Integrating sustainability considerations into your financial planning processes starts with setting goals:

- Baseline - You need a starting point for comparisons. Sometimes it is difficult to go back in time to gather historical data, and the baseline will be the year you start measuring. It is recommended to choose from the last 2 years or the current year.

- Setting targets - Once you have a good understanding of your environmental performance, you should consider your business objectives such as growth plans, expansion and other strategic decisions that will impact on your sustainability goals when setting targets.

It is also important that the targets are science-based and ambitious enough to meet external expectations. Science Based Targets is the go-to source for insights on how to set climate-related targets. For smaller companies at the beginning of their sustainability journey, a logical approach to selecting achievable milestones is a good start.

Taking into account the business outlook as well as the scientific guidelines and milestones, you will have ambitious but realistic goals. To be credible, targets should include both long-term and interim goals. Overly ambitious long-term commitments based on techniques that are at an early stage of development will not be well received.

- Scenario building - With the selected materiality topics and targets in place, your organisation is in a position to apply scenarios that may impact your results.

Mandatory sustainability reporting standards such as IFRS S2 and ESRS 2, require listed companies to disclose climate-related scenario analysis. There are many external factors outside the company’s control that can affect your P&L, and management needs to be aware of them. If you have already carried out a Risk & Opportunity Assessment, the analysis should be linked to your business objectives to gain insight into their financial impact and the potential cost of inaction.  (see the section "strategic analysis" for the mandatory requirements and the Risk & Opportunity Assessment)

Create business scenarios based on increased water, waste and electricity costs and potential taxes as well as opportunities such as market access, branding, grants, and green loans.

To get the most out of measuring and reporting on material topics and to ensure effective integration of the sustainability strategy, the metrics should be integrated into the internal decision-making process:

• Include sustainability metrics, both financial and non-financial, in periodic dashboards
• Communicate regularly internally: each business unit or product line manager should be able to analyse their progress and take ownership of their progress
• Identify opportunities for cost savings and revenue generation through sustainable practices, such as energy efficiency measures or waste reduction initiatives.

This will enable management to keep track of their priorities and sustainability performance and embed a continuous improvement and iterative system towards a more sustainable business model. This is preferable to a more tactical approach with ad hoc decisions or philanthropic activities to keep employees engaged.

Targets and scenarios require regular monitoring and reassessment. As the business forecast and overall strategy change over time, the defined sustainability KPIs will be affected and should be reassessed.

Stakeholder engagement requires identifying who needs what type of sustainability information. An ESG report can be as simple as interpreting the materiality data so that the reader can understand the scope, the business context, why an issue is considered material, performance over time, reasons for good or poor performance and planned actions.  

It is important to use neutral language to build trust. Do not overstate achievements and only highlight positive aspects. The report should be balanced and accurate.

It is good practice to include:

- An introductory statement from the CEO setting out the overall content

- Stakeholder engagement

- Materiality matrix

- Outcome of each topic over time and normalised values in graph format

- Comments on each topic – actions taken, next steps, etc.

- References to the framework used in an index format

- Examples of employee engagement

- Overall narrative on impact created

The ideal outcome is to present the sustainability report as an integrated part of the annual report.

Sustainability communication is much more than an ESG report. It should engage all stakeholders - customers, employees and the wider community - to build awareness and support for the company's sustainability efforts, and be delivered in a transparent and tailored way. Not only external, but also internal communication, sharing concrete initiatives and progress on the sustainability roadmap, is under increasing scrutiny.

Create the narrative:

Develop a clear, concise, and consistent message about the company's sustainability efforts that can be used in all communications, reports, and marketing materials. Monitor and evaluate the effectiveness of the company's sustainability communications and marketing efforts and make changes as needed to improve impact.

Communicate transparently:

Greenwashing can be defined as creating a false impression or providing misleading information to show that an organisation's products or services are good for the environment, or at least better than competitors. In essence, it is when a company or organisation spends more time and money marketing itself as sustainable than actually minimising its environmental impact. Companies sometimes engage in greenwashing because it helps them to be seen as ethical, which in turn helps their profitability, or they simply don't know they're doing it. Greenwashing is a threat to business because of the reputational risk it can cause, but even more so now that regulation is increasing, with the EU voting to "ban greenwashing and improve consumer information on product durability".

Transparency plays a key role in avoiding misleading advertising and/or ignorance. To minimise the risk of greenwashing, it can be helpful to identify the green credentials of products and create a process to regularly identify, monitor and manage them. If you have communicated incorrectly (e.g. in the facts and figures of the sustainability report), it's a good idea to make corrections.

Industry guidelines for sustainable communications can be found on the PRCA APAC Sustainability Working Group website.

Internal communications:

An effective internal communication strategy is essential to strengthen the culture of sustainability among employees and build morale and trust. Employee understanding of the sustainability strategy is a prerequisite for employee engagement and the integration of sustainable practices into day-to-day operations.

To enable a targeted action plan, the externalities, that have been previously valued (see Environmental and Social Impact Identification), should be analytically accounted for in the accounts.

Incorporating the externalities derived from valuation tools such as the internal carbon price or the living wage into the accounts allows the real cost of an activity, process or product to the company and its environment to be reflected in the company's reports, and progress on these externalities to be measured and disclosed over time.

This is an essential step in the decision-making process to avoid making decisions based only on apparent costs, which can encourage the depletion of natural resources or the exploitation of resource-poor countries. It should lead to more sustainable business practices.

The following cost allocation methods are examples of how externalities can be incorporated into accounting:

Activity Based Costing (ABC) - based on the activities that generate the costs, ABC allocates internal expenses to cost centres and cost drivers. For example, for the carbon emissions, ABC identifies potential activities that will generate carbon emissions and calculates their emissions data.

Material Flow Cost Accounting (MFCA) - is mainly used for manufacturing processes and focuses on identifying which processes can improve the use of raw materials, energy, water and waste. ISO 14051 outlines the requirements for an MFCA analysis, which is a useful tool for companies seeking a circular business model.

The suitability of the tool depends on the type of business (products or services) and the area of impact (energy, water, waste) you are dealing with.

Sustainability is not a cost, it is an investment to future-proof your business. Today's business leaders must be prepared to answer questions from stakeholders about their sustainability strategy and priorities. Implementing sustainable initiatives creates opportunities: attracting new customers who demand more responsible brands; meeting the increasing demand from listed companies for insight into their suppliers' sustainability strategy; attracting and retaining talent who seek purpose-driven employers; reducing operating costs through, for example, energy efficiency or reduced packaging.

To ensure that the strategy is sustainable, it is important to drive initiatives with a long-term vision. Redirecting all or part of the cost savings or additional revenue generated by successful initiatives into a dedicated budget will allow other sustainable initiatives to be funded at no additional cost. This will create a ripple effect and accelerate your transition to a more sustainable business model.