Reporting Sustainability
Dr Ruth Bender
Intended learning outcomes
By the end of the session and the related work students will:
1. Have an appreciation of the reasons why companies choose to report their
progress on sustainability issues, and the key choices they have to make in such
reporting.
2. Understand some of the main international frameworks used in sustainability
reporting, including some of the detail behind the Global Reporting Initiative
(GRI) and the work of the International Integrated Reporting Committee (IIRC)
3. Understand the practical difficulties companies face when adopting sustainability
reporting.
4. Be familiar with the political arguments surrounding the ways in which
companies make their sustainability reports.
2
Social and environmental
reporting (SER)
“SER is the predominantly voluntary, self-reporting
of an organisation’s social and environmental
interactions. Such reporting is increasingly
undertaken in stand-alone reports – some in hard
copy, many on the organisation’s website – and
represents an organisation's understanding of what
it is to be environmentally and/or socially
responsible and (potentially at least) sustainable.”
Social and Environmental Reporting and the Business Case. ACCA
Research report #98, 2007
3
SER ≠ CSR
Good
How good are the
company’s CR practices?
Bad
Bad
Good
How good is the company’s
CR reporting?
Source: Ruth Bender
4
For the rest of the session…
Addressing the
questions
Standards and
regulations
What next?
5
Addressing the
questions
6
Why
How
Who
Sustainability
reporting
Where
What
When
7
Why?
 Issues surrounding voluntary
disclosures
(Is CR reporting still ‘voluntary’)
Reason for reporting?
9
An institutional theory
explanation
We do things because other companies do them and they seem to
work…
Coercive
isomorphism
Results from pressures, formal and informal, exerted on
organisations by other organisations on which they are
dependent, and by cultural or regulatory expectations in society.
Mimetic
isomorphism
Uncertainty is a powerful force that encourages imitation - when
you don't know that to do, do what someone else is doing,
apparently successfully. So organisations model themselves on
other organisations.
Normative
isomorphism
Stems from professionalism - the collective struggle of members
of an occupation to define the conditions and methods of their
work, and to establish a cognitive base and legitimation for their
occupational autonomy.
DiMaggio, P.J. and Powell, W.W. (1983) The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in
Organizational Fields American Sociological Review
… and doing these things legitimises the company and makes it
easier to get resources
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Costs of disclosure
Information costs
Costs of collection, processing, auditing
and dissemination
Litigation costs
Costs associated with allegations of
incomplete, inaccurate information
Competitive
disadvantage
E.g. via disclosure of technological and
managerial innovation strategies and
tactics, and operational information
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Some benefits of disclosure
Legitimacy
Compliance with perceived ‘best practice’
and improved transparency to improve trust
and confidence in the organisation
Branding &
positioning
Attract customers and employees through
clear sustainability stance
Operational
improvements
Changing the organisational culture to make
people more aware of the strategy, and of
ways to improve inputs, waste, emissions
Risk management
Allows a fuller view of the organisation and
its environment (in the broadest sense),
including strategic and internal threats
Taken in part from IRC of South Africa Integrated Reporting Guide
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Who?
 Who will be involved in production?
 Who will the report affect?
 Who, if anyone, will verify the data?
Who is involved in preparation?
$$££$$€
€££
Diversity
environment
Fairness
14
Who will the report affect?
http://www.mystickfigurefamily.com/?gclid=CKTb8N6xyKwCFZQhtAodd0RBGA
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Who, if
anyone,
should
provide
assurance?
How?
On what?
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What?
Carbon neutral
Nuclear power
Climate change
Biodiversity
Pollution
Resource usage
Environment
Child labour
Water
Outsourcing
Diversity
Corruption
Product
Responsibility
Transparency
Health &
Safety
What?
Human Rights
Energy
Work-life Community programmes
balance
Financials
Responsible restructuring
Communication
Waste control
Learning
organization
Workers’ rights
Customers
Stakeholders
Philanthropy
Animal testing
Recycling
Supply chain policies
Equal opportunities
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What does our report cover?
?Our whole organisation and supply
chain
?Our whole organisation
?Divisions within the organisation
?Geographies within the organisation
http://www.fine.com/blog/wp-content/uploads/images/erp-supply-chain-vancouver.jpg
?And what aspects of sustainability
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How?
When?
Where?
Some guiding principles?
Sourced from: The Evolving Nature of Financial Reporting: Disclosure and Its Audit Implications. (2011)
[Original source - IASB Conceptual Framework , Chapter 3 Qualitative characteristics of useful financial information.
(2010)]
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How do you report?
http://blogs.law.harva
rd.edu/corpgov/2011/
04/26/what-boardmembers-shouldknow-aboutcommunicatingcorporate-socialresponsibility/
Based on a
Conference Board
Director Note by
Du, Bhattacharya
& Sen
22
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24
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Seeing through the greenwash…
Extract from review by Elaine Cohen [Beyond Business]
http://www.corporateregister.com/reviews/item/?n=74
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In summary…
http://www.domini.com/common/pdf/howtoreadsocialreport.pdf
In general, good reports:
“Go beyond documenting community relations
activities
Provide details on both policies and actual
practices
Report data that is company-wide and systematic,
accompanied by illustrative anecdotes
Set goals for future social and environmental
performance
Confront failures as well as promote successes
Address the most difficult issues a company
faces, particularly those relating to business
models
Integrate CSR reporting with financial reporting
and analyze the materiality of CSR issues to
daily operations
Readers will find a CSR report credible when it
discusses thoroughly and honestly those
issues that most deeply impact a company’s
business model and its implications for a just
society and sustainable environment today
and tomorrow”
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Standards and
regulations
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Laws
Standards
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UK, Companies Act 2006, s.417
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Coming soon…
Companies Act 2006 (Strategic Report and
Directors' Report) Regulations 2013
Quoted companies will be required to disclose, in a standalone strategic report,
 a description of the company's business model and strategy;
 the gender split, in number, for its directors, managers and employees;
 a consideration of human rights issues, alongside social and community
issues
Legislation expected October 2013
31
Coming soon…
“All businesses listed on the Main Market of the London Stock Exchange will
have to report their levels of greenhouse gas emissions from the start of the
next financial year under plans announced by the Deputy Prime Minister at
the Rio+ 20 Summit today.
The UK is the first country to make it compulsory for companies to include
emissions data for their entire organisation in their annual reports.
The introduction of the reports, following consultations with leading
businesses, will enable investors to see which companies are effectively
managing the hidden long-term costs of greenhouse gas emissions. The
majority of businesses responding to the consultation support the change
and government plans are also backed by leading employer and
environmental organisations including the CBI and the Aldersgate Group.
The new regulations will be introduced from April 2013. They will be
reviewed in 2015, before ministers decide whether to extend the approach to
all large companies from 2016.”
DEFRA press release, June 2012
http://www.defra.gov.uk/news/2012/06/20/greenhouse-gas-reporting/
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Guidance on reporting (i) Greenhouse gas emissions, (ii) Transport emissions,
(iii) other environmental impacts
Separate guidance for small businesses
https://www.gov.uk/measuring-and-reporting-environmental-impacts-guidance-for-businesses
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Countries all have different
regulations
Danish Financial
Statements Act
Companies must either
have to state that they don’t
do CSR, or say what they
are doing.
Applies to largest
companies in Denmark,
since 2009.
34
Coming soon?
Proposed EU Directive on non-financial
reporting (April 2013)
“Certain large companies to disclose a
statement in their Annual Report including
material information relating to at least
environmental, social, and employee-related
matters, respect of human rights, anti-corruption
and bribery aspects.
Within these areas, the statement will include
(i) a description of its policies, (ii) results and
(iii) risk-related aspects.”
“Large listed companies to provide information
on their diversity policy, including aspects
concerning age, gender, geographical diversity,
and educational and professional background.”
http://ec.europa.eu/internal_market/accounting/docs/non-financial-reporting/com_2013_207_en.pdf
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Laws
Standards
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Integrated Reporting
Global Reporting Initiative
37
“<IR> is a process that results in
communication, most visibly a
periodic “integrated report”, about
value creation over time. An
integrated report is a concise
communication about how an
organization’s strategy,
governance, performance and
prospects lead to the creation of
value over the short, medium and
long term. An integrated report
should be prepared in accordance
with the International <IR>
Framework.
While the communications that
result from <IR> will be of benefit
to a range of stakeholders, they
are principally aimed at providers
of financial capital.”
38
39
Integrated Reporting in
South Africa


In 2010 IR was made mandatory for companies listed on the Johannesburg Stock
Exchange
The IR report should be independently assessed
https://www.saica.co.za/Tech
nicalInformation/Sustainability
andIntegratedReporting/TheI
ntegratedReportingCommitte
eIRC/tabid/2371/language/en
-ZA/Default.aspx
http://www.sustainabilitysa
.org/Default.aspx
40
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Examples of Integrated
reports…
http://examples.theiirc.org/home
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Why did
the auditor
cross the
road?
43
Global Reporting
Initiative (GRI)
Started 1997/8 – first Guidelines issued in
2000
By 2010 about 2000 organisations
registered as issuing under GRI
Latest Guidelines (G3.1) issued March
2011 www.globalreporting.org
G4 expected some time in 2013 (draft
available)
Current and past reports available via
http://www.corporateregister.com/
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GRI reporting: Principles &
Guidance
Reporting Guidance helps decide what
to report on, and interpret the Framework.
Reporting Principles re Content: Materiality, Stakeholder
inclusiveness, Sustainability context, Completeness,
Reporting Principles re Quality: Balance, Comparability,
Accuracy, Timeliness, Clarity, Reliability
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G3.1: Standard Disclosures
Strategy and Profile
1. Strategy and Analysis
2. Organizational Profile
3. Report Parameters
4. Governance, Commitments, and Engagement
5. Management Approach and Performance Indicators
Economic 9 indicators
Environmental 30 indicators
Social:
Labor Practices and Decent Work 14 indicators
Human Rights 11 indicators
Society 8 indicators
Product Responsibility 9 indicators
G4 is a lot
more
complex
As well as the indicators there are disclosures in each category relating to management
approach, goals and policies
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External assurance is encouraged
 It’s external, done by demonstrably competent people who are
independent, and state their relationship with the organisation
 It’s done systematically, evidence-based, and properly
documented, to defined procedures
 It assesses the extent to which the organisation has applied the
GRI Reporting Principles
 It results in an publicly-available opinion or conclusions
The external assurance report assesses whether the
report provides a reasonable and balanced
presentation of performance, taking into
consideration the veracity of data in the report as
well as the overall selection of content.
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BUT…
“GRI’s vision is that
reporting on economic,
environmental, and
social performance by
all organizations is as
routine and comparable
as financial reporting.”
“GRI’s main challenge is how to
mainstream an international
standard common practice. Not
just developing sustainability
practices, nor even developing
sustainability reporting, but
developing common practice.”
“No harmonisation. Not even
harmonising EU regulatory
information requirements. Or
the requirements of ratings
agencies’ questionnaires.”
Nelmara Arbex (GRI) JustMeans conference on integrated
reporting, 2011
48
To summarise so far…
External forces:
Institutional theory - mimicry
Regulatory – eg King III, UK Business Review
UN-PRI
Other Stakeholders
Why produce
sustainability
accounts?
Internal forces:
Stakeholders – eg employees
Need for management information, eg re Carbon
Reduction initiative
Institutional theory
Stakeholder input
Mimicry, regulation,
consultants
Content and format of
sustainability accounts
Cost-benefit analysis
GRI, IIRC etc
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What next?
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World’s first environmental
P&L account
http://about.puma.com/
http://safe.puma.com/us/en/2011/05/puma-announces-results-of-unprecedented-environmental-profit-loss/
http://www.guardian.co.uk/sustainable-business/puma-completes-environmental-profit-and-loss?CMP=twt_gu
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Some other resources on
sustainability reporting
•
•
•
•
•
Large reports covering the whole field
Best practice in sustainability reporting
Standards and proposed standards
Investors’ requirements and reports
Other stuff
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Large reports covering whole
field
This 334 page book gives a
great view, from many
different authors, of all
aspects of integrated
reporting.
Published 2010, some
aspects will be out of date.
http://hbswk.hbs.edu/item/6532.
html
142 page report issued June
2012, after Rio.
Chapters written by different
experts, covering all aspects of
sustainability reporting
Available via
http://www.unep.fr/scp/publicatio
ns/details.asp?id=WEB/0169/PA
3,400 companies representing
the national leaders from 34
countries around the world,
including the 250 largest global
companies
http://www.kpmg.com/Global/en/I
ssuesAndInsights/ArticlesPublica
tions/corporateresponsibility/Pages/2011survey.aspx
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Large reports covering whole
field
“This report explores and documents the extent to
which corporate ESG information tracked and
managed internally by companies is consistent
with analogous information sought by external
parties, and in particular, by ESG investors and
the research companies that serve them.” 79
pages.
System to identify key KPIs by industry sector,
with the goal of creating a regulatory regime
with concise, comparable metrics… Applies this
method to five sample industries to
demonstrate how such a system might
hypothetically be implemented within a US
reporting context. http://hausercenter.org/iri/wpcontent/uploads/2010/05/IRI_Transparency-toPerformance.pdf
http://www.irrcinstitute.org/projects.php?project=55
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Examples of reports via…
http://database.globalreporting.org/
http://www.corporateregister.com/
Search 47,458 reports across 9,898
companies
“Winners will be announced Spring 2013”
http://www.corporateregister.com/crra/
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Standards and proposed
standards
From the initial summary of responses to the G4 exposure draft
https://www.globalreporting.org/resourcelibrary/G4-PCP1-Full-Report.pdf
56
Standards and proposed
standards
http://www.sasb.org/
“The Sustainability Accounting Standards
Board™ (SASB™) is a registered 501(c)3
non-profit organization engaged in the
development and dissemination of
industry-specific sustainability accounting
standards. SASB is establishing an
understanding of material sustainability
issues facing industries and creating
sustainability accounting standards
suitable for disclosure in standard filings
such as the Form 10-K and 20-F. SASB
addresses the unique needs of the U.S.
market, establishing standards for
integrated reporting that are concise,
comparable within an industry, and
relevant to all ~13,000 publicly listed
companies in the U.S.”
57
The AA1000 series
http://www.accountability21.net/
Principles-based standards that provide the basis for improving
the sustainability performance of organisations in all sectors.
Relates to processes rather than levels of performance
AA1000 Framework
Provides guidance to users on how to establish a systematic
stakeholder engagement process that generates the
indicators, targets, and reporting systems needed to ensure
to ensure greater transparency, effective responsiveness to
stakeholders and improved overall organisational
performance.
AA1000 Assurance
standard
Provides a methodology for assurance providers to evaluate
and provide conclusions on: the nature and extent of
adherence to the AA1000 AccountAbility Principles, and the
quality of the information publicly disclosed on sustainability
performance
(1999)
(AA1000AS - 2008)
AA1000
Accountability
principles standard
Provides a better framework for an organisation to use in
order to better identify, understand, prioritise and respond to
its sustainability challenges
(AA1000APS - 2008)
AA1000 Stakeholder
Engagement
Standard (AA1000SES –
Provides a framework to help organisations ensuring
stakeholder engagement processes are robust and deliver
results.
2011)
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Investors’ requirements
“This report from the Professional
Accountants in Business Committee
considers trends in investor demand for and
use of environmental, social, and
governance (ESG) information, and
recommends how professional accountants
can better support their organizations in
responding to these demands, and
ultimately improve the management and
reporting of ESG performance.”
http://www.ifac.org/publicationsresources/investor-demand-environmentalsocial-and-governance-disclosures
http://www.ceres.org/resource
s/reports/incr-listingstandards-draftingcommittee-consultationpaper-proposedsustainability-disclosurelisting-standard-for-globalstockexchanges/at_download/file
“…legislative and regulatory, legal,
reputational, and operational ESG
risks and opportunities Shareholders
will need to consider to fully
understand the Companies in which
they invest.”
http://www.cfapubs.or
g/doi/pdf/10.2469/ccb
.v2008.n2.1
59
UN-PRI
“The Principles for Responsible Investment aim
to help integrate consideration of environmental,
social and governance (ESG) issues by
institutional investors into investment decisionmaking and ownership practices, and thereby
improve long-term returns to beneficiaries.”
The Principles (launched 2006) apply across the whole investment
business and are not designed to be relevant only to SRI products
Over 1,000 institutional signatories in 50 countries (2012)
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ESG (environmental, social and corporate
governance)
1. Incorporate ESG into investment decisions
2. Be active owners and incorporate ESG into
ownership policies
3. Encourage ESG disclosure in investee
companies
4. Promote these principles in the investment
community
5. Work together to enhance our effectiveness in
implementing these principles
6. Report our activities and progress in their
implementation
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3 We will seek appropriate disclosure on ESG
issues by the entities in which we invest.
Possible actions
Ask for standardised reporting on ESG issues (using tools
such as the Global Reporting Initiative)
Ask for ESG issues to be integrated within annual financial
reports
Ask for information from companies regarding adoption
of/adherence to relevant norms, standards, codes of conduct
or international initiatives (such as the UN Global Compact)
Support shareholder initiatives and resolutions promoting
ESG disclosure
62
A great resource
Elaine Cohen is a
consultant and author on
sustainability reporting.
Her blog is http://www.csrreporting.blogspot.com/
Her own company’s awardwinning sustainability report
http://www.byond.biz/en/sub_page.asp?sp=3
23&p=16
And she tweets a lot about CSR
reporting at
www.twitter.com/elainecohen
Her tweets are downloadable as
a complete eBook at
http://www.byond.biz/en/news.asp
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www.twitter.com
Ruth999 (and see my CSR list)
elainecohen
GRI_Secretariat
davidcoethica
DoughtyCentre
Justmeans
theIIRC
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