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Monday, 7th January 2019

Survey: Consumers want corporates to include sustainability in profit calculations

Around four in ten members of the UK public believe that corporations should include social and environmental impacts in their profit calculations, a new survey has found.

The majority of survey respondents (65%) believed that corporates already had to include sustainability impacts in profit calculations

The majority of survey respondents (65%) believed that corporates already had to include sustainability impacts in profit calculations

Conducted by YouGov and commissioned by networking organisation Social Value UK, the survey quizzed 639 adults from across the UK on questions regarding corporate reporting, brand purpose and ethical investments. The results were published late last week.

When asked whether large companies should be forced to account for their positive and negative financial, social and environmental impacts when calculating their overall profitability, 40% of respondents said yes.

This view was found to be most common among millennials, with 44% of survey respondents aged 25-34 agreeing that companies should communicate their sustainability efforts alongside their financial progress.

Businesses are currently only required to communicate their rate of return when calculating profitability. However, 65% of respondents to the YouGov survey said they were unaware of this fact and said they thought negative social and environmental impacts were already included in the calculations.

Overall, just 11% of respondents said that they were satisfied with businesses defining profitability purely in financial terms.

“The overall ‘value’ or ‘profitability’ of a company is highly important as it informs key decisions, from setting share prices to informing economic analysis,” Social Value UK’s chief executive Ben Carpenter said.

“This hasn’t escaped the attention of members of the public, who now clearly expect companies to account for their social and environmental impact, as well as their financial performance.”

Traceability and accountability

The publication of the findings comes at a time when public demand for corporate transparency is rising among all age groups, with millennials – who want to buy from companies that have purpose, sustainability and environmental stewardship built into their ethos – leading the charge.

A recent survey by The Consumer Goods Forum and Futerra found that the majority of European shoppers are now more interested in buying from transparent and sustainable companies than choosing their favourite brand, with most consumers also expressing a desire for corporates to publish more information on the “full” impact of their products.

Leading businesses are moving at a pace to satisfy this growing demand for sustainability-related information. Marks & Spencer (M&S), for example, has pledged to create interactive digital mapping tools to showcase its entire supply chains as part of its Plan A sustainability strategy. It has launched such tools for its seafood, beef and dairy supply chains to date, and has also co-funded a similar app which allows businesses, investors and customers to track the origin of paper, wood and viscose sourced by corporates.

Similarly, the world’s largest palm oil firm recently pledged to use satellite tracking and other digital technologies in a bid to eliminate deforestation risks from its supply chains by 2020.

In the policy sphere, meanwhile, the UK Government unveiled a refresh of its Public Services Act, adding a clause requiring all public procurement projects to account for social and economic benefits as well as financial profit, last year.

Combined reporting boon

In light of the growing consumer demand for information concerning the supply chain, emissions and energy efficiency policies of the companies they buy from, many large firms have begun to forego standalone sustainability or financial reports in favour of integrated reporting.

recent survey of  158 corporates across 17 sectors found that one-third are now producing integrated reports – an 11% year-on-year increase. The survey additionally uncovered a 12% year-on-year decrease in the number of large firms labelling their progress documents as ‘sustainability reports’, with six in ten now choosing an alternative title.

Research suggests that an integrated approach to reporting can showcase how sustainability can act as a holistic driver for growth and value across a business, resulting in higher market valuation, increased stock liquidity and a longer-term investor base. 

The World Business Council for Sustainable Development has welcomed these findings, arguing that integrated reporting could help “push sustainability into the mainstream” while avoiding “tick box” actions.

Sarah George