Why we believe that brave brands will lead the Fashion Revolution

Yesterday the Fashion Revolution week ended. The Terrace reflects on this global movement for transparency in the fashion industry.

The fashion industry calls for a revolution

It’s Fashion Revolution Week and yes, a revolution is what the fashion industry needs. Fast fashion is the second most polluting industry in the world, next to oil. Apparel and footwear industries currently account for 8 per cent of global greenhouse gas emissions, only in 2015 the fashion industry consumed enough water to fill 32 million Olympic-size swimming pools and the dyeing and treatment of garments makes up roughly 17-20% of all industrial water pollution. Next to this environmental impact, apparel also comes at a social cost. According to the ILO, about 60 millionpeople are employed in the textile, clothing and footwear sector worldwide, and three quarters of these workers are women. In this way, the industry has served as ‘a stepping stone to development’ in many countries. Yet apparel also became widely known for its bad working conditions in factories, a lack of earning a living wage and even human rights violations. The collapsing of the Rana Plaza building in 2013, a building that hosted factories that worked for the world’s biggest fast fashion brands, was the final straw that accelerated a movement for change. The Fashion Revolution was initiated, an initiative that aims to accelerate collective action with worldwide campaigns that request/demand? more supply chain transparency of fashion brands.

Luckily, brave brands are taking the industry by storm

Well, that was quite some depressing news all at once right? Well, the good news is that many great things are happening. Entrepreneurs are stepping up worldwide, making a positive and sustainable impact the ‘purpose’ of their brand. At The Terrace we have worked with multiple ‘fashion revolutionists’ on strengthening their strategies for positive change. Whether they integrate sustainability in their business from the get-go or whether they turn their business model around, brands are getting serious about sustainability, and they are taking the market by storm. And to be frank, we believe the brands that change the status quo to be the only brands that will stay relevant. Why? Because consumers engage with the purpose of a brand more than ever and dedicating your business to the severe challenges the sector is facing, makes you matter more to your audience. Some brands that we believe are leading by example:

  • Good on You– This app rates thousands of fashion brands on sustainability
  • Mud Jeans– Innovative business model with circular jeans that you don’t need to buy
  • The Next Closet – Second hand designer products
  • Armed Angels – Challenges consumers on the true cost of fashion and incorporates sustainable textiles only
  • Veja– A brand continuously making their shoes more sustainable showcasing that sustainability does not happen over night
  • Reformation– Reaching the next generation of consumers with on trend recycled collections
  • Patagonia– Outdoor clothing brand that vows for anti-consumerism.

From individual commitments to an industry-wide movement

Brands play a huge role in turning the tide for the Fashion Industry, but alone they can only go so far. With the growing need for change in the sector, pre-competitive collaboration between companies, civil society and governments continues to grow. The Sustainable Apparel Coalition (SAC) is one of these examples, uniting retailers like Walmart and Patagonia and 200 other companies to assess their environmental and social sustainability throughout the value chain. The Fair Wear Foundation (FWF) enables member companies to assess and? improve workplace conditions. In 2017, The Fashion for Good centre opened in Amsterdam, which enables international brands, producers, retailers, suppliers, non-profit organisations, innovators and funders to work together in changing the fashion industry for the better. But also at country-level industry stakeholders are coming together to change the fashion business for the better. After the Rana Plaza collapse, the Dutch Agreement on Sustainable Garments and Textile  was initiated, a shared commitment  initiated by industry associations, trade unions, NGOs, and the National Government of the Netherlands to collaborate on many environmental and social issues in the garment sector.

Are you a company working in or with the apparel sector and want to create positive change?

There is a lot you can do. Addressing the challenges in the apparel sector and strengthening your business go hand in hand. Not sure where to begin? At The Terrace we are always happy to help brave organizations find their focus in becoming more sustainable, for instance with our Brand Purpose workshop. Get in touch with our team here if you want to know more.


Partnership for the sustainable development goals

You’ve probably heard to the Sustainable Development Goals set by the United Nations, also known as the SDGs or Global Goals. But how are these relevant to you and your organization? How is the Netherlands progressing on these goals? And how do different sectors contribute to the SDGs? Marjolein Baghuis of The Terrace organized an event for the alumni of Nyenrode Business University at the office of PricewaterhouseCoopers (PwC ). The SDG's were the topic of this day.

Immerse yourself in the SDGs through virtual reality

PwC Amsterdam built an SDG dome to bring the SDGs closer to its staff and clients. On March 29, 2019, PwC Amsterdam opened the SDG dome to the alumni of Nyenrode Business University.

The United Nations strive to achieve these goals by the year 2030. In the dome we tried to achieve the the Sustainable Development Goals as quickly as possible. Even for people with deep knowledge of sustainability, this proved to be quite a challenge. Our two teams achieved the SDGs by 2037 and 2044. These results and the impact of experiencing sustainability challenges and solutions through virtual reality raised the sense of urgency and the commitment to act in all of us.

Dutch organizations working on SDGs below the surface

At the launch of the SDG dome, PwC also presented research about the application of the SDGs by Dutch organizations. This shows that listed companies in the Netherlands embrace the SDGs, but that these have not been integrated effectively into the strategies and activities. A smaller subset of the Dutch ministries and municipalities refer to the SDGs but is not yet leading to different actions. Social enterprises and NGOs in the Netherlands hardly mention the SDGs at all in their annual reports. They do not see a sufficient added benefit to link their impact to the SDGs. So, below the surface, things seem to be moving, yet organizations could still make much more use of the SDGs. Linked to their operations, their impact in society and as a common language to connect with other organizations.

Dutch organizations primarily focus on SDG 8 (decent work and economic growth) and SDG 12 (responsible consumption and production). While we should pay more attention to SDG 5 (gender equality) and SDG 13 (climate action), as international research by PwC shows we are lagging behind on these SDGs compared to other countries.

PwC brings the goals closer for clients and staff

Wineke Haagsma, Director Corporate Responsibility at PwC shared how PwC integrated the SDGs and how they help clients to do this as well. There is a four-step process to select the SDGs to which they want to contribute:

  1. Start from the positive contribution of your own organization;
  2. Then act on the negative impacts of your own organization;
  3. Focus on the positive impact of your products and services;
  4. and finally, search for the negative impacts in your supply chain.

These four steps help organizations identify which SDGs provide challenges and opportunities for the future, and to select the SDGs on which to focus. For the selected SDGs, the next step is to dig into the underlying targets. Make the selected SDGs very concrete for your own organization, with clear goals linked to your own operations. And with KPIs to measure progress. The SDG selector can be a handy tool to support this selection process.

Through this process, PwC Netherlands selected four focus SDGs and linked these to the strategy. On their website, you can read more about the selected SDGs (8, 10, 12 and 16). Wineke’s enthusiasm and openness sparked many people to really consider how to get to work on the Sustainable Development Goals.

Plant-based networking

As always, these alumni events are wrapped up with networking drinks. PwC served organic wine and vegetarian snacks made from mushrooms grown on coffee grounds from PwC’s own offices.

This event was organized and chaired by Marjolein Baghuis of Change in Context, in her role as Chair of the Alumni Circle for Sustainability at Nyenrode Business University. 

This blog of Marjolein also appeared on the website of Nyenrode.


Tony's Chocolonely: Raising the chocolate bar for industry change

For years, I’ve been supporting chocolate – and change – maker Tony’s Chocolonely to create their annual report. My kids and my colleagues love that I work for them. Because I always return from meetings with their yummy chocolate in funky flavors. Their bars are a treat, but what inspires me most to work with them is their commitment to creating positive change in the industry. Here’s my take on their key ingredients for positive change!

Crazy people raising the (chocolate) bar

Positive change usually starts with frustration about an issue plus people crazy enough to doing something about it. And this ccompany started just like that. Investigative journalists were shocked to find out how much child labor and slavery there is involved in nearly all chocolate. In 2006, in an attempt to prove that it could be done, they produced 5000 bars of slavery-free chocolate. As this first batch sold out in just a few hours, they turned the experiment into a company.  The company tagline says it all: “Crazy about chocolate, serious about people.”

Partners towards a common goal

A shift to more sustainable business practices is needed at all steps along the chain. From cocoa farmers, chocolate companies and governments, to retailers and consumers. The people at Tony’s understand they cannot transform the cocoa industry by themselves. Tony’s therefore developed a roadmap towards its mission: “Together we make chocolate 100% slave-free”.

The roadmap engages five key actors in the industry to work towards this common goal:

  • Strengthen farmers to increase their income
  • Engage the largest companies in the industry to take action in their supply chains
  • Encourage retailers to leverage their buying power
  • Push governments to adopt and enforce legislation
  • Enable chocofans to raise awareness and spread the message

Scaling up for real movement

To really engage partners along the cocoa chain, Tony’s knows there needs to be a business case every step of the way. Its own story and success provide lots of inspiration to get different parties to act.

At the launch event for its 17/18 annual report that scale became very clear:

  • Over 5,000 farmers benefit from the special premium Tony’s pays, nearly 1,000 farmers are involved in awareness-raising activities to prevent unwanted child labor and slavery;
  • The Netherlands’ largest retailer Albert Heijn announcedit will use Tony’s principles of cooperation for 100% slave-free chocolate for its very successful private label chocolate brand Delicata. World leading chocolate manufacturer Barry Callebaut supports the change process;
  • 5,000 chocofans joined the party, over 8,500 people support Tony’s mission as Serious Friends;
  • And the brand became the market leader in the Netherlands with a market share of 19%. Net revenue grew by 23% to nearly € 45 million and a net profit margin of 4.5%.

Relentless ambition for chocolate and change

Nice numbers for a company that produced its first bar of chocolate just 12 years ago… But they know there’s still a lot of work to be done. Therefore, Team Tony’s continues to work – and party – very hard to increase its own impact by expanding the business to other countries and continuing to drive collaboration in partnership with many others.


Top tips for greenwashing: communicating sustainability in horticulture

In October 2017, The Terrace was invited by the MPS-group to lead a workshop for and with leading growers of flowers and flowering plants from the Netherlands. This was part of event in preparation for an international horticulture trade fair. The focus of the workshop was on how to best communicate on sustainability in the horticulture sector. Here's what I had to say about conviction, focus, collaboration and... greenwashing.

Tip #1: Start from your personal conviction

The trouble with sustainability is the lack of a common definition. It may include topics like environmental protection, labor conditions, community engagement, economic impacts and/or governance. There are so many terms floating around, like CSR, responsible business conduct, future-proof, thriveability... Whatever term you prefer, it needs to be relevant to your core business and your key stakeholders. Most likely, this will be a function of the industry, the cultural/national context and the conviction and focus of senior leadership. So before communicating your sustainability efforts externally, first consider what sustainability means to you. For which parts of sustainability do you care most deeply? Why did you get started with organic flowers? What made you integrate sustainability into your business model?

Tip #2: Focus on what matters

Sustainability is multi-faceted, so your sustainability strategy probably is as well. But while all those facets may be relevant and understood by people within the industry, they won't all be equally relevant for different stakeholders. So when communicating your sustainability strategy, think first and foremost from the perspective of your audience. For different target audiences, focus your sustainability story in different ways. While keeping the overall story the same, differentiate the key topics to highlight for different audiences. Not everyone knows as much about sustainability issues in horticulture - or whatever sector you're in - as you do.

Unilever uses a very powerful analogy to further strengthen its sustainability communications: the sword and the shield. The sword is a strong message that you pro-actively want to share with your target audience. And which is very relevant for that target audience. The shield contains other topics which you are working on in your sustainability strategy, but which are less relevant to your audience, or less easy to talk about as an individual brand or company.

For example, for Lipton's sustainability strategy includes both social and environmental elements. In consumer communication, the social elements are emphasized like a sword. Most consumers realize that picking tea leaves is hard work in tough locations, so this context helps Lipton tell its story about the programs it has in place to make life easier for tea pluckers. The improvements Lipton is making to reduce pesticides is more like a shield. Something to work on very actively, but as most consumers are unaware that nearly all tea in the world contains pesticides, communicating about this as an individual brand is more challenging. So while this may be a great topic for a sustainability website or report, we'd not recommend putting that same story on the pack.

Tip #3: Some stories are better told together

Some topics are difficult to raise, even if you feel it is high time the world knew about the issues and your solutions. This is where sector-wide collaboration and communications may be needed. Just like for tea, for the horticulture sector, pesticides might be such a topic. As an individual grower of flowers, this is a topic you might be able to raise with expert buyers in retail. But with consumers, this is not so easy. If you try to mention this on your packaging, consumers might just link your name to pesticides in general, rather than the reduction you've achieved. To raise awareness of the issues around pesticides, it would be better to collaborate. With industry bodies and certification providers, but potentially also with NGOs and consumer organizations.

Tip #4: Always be honest

Good communications about your sustainability efforts and performance can build trust in your organization and its products. But even if you're selling plants and flowers, and you'd like to make the world a greener place, what you're communicating has to be true. Only balanced communications - sharing both successes and challenges - builds trust. If what you're sharing is not true, then it's merely greenwashing. That word might have a nicer connotation for the horticulture sector than for others, but it will simply erode trust.


Top tips for reading sustainability reports

To mark International Literacy Day, this post is about reading sustainability reports. In 2016, the theme for International Literacy Day actually was “Reading the Past, Writing the Future”. Which is quite similar to our recent blog about transforming sustainability reporting to a tool for positive change. But that's a different story, as this blog is not about writing reports, but rather about reading them.

An ever increasing number of companies publish a sustainability report. Or integrate sustainability into their annual reporting process.  The question is, who reads these reports? And are the readers finding any use for the sustainability data and stories presented in the reports?

Who's reading?

In 2015, the Global Reporting Initiative, creators of the most widely-used sustainability reporting standards, co-authored a report with Oxfam, Informing decisions, driving change, about how different stakeholders read and use sustainability data captured in sustainability reports. It offers a comprehensive view of the key users of sustainability data, such as civil society organizations, investors, business, governments, market regulators, and media.

Some would argue that consumers also belong on that list, as well as prospective employees. Very different stakeholders with very different objectives. Yet all trying to get insights from reading the same sustainability report! Besides a few reporting geeks, many people may wonder how to best read or assess a sustainability report. So here are some tips to guide your reading!

Commitment or compliance?

The fact that a company has a sustainability report, doesn't always guarantee a real commitment to making their company more sustainable. A company may simply report only to comply with regulations. So a key thing to look for when reading a sustainability report is commitment. Is top management involved and engaged? What are they committed to exactly? How are decisions made regarding sustainability topics? The introduction to the report by the CEO or chairman is the best place to look for "commitment" signals. A great way to test the depth of this commitment is to cross-check the introduction of the financial report. If there is no mention of relevant sustainability topics there, then that commitment may not run so deep.

Connected context

The selection of topics for the sustainability strategy and report generally shows how connected a company is to its environment. So the next thing to look for in a sustainability report is a clear understanding of the company's context. Is the sustainability strategy linked to the vision and mission of the company, or is it focused on totally different topics? Are environmental and social risks and opportunities explored in relation to the business model? If you are less familiar with a specific industry, this may be hard to assess. In that case, reading parts of the sustainability reports of companies in the same industry will generate insights on the key topics.

Large companies are expected to act according to the OECD Guidelines and adhere to the UN Guiding Principles on Business and Human Rights. And all companies can use the Sustainable Development Goals as a framework to assess how their business contributes to a better world. So when reading a sustainability report, check whether and how the company references these frameworks.

When done well, companies select their so-called material topics after engaging relevant stakeholders, such as employees, clients, investors, NGOs, and communities. Through a materiality matrix, many companies plot the interests of their stakeholders against the interests or impacts of the company. That matrix and the accompanying text are my favorite parts of any sustainability report.

Completing the cycle

Sustainability is all about the future, yet reports tend to look back in time. So when reading a sustainability report, check whether the report on past performance is in function of the future. Are the long-term objectives clear, as well as the strategies and policies to reach them? Are they closely linked to the material topics identified? Does the report share relevant results for the past year as well as previous years as a benchmark? How do these results stack up against the goals for this reporting year?

Are the results balanced? Not just sharing what went well, but also the learnings from things that did not go as well? And does the report provide insight into the specific goals and action plans for the year ahead? These kinds of questions help you assess whether there is a structured, full circle approach to sustainability for the company. In which reporting is a key instrument to fuel improvement, rather than a goal in itself.

Consistency

The GRI Sustainability Reporting Standards (and Guidelines) help companies to prepare their sustainability report, but they also help the readers. Especially the GRI Content Index, which lists the standard set of disclosures for all companies and includes the material topics selected by the company. With it, the reader can easily find the pages for each topic.

And just like it's useful to scan the sustainability report of a company's peers and the financial report, it can be tremendously useful to have a look at previous reports by the same company. Is the company consistently reporting on the same material topics? If not, are there good reasons to change the scope of the strategy and report due to changes in context? Or is the company cherry picking its stories and KPIs from one year to the other, to always have good news to show?

And last, but not least, is the sustainability report itself consistent with the materiality analysis? Are the topics in the report - and the space they are given - in line with the materiality analysis? If not, it may be time to look for the page that highlights how to get in touch with the company about their report!


Transform your sustainability reporting to a tool for a positive future

Let's talk about how to transform reporting from a burden into a tool to build a better future. Our earlier posts zoomed in on materiality, but in the end, it's all about creating that better future. Here's our take on how to get more out of your reporting efforts. Just in time for the people in the midst of planning the next sustainability reporting cycle for their organization.

Every year, the reporting cycle returns and, every year, it turns out to be a lot of work. So it should raise questions around whether it’s worth the investment. Does the report itself add value to the company’s strategy and the sustainability efforts for a better future? Does it serve a strategic purpose beyond compliance with regulations and the accountability expectations of our stakeholders? For a strictly “by-the-book” type of reporting process, the answer to these questions is probably no.

Why? First, sustainability reporting suffers from a strange dichotomy. While sustainability is all about the future and long-term thinking, most corporate reporting is all about the past and has a horizon of just one year. Second, most companies do not use the reporting process to really connect the present performance to the future they to build and be part of. With our tips below, you can overcome this dichotomy and transform the reporting process into a powerful tool. So here we go!

Report the past in the context of the future

Start from the world you want in the future! In what kind of world does the company want to operate five to ten years from now? Instead of only looking back, we strongly recommend starting your sustainability report from the long-term vision and mission of the company. The report then gives an account of where the company is on your envisioned path

What does your company have to do to achieve that vision? How are your efforts to get there evolving? When you start from the vision and these questions, you report in the context of the future. This is a much more useful perspective for the company and for the report readers.

Focus on what's material for the future

Take your materiality analysis beyond the report! Most reporting frameworks include a so-called materiality analysis to identify the sustainability topics to be included in the report. The “by the book” analysis is mostly about what stakeholders want to know or what the company considers key risks, based on past performance and fears for the future.

To raise sustainability to a higher level, go beyond and ask: “what are the key topics we need to manage strategically to create value for the company and society?” Involve senior management in this analysis. Not only will the materiality analysis then inform the sustainability report content, but it will also provoke a strategic discussion and add a new perspective on what matters. That's the moment for sustainability (reporting) to enter to the board room.

Focus on what's material for the future

Involve your stakeholders in value creation! Stakeholders are vital to really create value for the company and society, so don't just engage them for selecting material topics for the sustainability report (as most reporting guidance recommends). Again, frame this step in the reporting cycle at a strategic level rather than the limited scope of reporting. And then continue the conversation from there.

Don’t limit the role of stakeholders to helping you choose your material topics. Really listen to what matters to them, what their goals are and jointly explore the world you want to build and the path you envision to get there. Only then can you find opportunities to collaborate and co-create on joint goals to make both your company and society stronger.

With these tips, we trust you can make your report a tool for positive change in the future, rather than just a report on positive change in the past. Let us know which of the tips you found most useful!

This blog post is part of a series on sustainability reporting and materiality. It is co-authored by Marjolein Baghuis of The Terrace and Nelmara Arbex of Arbex & Company. At GRI, they worked together on the creation and stakeholder engagement around GRI’s G4 Sustainability Reporting Guidelines. They now collaborate to support companies with strategic sustainability challenges, materiality analysis, and communications.


Developing roadmaps for reporting - for positive change

On June 22 and September 28, 2017, The Terrace held a workshop on sustainability reporting for companies just starting on their reporting journey and those eager to take their reporting to a higher level. Here are some of the key learnings from the workshop.

Start from why

We kicked off the workshop with a brainstorm on the reasons to publish a sustainability report. The participants came up with many: engaging stakeholders like clients, suppliers, and NGOs; having something tangible to prove what we claim to be doing; measuring and communicating our impact; accountability; informing and influencing employees to deliver on our sustainability strategy and more. Some are more internally focused, others are more externally oriented. Some relate to managing risks, others to identifying opportunities.

Make the complex simple

At the start of the workshop, we provided all participants an empty template for the reporting process. Using interactive exercises and group discussions, we jointly walked through the various steps in the reporting process. Here are some of the key questions we answered in the course of the workshop.

Prepare: Who's on the team? What are the tasks and timings? what budget is available? What are your initial ideas on topics to include in the report?

Engage: Which stakeholders are impacted by how you do business, and vice versa, which impact your business success? How can you engage with them effectively to understand their issues?

Focus: What are the material (or important) topics to include in your report (and in your strategy of course)? How does the prioritization of these topics compare for senior management versus the stakeholders' interests? What are the targets and measures for each of the material topics? And how will you achieve these targets?

Collect: Which sources are available to collect the information for your report? Who needs to be involved? And when do they need to deliver the information? Is it realistic to get this all ready in time for the first report?

Report: What are the key building blocks for your report content? How can you best structure this for legibility and engagement? Who will write, edit, check the report content?

At each step along the way, the workshop participants filled in parts of their roadmap.

Show the positive side of business

We closed the workshop with a brainstorm on how to make the best use of the report once it's done. All agreed that reports and their content are currently underutilized in communications. Besides sharing the report in its entirety with stakeholders and the press, the brainstorm also generated ideas like sharing parts of the report on the website or in social media, tailoring the content to engage different teams internally, training sales reps to use the report in sales calls, and - our favorite - throwing a party to launch it.

Don't be afraid

This advice came back again and again throughout the workshop. Be honest with yourself and your stakeholders and therefore also share things that are not going so well. Of course always in combination with your learnings and next steps. Or perhaps there are material topics you cannot yet measure. Again, signal that you understand this is a material topic, combined with how you will address and measure it in the coming year. A balanced, honest report that goes beyond the good news show is so much more credible! And don't be afraid to ask for help in the reporting process. A reporting consultant can add expertise and extra capacity to your reporting team at every step of the reporting journey.

At the end of the reporting workshop, the participants were certainly less afraid to get started on their (next) reporting journey. We closed the workshop by toasting to the personalized, actionable reporting roadmaps which they had each created during the workshop!

Interested in how The Terrace can support your sustainability journey? Please contact Marjolein or join one of our future workshops. The next sustainability reporting workshop will most likely take place in September 2017. Interested to join? Please let us know by sending an email to hello@theterrace.nl. We look forward to welcoming you in a future workshop!


Non-financial reporting: from comply and complain to explore and explain

In the past months, there has been quite some noise about corporate reporting. There's nothing unusual about that, as many companies publish their annual report in the first months of the calendar year. But this year, there seems to be more discussion about non-financial (or sustainability) reporting. Part of this is caused by the new EU Directive on Non-Financial Reporting. But it's also driven by the ever-increasing number of companies seeing true value from integrating sustainability factors into how they assess and report on their performance.

Complying with the EU Directive on Non-Financial Reporting

Assuming that transparency about sustainability topics will lead to better performance, the EU adopted a directive on non-financial reporting. By now, it has been transposed into national legislation in nearly all EU countries. It applies to all listed companies, banks and insurance companies with over 500 employees. As of the 2017 reporting cycle, it requires disclosure on select non-financial topics to provide stakeholders a more complete picture of a company's sustainability approach and performance. So what are the topics to be included? At a minimum, it should cover the company's approach, the risk assessment, as well as the results and key performance indicators regarding:

  • environmental matters;
  • social and employee aspects;
  • respect for human rights;
  • anti-corruption and bribery issues;
  • diversity on boards of directors.

The directive is not very prescriptive in how to report on these topics. If companies cannot (yet) report on these topics, they can simply explain why not.  And companies are free to choose how they structure this information and where they publish it. This can be part of the annual report or in a separate report. Unlike financial reporting, the data does not need to be externally assured. But the accountant does need to check whether the relevant information has been disclosed and whether any of it conflicts with other information provided.

Complaining about the reporting burden

An estimated 6000 European companies fall under this new EU directive. So perhaps you'd expect quite some sighs and complaints. Yet most of these companies already disclose their sustainability efforts on their websites, in separate sustainability reports or integrated into their financial reporting. Does this mean the directive will have no effect? Fortunately not. The voluntary practice on sustainability reporting has yielded positive results so far. But there are also quite some companies that seem to tick the box on sustainability reporting, yet have not truly integrated sustainability into their strategy. They report on what's easy to collect, or on things that at first glance may make them look good. For these companies, meeting the requirements of the EU directive could be a challenge. As they may not yet have policies, targets, and results in the areas listed above, the new legislation does indeed increase their reporting burden.

Exploring the value of integrated thinking

Many of the companies embarking on the transparency journey have found opportunities to improve their impact and their companies in parallel. The companies that benefit most are the ones that really try to understand what their materials topics are. These are the topics to include in their reporting, but more importantly, to focus on in their strategy. In a materiality assessment, a company assesses the impacts - both positive and negative - that their business can have on society at large. From their own perspective, but also through the eyes of their stakeholders.

From this analysis, they begin to understand how the relevant social, environmental and economic factors work together, ideally to create value for shareholders, stakeholders, and society simultaneously.  An in-depth materiality analysis provides the foundation for an integrated strategy with clear focus areas, each with their own goals and action plans. This strategic integration exercise is useful for all companies, not just the ones covered by the EU directive.

Explaining your focus, dilemmas, and results

Once you've chosen the focus for your strategy and reporting, be ready to explain and communicate it. This may include why you've decided not to include some of the topics included in the topics listed above. In your reporting cycle (and most likely elsewhere), get ready to share the achievements from your integrated strategy, yet also be ready to share what dilemmas you've faced and on which topics you've not yet reached your goals. An honest account of your performance will build trust with your external stakeholders and is a great way to engage your internal stakeholders - your employees - to celebrate success and to find better ways to reach your business and sustainability goals.

Interested in finding out what non-financial or sustainability reporting could do for your company or in getting started with sustainability reporting? Find out more in our upcoming reporting workshop on June 22, 2017. Find out more via this link. Does the EU Directive apply to your company and would you like a quick-scan on whether your reporting is compliant with the new EU directive? Please get in touch with Marjolein via marjolein@theterrace.nl.

Written by Marjolein Baghuis (@mbaghuis) for The Terrace, published simultaneously on changeincontext.com. 


The Terrace boosts reporting practice with Marjolein Baghuis

Marjolein is an expert and thought leader on corporate accountability, sustainability reporting and communications. At The Terrace, she will lead the reporting practice and support companies progress reporting from a burden to an inspiring communications opportunity. She will also be involved in sustainable strategy and communications projects.

The Terrace founder Leontine Gast: “We are pleased to add Marjolein's specific knowledge and expertise to our team. Her enthusiasm for positive change fits perfectly with the values of The Terrace. Together, we have all the skills to support companies in their ambitions to deliver positive change”

Through her work for the Global Reporting Initiative, Innate Motion and Change in Context, she has supported companies and people to create clear strategies and reports for positive change. Marjolein is the founder of Change in Context, an online platform for change towards a sustainable economy, which hosts her well-read blog. She also teaches sustainability at Nyenrode Business University. Previously, Marjolein worked for Procter & Gamble, Synovate and Greenpeace.

She is an active board member for the Nyenrode Alumni Circle for Sustainability and the regional Amstelland library. In addition, she serves on the advisory board of eRevalue, a British service provider in the area of ESG/sustainability big data, and speaks regularly at conferences on sustainability, accountability, and reporting.


Top tips to cut the crap: tips to help you and your organisation improve reporting

In the last decade, transparency and corporate reporting progressed tremendously, allowing society access to performance information that is usually not available in financial reports. Sustainability (or non-financial) reporting enable stakeholders – like investors, regulators, employees, NGOs, communities, partners, etc. – access to information about a company’s social, environmental and economic impacts, directly from the source.

But it’s not all good news from the reporting field, as many sustainability reports still consist of a hundred (or more) pages, difficult to navigate and to extract what matters. Many look just like glossy magazines and some even offer the same shallow content. They often present an overly positive, distorted picture of reality. They risk being considered greenwashing and useless for people intending to use the information to take decisions. Or to evaluate the readiness of an organization’s management to deal with social and environmental issues.

So ... it's time to cut the crap!

High-quality reports are clear, balanced, and focused on key issues. Corporate reports that are difficult to navigate, overly positive and/or unfocused do more damage than good for a company’s reputation. When not clearly showing the efforts, dilemmas, and results in tackling concrete societal issues, such reports just add to the overwhelming amount of useless information that surrounds us nowadays.

The European Union Directive on Non-Financial Reporting requires thousands of companies to start integrating sustainability topics to their annual reporting cycle, from the 2017 report onwards. This is a great opportunity for all involved in corporate reporting to make a step towards better reports. Cutting the crap in reporting helps experienced and new reporters generate more focused reporting. It improves the quality and reduces the cost of reporting - just what you need!

Here are our tips on how to cut the (reporting) crap!

Charming, but irrelevant

Reporting is not a beauty contest. Sustainability reporting standards, such as those provided by the Global Reporting Initiative (GRI), do not require a specific design or format. These standards offer guidance on how to prepare high-quality content. Well-organized, clear information is what really counts. If in addition, you want to make it look pretty and the visuals support clarity and navigation, that’s great. But well-structured, relevant content comes first. Always.

Random and unfocused

Don’t get distracted! Create focus through materiality analysis, an important step in the process to create a high-quality sustainability report. It helps to define the topics to focus on to sustain the company’s future in connection to society’s needs. These topics are selected by combining management’s strategic vision with inputs from strategic stakeholders’ representatives like employees, clients, regulators, and communities.

If done well, the analysis generates a focused, short list of topics that expresses the issues of high concern for society directly related to the strategy and core business activities. Once you have your material topics list, you are ready to think about which indicators (and other disclosures) best help you to tell your report readers what the organization is striving for and achieving on these topics. That’s it! These topics are the only ones you need to include in your report.

Annoyingly abundant

Don’t add extra information. Basic details about the organization – such as company size, the number of employees, markets where it operates, the location of the headquarters - as well as indicators related to material topics have to be included. Nothing more, nothing less.

Check the list of basic information to be disclosed, find the information required, organize it and present it in the clearest way you can. No tricks, no misleading. And if you can’t report on a required disclosure for some reason, explain why not. It’s really that simple.

Don’t add unnecessary information, even if it makes the organization look good. A report needs to balanced; the challenges and dilemmas should not be buried in strategically irrelevant content. Excess of information – even when presented in a beautiful way – can be quite detrimental to your reputation.

Poorly planned and costly

Gathering high-quality information isn’t cheap. Financial and human resources are needed to determine the units, the boundaries, the process, as well as for the systems for actual collection, aggregation, checks, approvals, and analysis of the data.

Preparing a good roadmap of what exactly has to be reported not only increases the quality of the report but also helps you make the best use of your valuable resources. Define a clear owner for the reporting process, if necessary supported by experienced outside professionals. Such as people with specific expertise on reporting, sustainability communications, etc. Good planning and ‘cutting the crap’ reduces the costs even more in case you’re involving an external service provider to assure the sustainability content of your report.

These tips can help you and your organisation improve reporting - and reduce costs - by progressing from:

  • Charming to clear
  • Random to relevant
  • Abundant to accurate
  • Poorly planned to professional

In times like these, when critical, well-informed decisions are needed, we can’t let useful information go to waste. Don’t bury your company’s impact and performance on key topics in the cacophony of useless information that surrounds us every day.

Join our campaign to cut the crap!

This blog is co-authored by Marjolein Baghuis of The Terrace and Nelmara Arbex of Arbex & Company. It also appeared on www.changeincontext.com and www.arbexandcompany.com