Sustainability reporting as a business strategy for a firm’s growth

0
58

‘Sustainability’ has been one of the most catchy and trendy topics during the past few years, which is defined by the Bruntland Commission in 1987 as “meeting the needs of the present without compromising the ability of future generations to meet their needs”. Most importantly, it consists of three pillars; economic, environmental, and social. Reporting on sustainable engagements and activities undertaken by organisations has become increasingly popular among entities, and many organisations tend to allocate separate segments for sustainability in their annual reports. In contrast, some others issue separate sustainability reports.

Organisations strive to attract capital providers, satisfy their stakeholders through sustainability reporting, and most importantly build public trust. Sustainability has become prominent with Sustainable Development Goals (SDGs) declared by the United Nations. Moreover, almost all the governments, private and public business organisations embraced this concept enthusiastically.

Even though sustainability reporting is vital to showcase organisations’ economic, social, and environmental concerns, it has encountered a considerable decline confronting the global pandemic, Covid 19, during the last two years in Sri Lanka. Many organisations were struggling to survive in their respective industries during the pandemic and post-pandemic period, facing numerous economic drawbacks such as rapid growth of inflation, deficiency of foreign currency reserves, unemployment etc. However, even though corporations in Sri Lanka are currently experiencing many economic bottlenecks and hardship, it is hard to dilute the importance of sustainability engagements at any circumstance upon certain valid reasons.

The recently conducted research by our team using all the manufacturing organizations in Sri Lanka has discovered an interesting finding concerning sustainability reporting. After rigorous analysis and observations of data for the last four years, researchers identified that sustainability reporting lays a concrete foundation for business growth. In other words, a strong association has been noticed between the sustainability reporting and sales growth of entities.

This is mainly due to the fact that public confidence is built and improved massively through sustainability reporting. Other than that such organisations are more attractive for external capital providers, customers, suppliers, employees, regulatory bodies as well as its own shareholders for transparent information provided through sustainability reports. Undoubtedly, this is an eye-opening finding to all the owners and top management of businesses to identify the significance of sustainability reporting on organisational growth.

Another interesting finding of the researchers was that sustainability reporting caused to reduce the cost of capital of organisations and thereby support to increase the firm’s market value. Thus, based on this finding, it is established that sustainability acts as a business strategy, enhancing the overall value of organisations. Enhancing the firm value is the dream of any company since it generates many benefits not only to its investors and owners but also to employees, suppliers, customers, lenders, and the public.

However, the findings of the research study also revealed that the level of sustainability of Sri Lankan organisations is still at a considerably low level. Unfortunately, reporting on sustainability is very low among Sri Lankan corporations compared to some other South Asian countries. The less attention and prominence given to this important mechanism would hinder the benefits that could have been successful otherwise.

The research findings have given a wake-up call for all relevant governing bodies of organisations and government regulatory agencies to immediately promote sustainability reporting at the entity levels. Based on our results, it is thoroughly recommended to assign considerable weights in a business’s annual reports to disclose sustainability engagements on an annual basis in a more appealing manner and generate stand-alone sustainability reports, if possible. It is high time that governing bodies of Sri Lankan companies should perceive sustainability reporting as a vital business strategy that helps elevate the firm’s growth and value, and thus, prioritise this initiative by all possible means.

Today, economies are not able to turn a blind eye to sustainability reporting even amidst paining challenges arising due to Covid and other economic crises, as the importance of sustainability reporting waves its flags high above all.

Sulochana Dissanayake1, Dilini Dissanayake2, Prof. Roshan Ajward3

[email protected], [email protected], [email protected]

Faculty of Management Studies, Rajarata University, Mihintale, Sri Lanka1,4, NSBM Green University, Mahenwatta, Pitipana, Homagama, Sri Lanka2, University of Sri Jayewardenepura, Gangodawilla, Nugegoda, Sri Lanka3