Aug 25, 2010

Who will take the lead? - Trends from the GRI Conference 2010

Although the Copenhagen negotiations in 2009 did not deliver on the much anticipated “Hopenhagen” and governments are still slow to implement mandatory requirements, the Global Reporting Initiative (GRI) announced ambitious goals at this year’s Amsterdam Global Conference on Sustainability and Transparency.

The GRI would like to see all large and medium-sized companies – about 80,000 firms worldwide – reporting on their material environmental, social and governance performance (also called ESG performance) by 2015. Indeed the number of organizations issuing GRI reports has risen by 46% from 2007 to 2008, with about half of the reports coming from Europe and North America in second place.

Notably, Asia and Latin America are catching-up as interest in social and environmental reporting in these regions is growing fast. One obvious sign was in evidence at the GRI’s 2010 READER’s CHOICE awards ceremony when three Brazilian companies swept the awards which recognized the sustainability reports that best meet the needs of the readers.

Along with these encouraging developments, some would like to see governments more active in setting minimum standards and encouraging voluntary disclosure. According to a report on global approaches to sustainability reporting by UNEP, KPMG and others; 142 mandatory and voluntary country standards are currently in place. Next to regulation, additional forms of successful government involvement were discussed including leading by example and further implementing sustainability reporting in public agencies.

Voluntary reporting standards are equally evolving. The International Organization for Standardization (ISO) plans to release the new ISO 26000 Social Responsibility Standard at the end of 2010. The new standard defines fundamental expectations of a company that claims to operate under the concept of sustainable development and is intended to complement existing international agreements. However, ISO’s Deputy Secretary-General, Kevin McKinley, emphasized that the standard provides guidance only and companies cannot be certified against it.

The business community has embraced sustainability reporting as much more than just a boiler plate to promote the company in public. Reporting has become a management tool that helps to improve corporate ESG performance. As Barbara Kux, Siemens' Chief Procurement Officer and Chief Sustainability Officer put it:”What gets measured gets done”.

The increased focus on performance is necessary to improve the credibility of sustainability reports among stakeholders. Just ticking boxes and business as usual are not enough according to Kumi Naidoo, Executive Director of Greenpeace International. BP’s recent oil-spill-disaster illustrates that outstanding sustainability reporting measured by current standards does not necessarily reflect the whole picture of environmental, health and safety performance of a company.

A much discussed topic at the conference was the need to give investors a clearer sense of a company’s financial risks and opportunities. The combination of financial reporting and ESG reporting and the development of one global standard for such integrated reporting by 2010 was one of the GRI propositions. The International Integrated Reporting Committee (IIRC), an initiative of Prince Charles' Accounting for Sustainability Project, seeks to develop guidance for integrated reporting with strong involvement from the investor community.

Standardizing sustainability reporting need to be addressed urgently. How can stakeholders compare the ESG performance of companies whose businesses are` diverse and who are facing varying environmental issues because they operate in different  geographical contexts? How can a single report satisfy the needs of different stakeholder groups and how can stakeholders be more engaged in the process? Ultimately, collaboration and partnerships between government, business, NGOs, financial markets and consumers will need to be expanded, so that a global standard for sustainability/ integrated reporting can emerge.


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