Anton Colella: Time is running out for current system of business reporting

There's nothing like a financial crisis to make companies focus on the fundamentals. When credit is tight, management teams need to ensure that the business is running like clockwork - sales revenue is coming in, customers are being looked after and overheads are kept under control.

That should not be surprising. Business measures itself against hard financial metrics such as profit, return on capital employed and earnings per share. More attention is paid to these when times are tough.

It is logical to assume if companies are finding it tough, any commitment in terms of time and cost perceived to be outside their core areas of activity will be diluted. That's often why advertising or consultancy are the first areas cut. Sustainability activity has also come under threat.

This is perhaps a natural reflex at a time of economic stress. But it does raise the question of whether a sustainability commitment matters to companies. It may well be that, in the near future, they will not have a great deal of choice. That's because sustainable business means a lot to governments as well as to regulators and standard-setters.

The probable reintroduction by the coalition of an operating and business review for listed companies regulates the need for them to report against non-financial measures such as environmental impact. That's only one example.

This reflects a view that no business is an island. It is part of a community from which it draws its labour and natural resources. It depends on that community to buy and use its products and services. If business accepts this, accounting to that community for its impacts and benefits is part of the bargain.

Regulatory intervention can only be part of the answer. Perhaps the biggest challenge will be ensuring a commitment to sustainability is recognised, not only as a "nice to have", but also as something that is good for the business.

This is undoubtedly being proved at many companies, where building sustainability plans into their strategies has reduced water and energy usage, resulting in products that are good for the consumer, but also save the business money.

It is widely acknowledged that a business commitment to the sustainability agenda is the right thing to do. Effective measurement and reporting is necessary in explaining its positive effects. This will be helpful in influencing the mindsets of the investors and other stakeholders who judge company performance.

They will have to adopt a longer-term view - which is often necessary to appreciate the benefits of sustainability - alongside the traditional short-term metrics of EBITDA and stock turn. This will take time. Without this step, incentives for embedding sustainability in corporate plans become weaker, as for many businesses, investors are the most important audience.

This means the traditional reporting model needs to change. It is designed to report on pounds and pence rather than carbon capture and water usage. Until hard data on sustainability is linked to performance, the sustainability pages of the annual report will be viewed as a place to look at the pretty pictures before you get to the meaningful stuff towards the back. Icas and others are considering how best financial performance and sustainability can be linked in a new reporting model.

Sustainability activity is moving up the political agenda. The challenge for business is to ensure its value can be properly measured and reported. Without that, it may well become a victim of the next financial crisis.

• Anton Colella is chief executive of Icas, the Institute of Chartered Accountants of Scotland.