To unlock these benefits, sustainability needs to be embedded in a company's strategy and its operations, not a siloed function off to the side. In a survey conducted by McKinsey ⁹ , companies who reported value creation from sustainability practices:

• Exhibited a ‘strategic, purposeful approach’ that differed from that of other companies in several ways, such as their company’s CEO making sustainability a priority on the strategic agenda and engaging employees by embedding sustainability in the corporate culture.

• Addressed sustainability to fulfill their purpose, align with their goals, mission, or values, or to make a tangible, positive impact on an issue, rather than for compliance reasons; and

• Established clear and focused priorities, set targets or goals, and developed key performance indicators to measure and track progress.

Schneider Electric creates software and services for energy management. It has not only set ambitious targets to reduce its own emissions, it also helps its customers reduce emissions and become more energy efficient. Through initiatives like the Sustainability Impact Awards, Schneider Electric supports its partner ecosystem in achieving sustainability goals, emphasising electrification, digitisation, and decarbonisation efforts globally.

"For many years now, sustainability has been at the heart of what Schneider Electric does. For an IMPACT company it's more than just a corporate goal, it's the driving force that shapes our business decisions and inspires our employees".

— Oliver Blum, CEO, Schnieder Electric ¹⁰

The new sustainability reporting standards will require significant investment in processes, data, systems, and sustainability expertise, but at the same time, seek to leverage your existing reporting systems and controls. Look to build and extend the capability of your financial disclosure team. Some companies are even appointing a sustainability controller.

Despite these adjustments, there are clear benefits. Research conducted by McKinsey ¹¹ demonstrated that companies with a strong sustainability proposition correlate with higher equity returns and reduced downside risks, evidenced, among other ways, by lower loan- and credit-default-swap spreads and higher credit ratings. Access to capital is another key benefit, with a significant pool of global capital available to sustainable businesses ¹². Airtrunk, one of the largest issuers of sustainable financing in the data center industry globally, has raised over A$7 billion in sustainability linked finance ¹³. The margin on the funding is linked to the achievement of sustainability targets including carbon, energy, and water efficiency, gender diversity and gender pay equity targets. Airtrunk has pledged to donate the savings achieved in margin reduction on the funding to social impact programs.

For businesses looking to capitalise on these benefits, the path forward involves more than just meeting new regulations. It requires a strategic, integrated approach to sustainability that connects directly to a company’s vision, values, and operations. The following steps outline a roadmap to comply with new reporting requirements and leverage them for value creation:

1. Start by engaging your business leaders and other stakeholders (including employees, customers and investors) to understand what matters most to them (this is often called ‘sustainability materiality’).

2. Clarify which sustainability topics are the most important, that are linked to your business model, and that can reap benefits and improve management of risk (financial and other). For many companies – indeed, essential for larger companies given mandatory reporting – climate will be one of these themes.

3. Perform a gap analysis to understand what additional capabilities, data, processes and systems will be needed to comply with the mandatory disclosure requirements, and any specific regulatory reporting requirements that apply to your business.

4. Scan the market for any specific guidance for your sector and/or scale of business – in some cases, sectors frameworks are emerging as voluntary industry standards.

5. Identify 2 or 3 focus areas that will really create impact and change your business and build these into your organisational strategy.

6. Develop sustainability principles (linked to your focus areas) and connect them to your corporate vision and values.

7. Assess how you will manage risk and develop action plans for the focus areas.

8. Be clear on how you will track progress, and who will oversee your approach, including disclosures. Design and implement processes and governance structures to oversee strategy and compliance. Leverage technology to collect data and to track progress.

9. Plan to develop transition plans to reach the goals, with actionable steps and performance metrics.

10. Communicate your goals effectively, fostering buy-in and collaboration.

By embracing the reporting requirements as an opportunity for strategic business leadership and risk management in a rapidly evolving world, rather than an obstacle to be overcome, companies can simultaneously fulfill their compliance obligations, enhance reputation, strengthen market position, and unlock financial benefits.