The changing economic order, globalisation and the negative social and environmental impacts they bring with them are changing the agenda of investors and therefore companies. New concepts of the economic order such as countries’ zero-emission commitments, regulations such as the&nbsp;European Green Deal,&nbsp;environmental risks are among the most effective and prioritised risks on the world agenda, the rise of responsible investments in global markets, stakeholder capitalism and the big reset is pushing companies to create environmental, social and corporate governance (ESG) focused strategies.With this change, innovative business models, circular and zero carbon economy, people-oriented and inclusive systems, a management approach that focuses not only on shareholders but also on all stakeholders, and integrated management have become the focus of leading companies.<h3 dir="ltr" fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">Number of reports on the rise as their scopes get wider</h3>At this point, companies and leaders started to intensify their sustainability-focused reporting in order to explain themselves to the stakeholders for whom they are responsible. The number of reporting companies in the S&amp;P 500 has more than quadrupled in the last 10 years. Today, <a fr-original-style="" href="https://www.sustainability-reports.com/ga-institutes-publishes-2021-sustainability-reporting-in-focus-trends-report/" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">92%</a> of the companies in the S&amp;P 500 and <a fr-original-style="" href="https://assets.kpmg/content/dam/kpmg/sg/pdf/2022/10/ssr-small-steps-big-shifts.pdf" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">96%</a> of the 250 largest companies in the Fortune 500 are conducting sustainability reports.In addition to competitive advantage, changing customer demands, and the need to attract and retain talent, the biggest motivation for reporting is to provide the information needed by investors, especially for publicly traded companies. Today, the amount of investment received by companies with high sustainability performance in global markets is over 35 trillion dollars. Moreover, research shows that companies with high sustainability performance have better financial performance. Being traded on reliable global sustainability indices is the primary way to prove that companies are performing well. The Dow Jones Sustainability Index, FTSE4Good Index Series, MSCI ESG Indices and the Borsa Istanbul Sustainability Index from Turkey question the performance of companies in terms of ESG through different evaluation methods. This explains not only the number of reports but also the rate of increase in data coverage.<h3 dir="ltr" fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">According to which standards is reporting done?</h3>Just as effective international initiatives ensure the reliability of financial reporting, the world of sustainability reporting adopts a similar approach. Sustainability reports are generally based on the Global Reporting Initiative (GRI) Standards, Sustainability Accounting Standards Board (SASB) Standards, World Economic Forum Stakeholder Capitalism Metrics (WEF SCM), United Nations Global Compact (UNGC) and the International Integrated Reporting Council (IIRC) framework for integrated reports. In climate-related reporting, in addition to the Carbon Disclosure Project (CDP), risks and opportunities are included in accordance with the recommendations of the Task Force on Climate Related Financial Disclosures (TCFD).&nbsp;In addition to global developments, regional and local expectations from companies have started to increase and different reporting requirements have emerged. For example, the European Commission has made non-financial reporting mandatory for all publicly traded companies and published the Corporate Sustainability Reporting Directive (CSRD).&nbsp;On the other hand, every publicly traded company in Turkey is obliged to make disclosures in its financial reports in accordance with the Capital Markets Board's Sustainability Principles Compliance Framework.&nbsp;These reporting requirements affect not only companies but also the supply chain. For example, with the German Supply Chain Due Diligence Act, which will take effect starting 1 January 2023, companies will be responsible for the entire supply chain in terms of child labour, forced labour, forms of slavery, occupational health and safety, and decent wages. This will increase the transparency of social risks in the reporting of companies doing business with Germany. Similarly, with the European Green Deal, companies trading with the European Union will increase their performance and reporting on different environmental, social and governance issues, especially climate change and gender equality.<h3 dir="ltr" fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">A common language in reporting</h3>Although companies use the reporting guidelines they want according to their priority stakeholder groups and sectors, they may experience confusion and difficulties due to the increasing number of standards, guidelines and practices in recent years. Today, many companies think they do not know where to start reporting on sustainability or that existing reporting methods, indices and standards are too complicated. In such cases, the best step for companies is to identify the most appropriate reporting standards, guidelines and practices for their needs and take action accordingly.The International Financial Reporting Standard (IFRS) has taken action to create a common reporting standard by gathering sustainability disclosures together, thus preventing confusion caused by different reporting standards. With the participation of organisations and stakeholders working in this field, IFRS published two standards titled General Requirements for Sustainability and Climate Related Financial Information (IFRS S1 and IFRS S2). These standards, which are still at the draft stage, are planned to be implemented quickly, especially for publicly traded companies. In fact, as recently announced during COP27, IFRS S2 will be included in CDP reporting starting in 2024.<h3 dir="ltr" fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">What is an ideal reporting standard?</h3>More important than finding the most appropriate reporting standard for companies is the&nbsp;content quality&nbsp;of their reporting. The more impact-focused, transparent, balanced and inclusive a company's reporting is, the closer it comes to the ideal.No company is perfect, so it is important to reflect good performance while holding room for improvement. For example, not including a negatively publicised incident in the report at all reduces the credibility of the report. However, we should read about the truth and the effects of this negative event, and the actions to be taken in the coming period in a company's sustainability report.Another important factor that improves the quality of content is the stakeholder’s voice&nbsp;in the report. It is important for companies to act together with their stakeholders in decision-making processes in order to minimise risks and ensure harmony between stakeholder groups. Explaining how stakeholder engagement mechanisms work throughout the company and sharing the feedback received and responses given are among the expected criteria.&nbsp;Analysing and financialising the impacts of sustainability issues on the company is one of the main requirements for reporting, but nowadays, including the negative and/or positive impacts&nbsp;of the company on the environment, society and economy is a finding sought in new generation reporting. Another important criterion for an ideal report is that the targets aligning with the strategy and the data should be comparable. Comparisons with past performance, future forecasts and industry averages provide meaningful inferences for the reader.<h3 dir="ltr" fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">Conclusion</h3>Sustainability reports provide a snapshot of the current situation of an organisation. For a better sustainability report, all companies need ESG strategies and targets that are integrated with their business strategy and are supported by clear action plans.&nbsp;All stakeholders, especially investors, need clarity on how companies will act in the near term within the framework of a long-term vision with strong interim targets for 2030 or the closer term.&nbsp;It is likely to become increasingly important in the coming period for companies to manage their portfolios according to environmental and social risks and opportunities, and to share these transparently through sustainability reports.

Aposto Business

Why is sustainability reporting conducted?

One of the most recent discussions about the transition into a circular economy is around who should take responsibility in this process. Global action plans usually put the responsibility on the private sector. However, it is a fact that states, individuals, the academy, and NGOs should take equal responsibility. However, this responsibility put on the private sector increases the importance of circular economy within corporate social responsibility strategies.&nbsp;However, this increasing emphasis creates new problems.The lack of a clear, limited frame of circular economy –&nbsp;which we as Circular Economy 101 think is one of its best qualities&nbsp;– causes every business to frame circular economy in their own way. Obviously, this leads to a misunderstanding of circular economy, diminishes it to waste management exclusively, and slows down the transition.A group of academics conducted a study focused on the relationship between circular economy and sustainability in&nbsp;the private sector. The study was conducted with leading companies in the field of economics in Italy and the Netherlands, and the article was published with the title “<a fr-original-style="" href="https://link.springer.com/article/10.1007/s43615-021-00064-7" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">What Is the Relation between Circular Economy and Sustainability? Answers from Frontrunner Companies Engaged with Circular Economy Practices</a>.”We will not be focusing on the entirety of the article, but as Circular Economy 101, we believe that we need to reassess some issues in order for circular economy to be understood correctly and to discuss the rights and wrongs of the transitional period of the private sectorLet’s investigate how the private sector defines circular economy, relates it to sustainability, and how much importance it attributes to it.<h2 fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">➡️&nbsp;What is circular economy?</h2>The first question that was posed to the companies in the research was about the definition of circular economy. Most companies define circular economy in a way that suits their company, but only a few of them give definitions that are similar to those of the <a fr-original-style="" href="https://ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">Ellen MacArthur Foundation</a> or the <a fr-original-style="" href="https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">European Commission.</a>When asked about the characteristics of a circular economy, its most frequently mentioned feature is “Designing products to prevent waste.” But there is another issue here. One of the most basic principles of circular economy, "the Product as a Service" feature is the least mentioned feature by the companies. Companies don’t attach much importance to this feature which proposes taking ownership of the product from the consumer and giving it to the manufacturer, aiming to conduct processes such as maintenance and repair, thus keeping the products in use for a much longer period of time.<img src="https://images.aposto.com/2022/6/2/1658243893586.png" style="display: block; vertical-align: top; margin: 5px auto; text-align: center; width: 100%; max-width: 550px; border-style: none; position: relative; cursor: pointer; padding: 0px 1px; box-sizing: border-box;" width="550" ratio="1.72" fr-original-style="display: block; vertical-align: top; margin: 5px auto; text-align: center; width: 100%; max-width: 550px;" fr-original-class="fr-draggable">Source:&nbsp;<a fr-original-style="" href="https://link.springer.com/content/pdf/10.1007/s43615-021-00064-7.pdf" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">https://link.springer.com/content/pdf/10.1007/s43615-021-00064-7.pdf</a>&nbsp;p:740<hr fr-original-style="" style="height: 0px; overflow: visible; border-bottom: none; clear: both; user-select: none; break-after: page; box-sizing: border-box;">🔍 Circular Economy 101’s take: Even though there is no clear definition of circular economy, it is incorrect to limit it to recycling&nbsp;or the&nbsp;10 R Strategy. Circular economy should be approached as a system of thought, a way of working that is the exact opposite of linear economy.Hence, it requires not only managing waste correctly, but also preventing waste generation, changing design processes to prevent waste generation, changing the mindset to change that, and changing the education system to change that mindset... In other words, the circular economy is a mentality that requires a change in the social systems. As the definitions made by companies according to their own practices limit the potential of a circular economy, it will be no different than putting a band-aid over the linear economy and its existing problems.<h2 fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">Reductive definitions</h2>One out of four companies emphasizes the need for a change in mentality in society when defining circular economy. Researches note that only a few, small-scale initiatives define circular economy as a thought system that&nbsp;“promotes respecting nature.”Moreover, while defining circular economy, it is noteworthy that one-third of the companies say it’s a "roof concept." Since circular economy includes different concepts as such as biomimicry, cradle to cradle, R strategies, it may have a non-stable definition for some of the companies.🔍 Circular Economy 101’s take:&nbsp;We can see that definitions change according to where and how companies use the concept of circular economy. For some, this allows for a positive meaning to emerge, as circular economy can adapt to any subject thanks to its flexible structure. On the other hand, defining it on a case-by-case basis leads to reducing it to a single, simplistic strategy, something we criticize. We are of the opinion that circular economy is losing the totality of its meaning with reduced definitions as just waste management, or efficient use of resources.<hr fr-original-style="" style="height: 0px; overflow: visible; border-bottom: none; clear: both; user-select: none; break-after: page; box-sizing: border-box;"><h2 fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">“Less consumption,” whose responsibility is it?</h2>Another issue that the research draws attention to is the definition of one of the most important features of circular economy as sufficiency. Although more than half of the companies state that sufficient consumption and efficient use of resources are very important for circular economy, all participants state that they do not know whose responsibility it is to “consume less.”Companies think that it is not their responsibility to promote less consumption, and that they are only responsible for consumers’ demand. In other words, the responsibility for less consumption is left entirely to the consumer.While companies that trade directly from business to consumer (B2C) leave the responsibility to the consumer, companies that trade from business to business (B2B) state that they do not have much influence on who is responsible. The last note, which draws attention to the context of consuming less, argues that "being content with less" is irrelevant to circular economy, and that instead of saying "consume less" to consumers, a consciousness of "responsible consumption"&nbsp;should be instilled.<h2 fr-original-style="" style="margin: 0px; color: rgba(0, 0, 0, 0.85); font-weight: 500; padding: 0px; box-sizing: border-box;">➡️&nbsp;Circular economy and sustainability</h2>The vast majority of companies that participated in the study stated that circular economy is one of many tools to achieve <a fr-original-style="" href="https://turkiye.un.org/en/sdgs" rel="noopener noreferrer" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">the United Nations Sustainable Development Goals.</a> While it is noteworthy that the area where circular economy is strongest is environmental issues, its impact on social and economic areas is emphasized. The most striking finding is that all participants agree that there would be no improvement in terms of “social equality” with the implementation of a circular economy.Participants agree that sustainability and circular economy are intertwined concepts, and think that the most important deficiency that distinguishes circular economy from sustainability is that it does not influence social issues directly. The participants, who think that a circular economy is the most powerful tool to achieve goals in environmental and economic issues, argue that this tool does not directly contribute in terms of social issues.After all of that, another issue that all participants agree on is that they cannot say "which one of circular economy or sustainability is a more generalized, more inclusive concept." It is believed that since both are very intertwined, broad concepts, a clear distinction cannot be made at this time.Finally, while some of the participants associate sustainability with the term "less," they associate circular economy with more positive, innovative questions such as “What are the alternatives? Is this possible?” While sustainability is thought to be a more ill-defined concept, it is among the points emphasized by the participants that circular economy is a more logical, tangible concept based on more scientific grounds.<img src="https://images.aposto.com/2022/6/2/1658244121861.png" style="display: block; vertical-align: top; margin: 5px auto; text-align: center; width: 100%; max-width: 550px; border-style: none; position: relative; cursor: pointer; padding: 0px 1px; box-sizing: border-box;" width="550" ratio="1.87" fr-original-style="display: block; vertical-align: top; margin: 5px auto; text-align: center; width: 100%; max-width: 550px;" fr-original-class="fr-draggable">Source:&nbsp;<a fr-original-style="" href="https://link.springer.com/content/pdf/10.1007/s43615-021-00064-7.pdf" style="color: rgb(9, 9, 9); text-decoration: none; background-color: transparent; outline: none; cursor: pointer; transition: color 0.3s ease 0s; touch-action: manipulation; user-select: auto; box-sizing: border-box;" target="_blank">https://link.springer.com/content/pdf/10.1007/s43615-021-00064-7.pdf</a>&nbsp;p:743<hr fr-original-style="" style="height: 0px; overflow: visible; border-bottom: none; clear: both; user-select: none; break-after: page; box-sizing: border-box;">In conclusion, the problem of misunderstanding circular economy, which we, as Circular Economy 101, always draw attention to, persists not only in our country but also in leading countries in the field of circular economy in the world today.“Is sustainability more inclusive or is circular economy more applicable?” No one has a clear answer. But what we must do is quite simple. We should read, learn about, and apply circular economy in its broadest form. Social change is only possible through holistic reforms regarding the environment, society, and the economy. The basis for which is every individual being made aware.What do you think the results would be like if this study was conducted in Turkey?&nbsp;

Sustainability ile ilgili hikayeler