How sustainable development changes business practices

More and more companies are beginning to understand and recognize the importance of sustainable development for long-term success and stability. But what is sustainable development and how does it affect us?

The concept of sustainable development was first introduced in the late 1980s due to the increasing social and environmental issues that come with economic progress. A United Nations (UN) 1987 paper, Report of the World Commission on Environment and Development: Our Common Future, defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’ The key is finding a balance where economic growth supports, rather than sacrifices, the well-being of individuals and communities.

GLOBAL EFFORTS IN PROMOTING SUSTAINABILITY
In 2015, UN member states agreed to adopt 17 sustainable development goals or SDGs —”global goals” that help the world achieve sustainable development. These goals serve as a call to action to improve everyone’s lives by 2030 as companies strive and thrive in a dynamic business landscape. The SDGs aim to address a wide range of global challenges, among which are those related to poverty, education, healthcare and gender equality.

Currently, sustainable development is being championed by various international organizations, including the United Nations Conference on Trade and Development (UNCTAD), the International Financial Reporting Standards (IFRS) Foundation and the Sustainability Accounting Standards Board (SASB). They develop frameworks and guidelines to help companies integrate sustainable practices into their business operations.

PHL EMBRACES SUSTAINABLE DEVELOPMENT

To practice sustainable development, companies should begin by being socially and environmentally conscious and responsible in how they use their resources. In the Philippines, companies can reflect this commitment in various initiatives within and outside business operations:

• When working with suppliers, vendors and other third parties, choose to work with those with strong ethical practices, particularly with all those in the supply chain that comply with the law and adhere to high standards of business ethics.

• Observe transparency throughout the supply chain to ensure that materials are sourced in an environmentally responsible manner and are not harmful to society.

• Integrate sustainability clauses into contracts or agreements to set clear expectations on environmental performance and social responsibility from their stakeholders.

• Use renewable energy sources to further reduce the environmental impact of energy consumption and support the global shift towards clean energy.

• Engage with communities where the business operates to help you assess the social and environmental implications that the business may have on these communities.

REPORTING REQUIREMENTS FOR SUSTAINABILITY
On Oct. 21, 2022, the Financial and Sustainability Reporting Standards Council (FSRSC) established the Philippine Sustainability Reporting Committee (PSRC) to render technical assistance to the former in the adoption and issuance of guidelines for sustainability reporting in the Philippines.

In 2019, the Securities and Exchange Commission (SEC) introduced sustainability reporting guidelines for Publicly Listed Companies (PLCs). The guidelines were crafted to ensure transparency and accountability among publicly listed companies by requiring them to disclose their sustainability practices and impacts. Under SEC Memorandum Circular No. 4, Series of 2019, PLCs are required to submit sustainability reports along with their annual reports.

At present, to comply with the sustainability reporting guidelines and standards, publicly-listed companies are asked to do the following:

• Include non-financial data when providing a comprehensive view of their overall business performance. Specifically, this involves disclosing detailed information on how sustainability is integrated into their governance structures, strategic planning, risk management processes, and performance metrics.

• Present sustainability reports at the same time as financial statements, allowing stakeholders to receive all relevant information in a timely manner.

• Include data from previous periods in sustainability reports to evaluate the progress and effectiveness of the company’s sustainability initiatives, to provide information on whether a company is improving, stagnating or regressing in its sustainability efforts.

• Explicitly state compliance with IFRS Sustainability Disclosure Standards to indicate that the company is adhering to the internationally recognized guidelines for sustainability reporting. This promotes the company’s credibility and reliability of the information provided on its sustainable practices.

The journey towards sustainable development is an ongoing process that demands commitment and collaboration among the government, business, communities and the larger society. The government’s support through its regulatory frameworks is crucial in setting the direction of the country’s pursuit towards a more sustainable future for all. For micro, small and medium-sized enterprises (MSMEs) and large corporations, their industrial and other business development programs must be designed in ways that would also mean progress for everyone. On the other hand, our society must be more involved in advocating for a sustainable lifestyle and in supporting businesses that are implementing sustainable business practices.

By understanding the principles of sustainability and integrating them in business development programs, companies can not only contribute to economic growth but also to a healthier environment and equitable society for current and future generations.