Profit Q+A: Laying the IT Groundwork for Sustainability Reporting

PROFIT Online: How are executives responding to the value sustainability reporting can bring to their organizations?

Floyd: In order to fully embrace sustainability reporting, organizations need to undergo a shift in culture and place an emphasis on sustainability performance as a corporate goal. Many executives still question the emphasis on sustainability initiatives and the impact of such initiatives on the bottom line.

For example, at Cal Poly’s 2007 International Career Conference, an executive speaker from a relatively large organization stated that there is really no triple bottom line – there is only one bottom line: Companies need to make money. More effort needs to be expended in connecting the dots between sustainability performance and important organizational issues, such as corporate reputation and the future value of key assets.

PROFIT Online: How can forward-thinking managers help connect those dots in their organizations?

Floyd: There is a growing demand for corporate governance systems to address more diverse stakeholders, instead of just the shareholder, but the sustainability reporting initiative is still very new. Enacting this kind of reporting requires a new set of systems that can track the relevant information. While there are existing reporting frameworks, organizations are challenged to identify the metrics that best pertain to their situation.

Choosing the key performance indicators (KPIs) is not an easy task. KPIs might be chosen that reflect the biggest impact on the organization, rather than those that have the biggest impact on society, or on issues where that organization has a significant and sustained presence. To make matters more interesting, the complexity of these systems is enormous when one considers working with partners in the supply chain, and the inherent difficulties in collecting meaningful data from disparate resources.

Transparency helps all involved, but training of all partners is required. Companies have had years of experience on financial reporting, and Sustainability Development Reporting (SDR) systems present new challenges. With new systems in place, quality and assurance issues are becoming paramount. Organizations need to find a way to easily collect and consolidate this data and to present it to key decision makers and constituents in a manner that is auditable to the financial-reporting level.

Given all these challenges, industry is responding. Thousands of companies are actively engaged in SDR assisted with advances in information technologies as well as simply making excellent decisions regarding corporate sustainability responsibilities.  When one reads about work such as Michelin’s rubber-cultivation project in Bahia, Brazil and the awards some companies are earning with their reporting activities, it is clear that we are making progress.

PROFIT Online: What role does academia play in advocating for this new reporting need?

Floyd: Academia is responding to business’ needs by better educating students. In February, Cal Poly held a daylong session with academics and industry partners to identify what our students need to know to address sustainability. Courses such as accounting are being redesigned to include sustainability issues.

In 2007, as a senior project, a team of Cal Poly students from the Orfalea College of Business designed and built an SDR system for a hypothetical lumber company. Building on The Global Reporting Initiative’s reporting framework, they identified key individuals and KPIs, selected data that would reflect success for the KPIs, and developed a reporting system in Oracle-Hyperion’s System 9. Cal Poly’s learn-by-doing approach, coupled with industry support from Oracle-Hyperion, provided the educational foundation for students to learn how to use technology to address sustainability.