Full product transparency: The future of reporting
Good corporate reporting is based on the principles of accountability and transparency. When reporting on sustainability, this transparency is greatest when focused at product level. After a decade of corporate responsibility (CR), FPT heralds a new era for reporting. With many – and often most – environmental impacts occurring outside a company’s boundaries, extending reporting from the narrow confines of a company’s own operations to the wider effects of the products it sells demonstrates superior accountability. This is the ultimate in transparency. It is also of greater relevance to most stakeholders, who are more interested in a company’s products than its facilities.
Accountability across the whole value chain
So forget reporting at company level. Classic CR reporting is too narrow in focus, and it misses too much. Environment sections of reports are usually limited to the immediate impacts of a company’s operations, perhaps with a nod to managing impacts in the supply chain. By extending reporting to include the impacts of products throughout their lifecycle, companies can demonstrate transparency and accountability across the value chain.
A supermarket should take accountability for the products that go through it, not just its buildings
Which environmental impacts, for instance, should a retailer be account- able for – and report on? The environmental impact of a supermarket extends well beyond the doors of its stores to include the impacts of all the products it sells. These occur before and after the products enter and leave the stores – in their production, their use and their disposal. Yet conventional corporate reporting would largely ignore anything that happens outside of the store, apart from a few cherry-picked case studies.
By taking accountability for the impacts of products across their lifecycle, retailers can gain a much better idea of their overall impact on society – and of the type of products they might want to sell. Arguably, it was this kind of approach that led the do-it-yourself retailer B&Q to stop selling patio heaters. A traditional CR approach would not have registered the significant environmental impacts of patio heaters in their use phase. Ikea is now assessing its products based on a sustainability product scorecard to assess the lifecycle impacts of its products, including waste, energy and water from their use in customers’ homes.
A traditional corporate report might pick out one or two products as case studies and look at their impacts, but what about the rest? If a company produces EPDs based on lifecycle assessment for all its products, this can reveal its overall impact much better than any CR report. An EPD takes into account the ingredients of a product, the methods of its production, and the full environmental impact of each stage of its lifecycle.
If we apply the supermarket approach to other sectors, we can see a different level of debate about who should be accountable for what. What about a private equity firm owning various companies? Rather than ticking some boxes and sending back a meaningless Stanford Research Institute-type questionnaire, private equity firms could report the overall impact of each of their companies based on the products these companies sell or make. This would be possible if those companies all produced EPDs for their products. The same thinking would apply to project finance.