The future of sustainability reporting: how can we make it better?
The launch of new G4 guidelines raises the questions of how far sustainability reporting has got us and how can we improve?
Last month's EU Commission proposal for a directive requiring sustainability reporting (SR) by large European companies and this week's Global Reporting Initiative (GRI) conference, where EU Commissioner Michel Barnier will doubtless promote the draft law, make it timely to assess where SR 1.0 has got us, and what SR 2.0 might look like.
With the rise of new initiatives in the SR space, three core questions need to be addressed – what's changed as a result of SR; what needs to be done to improve it; and what improvements do alternative approaches offer?
While there are a number of different ways of measuring and communicating sustainability performance, it is clear that the GRI is the main framework used. If SR is to improve, this means either helping GRI to improve and gain more traction, or developing a better alternative. Options for the latter include reporting at the product, facility, company or sector levels.
There's a need to accept that reporting on public policy impacts (eg contributions to the Millennium Development Goals) and on matters of business performance do not automatically overlap. How far these are complementary will depend entirely on the regulatory framework. This is an argument for a greater government role in SR, and for close business and reporting organisation engagement in the development of the post-2015 agenda.
Finally, there's an urgent need to have independent monitoring and analysis of the quality of SR. As things stand, there is little basis on which to assess the range of sweeping claims that embrace everything from SR is "meaningless unread greenwash" to SR is "changing the way companies see their role in the world". A decade after the launch of the GRI, we are still not able to make a full and accurate assessment of the impact of SR, regardless of the framework used.
This situation is both a crucial public policy issue and a vital business issue. Fundamentally, SR is not just about how well a company is identifying sustainability business risks and opportunities. It's also about regulators and markets getting a steady stream of quality information on which to base vital policies, regulations and investment decisions.
In this context, a debate about how well SR is working is overdue and healthy. In my view, there is an element of truth in all of the schools of thought mentioned above. I am, however, also convinced that SR has led to a new level of awareness and strategic thinking in many companies, resulting in concrete changes for the better.
If a level playing field is what's wanted, we need both a common set of government-agreed sustainability goals, and a common language to talk about what we're doing to achieve them and to benchmark progress. So far, the GRI has the best offering in this space
Another is the trend towards developing new initiatives to tackle measurement and reporting in different ways. The most notable of these include the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). However you look at these, they carry the implicit message that either GRI isn't the right answer or, worse, perhaps isn't even the right question. The IIRC, for example, is forthright in saying that its agenda is not even about sustainability but rather assessing the value prospects of a company.
On the one hand, such initiatives offer potential progress based on user experience over the past decade. On the other, they risk confusing the SR landscape. Prospective users and analysts need to understand better how they link to the GRI and other frameworks. Do they complement or replace them? How do they address the growing pressures to create "shared value" or demonstrate positive societal impacts? How do they better drive improved financial value and sustainability performance?
For its part, the GRI also has questions to answer. For many GRI users, the launch of the G4 guidelines this week will be a moment of truth. Key questions include how far GRI has gone in addressing user and reader critiques and proposals for improvement. How much will reporters have to change existing practices?
In this space there is a need for one more initiative. Perhaps called sustainability report watch, its role would be to provide the missing independent, consistent and high-quality monitoring and analysis of SR practices and initiatives, exposing the false claims and profiling the leaders. In short, someone to report on the reporters. Any takers?
Paul Hohnen is an independent consultant and an associate fellow of Chatham House. He has been a diplomat, director of Greenpeace International and a director of the Global Reporting Initiative.
http://www.guardian.co.uk/sustainable-business/blog/future-of-sustainability-reporting
With the rise of new initiatives in the SR space, three core questions need to be addressed – what's changed as a result of SR; what needs to be done to improve it; and what improvements do alternative approaches offer?
Fuzzy reporting
We need to accept that the vast majority of companies still have no idea what their sustainability impacts are. While thousands of (mainly listed and high-profile multinational) companies do issue sustainability reports, there is still a long way to go. The EU proposal, which would extend to about 18,000 companies, recognises this deficiency.While there are a number of different ways of measuring and communicating sustainability performance, it is clear that the GRI is the main framework used. If SR is to improve, this means either helping GRI to improve and gain more traction, or developing a better alternative. Options for the latter include reporting at the product, facility, company or sector levels.
There's a need to accept that reporting on public policy impacts (eg contributions to the Millennium Development Goals) and on matters of business performance do not automatically overlap. How far these are complementary will depend entirely on the regulatory framework. This is an argument for a greater government role in SR, and for close business and reporting organisation engagement in the development of the post-2015 agenda.
Finally, there's an urgent need to have independent monitoring and analysis of the quality of SR. As things stand, there is little basis on which to assess the range of sweeping claims that embrace everything from SR is "meaningless unread greenwash" to SR is "changing the way companies see their role in the world". A decade after the launch of the GRI, we are still not able to make a full and accurate assessment of the impact of SR, regardless of the framework used.
Debating the merits of SR
Only better and more transparent information about the quality and quantity of SR will help address the various schools of thought that are now out there. Criticisms of SR include that it's not accurate, makes no difference, doesn't measure what counts, is not material, is not linked to financial risk or performance, isn't read or is not visionary enough. And then, of course, there are the opposing critiques that SR indicators are either too simplistic and tick-box or too complex.This situation is both a crucial public policy issue and a vital business issue. Fundamentally, SR is not just about how well a company is identifying sustainability business risks and opportunities. It's also about regulators and markets getting a steady stream of quality information on which to base vital policies, regulations and investment decisions.
In this context, a debate about how well SR is working is overdue and healthy. In my view, there is an element of truth in all of the schools of thought mentioned above. I am, however, also convinced that SR has led to a new level of awareness and strategic thinking in many companies, resulting in concrete changes for the better.
Progress toward SR 2.0
The failure to address these concerns systematically, however, has a negative impact at several levels. One is a chilling effect. Companies considering SR are deterred from doing so because of the many open questions. Add this to concerns about cost and complexity and you have a disenabling environment that ensures universal SR will remain a distant prospect.If a level playing field is what's wanted, we need both a common set of government-agreed sustainability goals, and a common language to talk about what we're doing to achieve them and to benchmark progress. So far, the GRI has the best offering in this space
Another is the trend towards developing new initiatives to tackle measurement and reporting in different ways. The most notable of these include the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). However you look at these, they carry the implicit message that either GRI isn't the right answer or, worse, perhaps isn't even the right question. The IIRC, for example, is forthright in saying that its agenda is not even about sustainability but rather assessing the value prospects of a company.
On the one hand, such initiatives offer potential progress based on user experience over the past decade. On the other, they risk confusing the SR landscape. Prospective users and analysts need to understand better how they link to the GRI and other frameworks. Do they complement or replace them? How do they address the growing pressures to create "shared value" or demonstrate positive societal impacts? How do they better drive improved financial value and sustainability performance?
For its part, the GRI also has questions to answer. For many GRI users, the launch of the G4 guidelines this week will be a moment of truth. Key questions include how far GRI has gone in addressing user and reader critiques and proposals for improvement. How much will reporters have to change existing practices?
In this space there is a need for one more initiative. Perhaps called sustainability report watch, its role would be to provide the missing independent, consistent and high-quality monitoring and analysis of SR practices and initiatives, exposing the false claims and profiling the leaders. In short, someone to report on the reporters. Any takers?
Paul Hohnen is an independent consultant and an associate fellow of Chatham House. He has been a diplomat, director of Greenpeace International and a director of the Global Reporting Initiative.
http://www.guardian.co.uk/sustainable-business/blog/future-of-sustainability-reporting
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