Why every company should embrace sustainability reporting

Cephas Osoro. [File Courtesy, Standard] If you attended school in my days, you must have heard this saying: No man is an island. I am not so sure about the generations that followed, but I would bet they have heard it in other formats. Indeed, no one-not a human, not an animal, not a factory, not a company-operates in an island by themselves and on their own. There are many stakeholders to contend with. Apart from your employees, there are suppliers you buy from and clients you sell to. If you're in a business, let's say you are selling bottled water: where are you getting the water from? You are certainly not creating it from nothing. Is it being extracted sustainably? As you extract the water from the environment, are you polluting the environment in the process? Is the source of that water, is it healthy? And after X number of years of extracting water from that source, will you have done your part to ensure that it is revitalized and still produces water for everyone in the community? Or will you just drain it and move on elsewhere when it is no longer of use? Otherwise known as ESG (Environment, Sustainability, and Governance) reporting, sustainability reporting is about production and manufacturing that is executed without causing harm to the environment and the human beings that live within the ecosystem. It is about being aware of the environment, being aware of all the stakeholders, and leaving this world a better place for the coming generations. We all know about financial reporting. At the end of every financial year, companies and organizations publish their financials detailing cash flows. Well, now, the law will require that, apart from reporting the financials, each corporate player must also report on their ESG. Technically, early adoption has been encouraged. However, the plan is for it to be done in phases. As of 2024, all listed companies are already reporting ESG. Second in line are public companies. The third stream is the private sector. The rollout is worldwide: it is not just in Kenya. Far from it. I talk to my colleagues in other African countries: they're also struggling with implementation. In Europe, it was made compulsory a year or two ago. South Africa is ahead of the curve - in Africa: they started much earlier. ESG reporting, like financial accounting, will follow global standards. We're members of the IFA (International Federation of Accountants). We subscribe to their ideals. And we're obligated as members to adopt and implement any standards that are promulgated by the International Accounting Standards Board (IASB). As a network, Crowe - the accounting firm I work for - has developed tools which we can use to help our clients report on sustainability following global standards. Just this January, many of us, from every corner of the world, met here in Nairobi to further develop tools we will be using to help clients report ESG. That said, I wouldn't be shocked if some are not convinced about this new layer in financial reporting. Some are wondering to themselves: whether the river is being polluted or not, as long as my business is making profits, why should I care? My answer to you is: you should. We are in 2025. And the level of awareness the general public has of business processes is at its highest in human history. Other than that, we are living in the age of Gen Z; I mean, you've seen what they can do. They are discerning individuals. If they know that your profits are coming at the expense of the environment, they live in they have the capability of initiating a revolt that will see you wallowing in losses sooner rather than later. Or worse, having to close operations altogether. They are well-read people and also have the extra benefit of accessing information by just Googling. They'll probably boycott everything linked to your company. Banks and financial institutions are also moving towards green financing. Certain banks will demand to know what you're getting into before they offer you a facility. If they suspect, even a little, that you're going to mess up the environment, they'll ask what mitigating measures you have. And if you don't, they'll probably deny you that financing. What am I saying? Simply put, if you're not going to join the rest of the corporate world, you'll be left behind. Critically, your customers will move to somebody else who is more ESG-inclined. What happens if you fail to produce your ESG alongside your financials? Auditors have a responsibility to report, in the audit opinion, that the directors of the company have refused to comply with this reporting standard. Accountants are obliged to do that. In the small world we live in, you will find yourself slowly being isolated. So even if I need your product, I might forego buying from you because of the reputation the company has for being non-ESG compliant. If you export to a company in the West, they would earnestly begin to look for someone else as their laws direct them not to conduct business with ESG non-compliant entities. We all know that is not how you want to grow the company and guarantee your shareholders' profits. Cephas Osoro is a Certified Public Accountant with over 30 years of experience. He is a Managing Partner with Crowe Global and is a member of the Institute of Public Accountants in Kenya, England and Wales, Uganda, and Rwanda.

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