By Bernie Cahiles-Magkilat
If you think business sustainability is all about environment and humanitarian considerations, you’re wrong. Sustainability encompasses all facets of a business operation, starting from governance to operations.
Michael Gallego, partner and head of knowledge management of P & A Grant Thornton, explained the “Roadmap on Sustainability” at the recent Sustainability Forum as companies are now required to submit Sustainability Reports by regulatory bodies.
“When you embark on sustainability, you have to look at it from governance level all the way to operations, from strategy to operations, that is part of the sustainability journey,” said Gallego.
“For instance, the management said we don’t have corruption but the people below are parties to it. Your governance does not align with operations,” he said.
That is why companies have to look at the culture. “Is the culture ready to support sustainability practices,” he added.
“It is basically what value do you provide to stakeholders. So if you’re stakeholders are your employees, do you give them the right salary, do you provide them training, do you give them good working environment,” he said.
“If your stakeholder in the government is the Bureau of Internal Revenue, what is valuable to them? Their objective is for us to pay the right taxes, that is our sustainability contribution to the government,” he said.
To measure where companies are in their sustainability journey, they are guided by the “Roadmap on Sustainability,” a global standards prepared by the UN Global Compact, a voluntary initiative based on CEO commitments to implement universal sustainability principles and to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.
The sustainability roadmap is also a framework that measures the level of a company’s sustainability journey.
“If I am at level 1 or 2, how do I progress to the next level,” he said.
The most difficult in the sustainability journey is getting all the information because some operations are still manual. “You have to capture all these data to make sense of your journey,” he added.
At present, the Securities and Exchange Commission is requiring all publicly listed companies, roughly 260 of them, to submit Sustainability Reports. He estimated there are less than 400 companies, including the public firms, doing the Sustainability Reports.
SEC Commissioner Kelvin Lester Lee said the SEC is looking at requiring all companies to submit Sustainability Reports.
By 2024, the SEC will change its approach from “comply or explain” to “mandatory” requirement for all types of corporations to submit Sustainability Report (SR).
The Corporate Governance Division of the SEC shall strictly monitor SR submissions and study the trends for purposes of policy formulations.
Non-attachment of the Sustainability Report to the Annual Report shall be subject to the penalty for incomplete annual report provided under SEC Memorandum Circular No. 6, Series of 2005.
“SEC is taking an active stance on sustainability, we’re big on penalties now,” he stressed.
According to Lee, sustainability is good business where investors pour in capital on companies that submit sustainability reports and continue on their journey to sustainable business.