New sustainability reporting mandates in the European Union will affect many U.S. companies that do business in Europe and will require them to come to grips with a new concept: double materiality. Rather than reporting solely on the financial materiality of sustainability issues, companies will need to develop new processes for identifying and assessing impact materiality â€" that is, how their actions affect external stakeholders.

Quarterly earnings calls present an opportunity for businesses to share how their long-term financial performance is tied to environmental, social, and governance (ESG) issues. They can overcome obstacles to discussing ESG in these calls by laying the groundwork for interest in ESG, adapting the call schedule, explaining and reporting on the return on ESG investment, developing cross-functional collaborations, and staging the call as theater.

Beth Collins, CFO of Software Sense, an American multinational computer hardware and software developer, contemplated various ways that her publicly traded company could embrace a more long-term orientation in its quarterly reports and throughout its reporting ecosystem. Like other publicly traded companies, Software Sense faced constant pressure from investors and analysts to increase short-term financial-performance metrics, particularly in its quarterly earnings calls. Many in business were concerned about the deleterious effects of short-termism, which referred to the practice of focusing on short-term rather than long-term performance and results; these effects included less attention paid to long-term value creation and innovation, strategy, and fundamentals; less R&D investment; and the implementation of high-risk strategies that could threaten the company's health. Recently, Collins had read about and heard presentations by Chief Executives for Corporate Purpose (CECP), an initiative encouraging business leaders to reframe investor calls away from short-term reporting and toward a more long-term strategic approach and orientation. As she researched CECP's recommendations and strategies, Collins could see the benefits of this approach-but also the potential problems.

Most CEOs have detailed long-term plans, which are often closely held secrets out of concern that competitive advantage may be undermined by detailed disclosure. Yet disclosing a long-term plan provides an opportunity to identify financially material sustainability issues and demonstrate how the company manages business-critical issues -information that's valuable to investors.