To get the pulse of an institution’s financial management and its room for growth, we must first look at its financial statements. The information in these statements is, of course, essential but often provides only a partial picture focusing on short-term returns.
To understand the true value created by an organization, we need to look more broadly. This necessitates going beyond traditional financial reports and spending time understanding how the institution manages its non-financial resources.
Consider metrics such as the amount of resources (energy, water, and materials) used to bring a product or service to market; the costs (or savings) associated with employee turnover rates or low employee morale; the number of trainings offered for professional development; or the multiple unique ideas generated by a diverse workforce.
Such non-financials, hand-in-hand with traditional financial metrics, provide a more comprehensive picture of an institution’s ability to create long-term value and a better understanding of business risks, resilience through instability and opportunities for growth. Presented together, this information enables investors to make smarter financial decisions.
Research shows that more and more investors are incorporating non-financial information into their decision making. The tool institutions use to communicate this comprehensive value is called integrated reporting, providing a more holistic view of how organizations manage financial and non-financial resources.
Sustainability as part of business acumen
According to a survey by McKinsey in 2014, 43% percent of the 2,900 executives surveyed said their companies align sustainability with their overall business goals, mission, or values. The executives ranked reducing energy use in operations at 64%, reducing waste at 63% and managing their corporate reputations for sustainability at 59%.
This trend holds true here at the World Bank Group. Our sustainability commitments range from addressing the institution’s impacts on climate, to the places where we operate, to the people we employ and the finances we manage.
Highlights in this year’s World Bank Sustainability Review include:
-We reduce natural resource waste and decrease the costs of day-to-day operations.In the last year, 8,000 GJ were reduced, by, for example, upgrading lighting in many offices, installing solar panels at the Islamabad office and efficiently managing the heating, ventilation, and air conditioning (HVAC) demand in the Washington and Chennai offices.
-We promoted low-carbon development in our 130 offices worldwide. GHG emissions in fiscal 2014 were around 165,000 metric tons of carbon dioxide. We aim to be at 160,000 by 2017.
-We provide a strong employee value proposition by offering staff a compelling mission, an opportunity to work globally, competitive pay and benefits, and meaningful careers in a diverse and inclusive environment. The World Bank’s nearly 12,000 staff are drawn from more than 170 countries and speak more than 140 languages, reflecting the rich diversity of our client base.
Sustainability for economic stability
Transparency is essential, not only for managing our own institution, but also for stabilizing economic growth and promoting sustainable development. Markets are driven by information and unless both financial and non-financial data are properly measured and disclosed, capital markets cannot function efficiently.
One challenge that we face is a lack of a standardized approach in measuring intangible resources, such as intellectual and human resources, and understanding the correlation with financial resources. To this end, our country partners are creating policies to enable and promote measurement and reporting of nonfinancial metrics on par with financial data.
For example, a recent study found 140 national standards encouraging non-financial reporting, of which two-thirds have mandatory reporting requirements. Brazil, South Africa, France, and Denmark (Friends of paragraph 47) endorsed sustainability reporting in Rio+20. And in the Europe 2020 Strategy, the Commission made a commitment to renew the EU strategy to promote corporate social responsibility.
The World Bank Group has been modeling best practice by publishing non-financial metrics in our Sustainability Reviews and in promoting this effort through our clients. I’m confident we will continue to expand and promote our efforts to become even more sustainable over the long term.