How to keep sustainability reporting relevant to investor information needs

In the past, there was significant reliance placed on financial information when trying to gain insight into an organisation’s ability to thrive and compete in the long term.

However, over the last few decades, investors began to recognise the growing need to also understand the non-financial capabilities of organisations.

This ranged from governance and leadership, talent strategy, technology, digital transformation and climate risk, to name a few. The economic imperative for this was clear as there was data providing inference that organisations need to provide information on how they are navigating and managing the non-financial enablers to their business growth strategy.

In other words, investors need to understand how sustainability risks and opportunities affect the long-term financial fortunes of an organisation.

Therefore, organisations need to understand the expectations of investors for non-financial information. It is not an end in itself but aimed at providing insight into how sustainability risks and opportunities impact the cash flows of an organisation.

Read:  Why materiality in sustainability reporting matters

It is also important for organisations to give focus to those sustainability risks and opportunities that have a material financial impact when preparing their sustainability reports.

Sustainability reports must demonstrate how these risks and opportunities affect the financial prospects of an organisation, including how the organisation is managing them to create and preserve long-term value.

The complexity within the operating environment today, the speed of innovation and fierce competitive landscape make it clear that an organisation will require more than financial capital to guarantee long-term financial success.

Organisations should provide information on how they intend to make available over the long-term, the material non-financial capital required for value creation in the short, medium and long-term.

The IFRS sustainability disclosure standard is an investor-focused standard designed to help organisations tell a comprehensive value creation story with financial and non-financial capital.

While the standard was built to be interoperable with other frameworks, organisations must remember to filter out investor-focused information from their broader sustainability risks and opportunities to highlight information that is material financially.

The writer is a Partner at PwC Kenya. He is also an author who writes and speaks widely on corporate reporting topics