1.1 Ten Recommendations for Best Practice

For a company’s sustainability agenda to be effective, it must be supported at the highest level of the hierarchy. The executive management is responsible for defining the most important issues and performance indicators, promoting cultural change, and ensuring that employees understand and accept the targets set and the requirements agreed.

A regular sustainability analysis is crucial for identifying gaps and drawing up an action plan for achieving short-, medium- and long-term goals. This includes identifying existing structures, processes and systems that need to be either adapted or retained. A review of the company’s documents, organizational structure and management system is a good starting point. This sustainability analysis can be performed by consultancy firms or internal committees.

A company’s sustainability reporting must meet the needs of many stakeholders with different requirements and expectations. Engaging in dialog with the most important stakeholders and identifying key topics are therefore crucial for aligning the company’s strategy with sustainability factors. Furthermore, sustainability information should be actively disclosed and communicated via established communication channels if it is to provide added value, especially for investors.

The next step should be to set priorities according to the principle of materiality, so that the reporting does not contain irrelevant or too much information. Companies should identify four to eight material topics and review them regularly. Reports should be brief and concise and concentrate on the most important issues. Secondary information can be provided on the company’s website. Last but not least, material information should be published in an integrated report in order to do justice to the interdependence between financial and non-financial information.

To achieve a good balance between economic, social, and environmental results, a governance structure for sustainability is required at all levels of the organization. A sustainability committee, consisting of members of the board of directors, should develop and monitor the implementation of the sustainability strategy and guidelines. Division heads and management are responsible for the coordinated implementation of the sustainability measures defined by the committee and the exchange of information between departments and business units. The board of directors should have ultimate responsibility. As the highest governing body, the board of directors oversees the achievement of corporate objectives and strengthens stakeholder confidence in the credibility of the company’s sustainability efforts. It is recommended to involve external parties such as stakeholders and/or experts.

When companies reach this phase, the integration of sustainability into strategy and management will undoubtedly have an impact on the company’s goals and its relationships with stakeholders. A review should therefore be conducted to assess whether the company’s identity – i.e., its mission, vision, and values – is in line with the new commitments. If this is not the case, now is the right time to make changes.

A series of general and/or sector-specific commitments can help companies formulate and continuously develop a sustainability strategy and integrate themselves into a network of learning and interaction with stakeholders. Examples include joining initiatives like Sustainable Stock Exchanges (SSE) and the United Nations Global Compact.

The development of sustainability guidelines is a key step in the process of implementing strategies through binding targets and management systems. The guidelines should define the organization’s sustainability management targets and processes in order to ensure that all divisions and departments plan and carry out the relevant measures. A good set of guidelines is brief and objective and is forwarded to all internal and external stakeholders. Economic incentives can also be created by including social and environmental targets in performance appraisal systems. 

The sustainability strategy must be integrated into all areas of the company and include targets with quantifiable indicators. These key performance indicators (KPIs) are based on the strategic sustainability goals and must be realistic, achievable, and time-limited. To integrate sustainability, it is also necessary to adapt company commitments, management systems, and guidelines. This process serves to institutionalize the implementation of sustainability goals in the company’s day-to-day activities, strengthen the corporate culture, and reduce compliance risk. KPIs should be monitored at both the operational and management level. The data must be presented to the board of directors on a regular basis.

Transparency is crucial for gaining stakeholders’ trust. The best way to demonstrate transparency and accountability is to publish reports. However, the importance of integrated reports is also increasing, including from a regulatory perspective. To be credible, reporting must be balanced, comparable, reliable, and precise.