclosure and the Global Reporting Initiative (GRI), a multi-stakeholder network and a collaborating centre of the United Nations Environment Programme, has pioneered just that. The GRI’s Sustainability Reporting Framework facilitates transparency and comparability among companies that use it and play a vital role in enabling a standardized approach to disclosure. First issued in 2000, then 2002, the third iteration, the G3 Guidelines, was released in 2006.
The GRI Guidelines set out the principles and indicators that organizations can use to measure and report their economic, environmental, and social performance. In order to ensure the highest degree of technical quality, credibility, and relevance, these guidelines have been developed and are continuously improved through a consensus-seeking process with participants drawn globally from business, civil society, the labour movement, and professional institutions. A cross section of global stakeholders who share the vision that reporting on economic, environmental, and social performance by all organizations should become as routine and comparable as financial reporting develop this standard. The resultant G3 Guidelines are a free global public good and have been translated into many languages.
In addition to the universally applicable core guidelines, the framework also contains Sector Supplements. These are specialized reporting guidance for companies in a range of industry sectors – such as mining and metals, automotive, and retail and apparel, which caters to the unique sectoral sustainability challenges. This guidance is also created using a balanced group of geographic and sectoral representatives including Pakistani nationals.
Over 1250 companies in over 60 different countries have self-declared the use of the GRI Guidelines as a framework for their sustainability reports, while a multitude of other companies use the GRI Guidelines on a more informal basis without self-declaration. The benefits of reporting outlined are clear to these companies, including the likes of Engro Chemical Pakistan Limited. As more businesses and other organizations in the country start to recognize the benefits of sustainability reporting and the contribution of this practice to the Pakistani population’s economic and social development, sustainability reporting in the country is set to increase.
The GRI Guidelines can be downloaded for free at www.globalreporting.org
If you are interested in supporting the translation of the GRI Guidelines into Urdu, please contact GRI at info@globalreporting.org
