Sustainability Reporting and Communications

Alan S. Gutterman

• Verlag: Business Expert Press
• Jahr: 2020
• ISBN:
  9781952538971
• Thema: Volkswirtschaftslehre
• Thema: Nachhaltige Entwicklung

This book is intended to be a practical introduction to sustainability reporting and communications that begins by discussing material legal and regulatory considerations and the some of the major sustainability reporting frameworks and then continues with detailed illustrations of how companies might create and distribute their sustainability reports and develop and implement their CSR communications strategies.

In order to know whether or not the corporate social responsibility (CSR) initiative and its related commitments are actually improving the company's performance, it is necessary to have in place procedures for reporting and verification, each of which are important tools for measuring change and communicating those changes to the company's stakeholders. While certain CSR and corporate sustainability disclosures have now become minimum legal requirements in some jurisdictions, in general such disclosures are still a voluntary matter and companies have some leeway as to the scope of their disclosures and how they are presented to investors and other stakeholders.

This book is intended to be a practical introduction to sustainability reporting and communications that begins by discussing material legal and regulatory considerations and the some of the major sustainability reporting frameworks and then continues with detailed illustrations of how companies might create and distribute their sustainability reports and develop and implement their CSR communications strategies.

CHAPTER 1

Introduction

In order to know whether or not the corporate social responsibility (CSR) initiative and its related commitments are actually improving the company’s performance, it is necessary to have in place procedures for reporting and verification, each of which are important tools for measuring change and communicating those changes to the company’s stakeholders. Hohnen and Potts described reporting as “communicating with stakeholders about a firm’s economic, environmental and social management and performance” and verification, which is often referred to as “assurance,” as a form of measurement that involves on-site inspections and review of management systems to determine levels of conformity to particular criteria set out in codes and standards to which the company may have agreed to adhere.¹ Verification procedures should be tailored to the company’s organizational culture and the specific elements of the company’s CSR strategy and commitments; however, it is common for companies to rely on internal audits, industry (i.e., peer), and stakeholder reviews and professional third-party audits. Verification procedures should be established before a specific CSR initiative is undertaken and should be included in the business case for the initiative.²

While certain CSR and corporate sustainability disclosures have now become minimum legal requirements in some jurisdictions, in general such disclosures are still voluntary and directors have some leeway with respect to the scope of the disclosure made by their companies and howthey are presented to investors and other stakeholders. Some companies continue to limit their disclosures to those are specifically required by regulators; however, most companies have realized that they need to pay attention to the issues raised by institutional investors and other key stakeholders and make sure that they are covered in the disclosure program. At the other extreme, there are companies that have embraced sustainability as integral to their brands and have elected to demonstrate their commitment by preparing and disseminating additional disclosures that illustrate how they have woven sustainability into their long-term strategies and day-to-day operational activities. These companies understand that not only are investors paying more attention but that more and more people everywhere are considering environmental, social, and governance (ESG) performance when deciding whether to buy a company’s products and/or work for a particular company and that it is therefore essential to lay out their specific CSR and corporate sustainability goals and the metrics used to track performance and provide regular reports to all of the company’s stakeholders on how well they are doing against those goals.³

The scope of the company’s reporting and verification efforts will depend on various factors including the size of the company, the stage of development and focus of its CSR commitments, legal requirements, the financial and human resources available for investment in those activities and the degree to which companies want and are able to integrate sustainability indicators into their traditional reporting of financial results. Ceres, a nonprofit organization advocating for sustainability leadership (www.ceres.org), has developed and disseminated its Ceres Roadmap as a resource to help companies reengineer themselves to confront and overcome environmental and social challenges and as a guide toward corporate sustainability leadership.⁴ In the area of disclosure and reporting, Ceres stated that the overall vision was that companies would report regularly on their sustainability strategy and performance, and that disclosure would include credible, standardized, independently verified metrics encompassing all material stakeholder concerns, and details of goals and plans for future action. Specific expectations regarding disclosure were as follows:

• D1—Standards for Disclosure: Companies will disclose all relevant sustainability information using the Global Reporting Initiative (GRI) Guidelines as well as additional sector-relevant indicators.

• D2—Disclosure in Financial Filings: Companies will disclosematerial sustainability risks and opportunities, as well as performance data, in financial filings.

• D3—Scope and Content: Companies will regularly disclose trended performance data and targets relating to global direct operations, subsidiaries, joint ventures, products, and supply chains. Companies will demonstrate integration of sustainability into business systems and decision making, and disclosure will be balanced, covering challenges as well as positive impacts.

• D4—Vehicles for Disclosure: Companies will release sustainability information through a range of disclosure vehicles including sustainability reports, annual reports, financial filings, corporate websites, investor communications, and social media.

• D5—Verification and Assurance: Companies will verify key sustainability performance data to ensure valid results and will have their disclosures reviewed by an independent, credible third party.

Cleveland et al. recommended that companies should align the manner in which sustainability issues are reported or communicated to stakeholders and others with the type and purpose of the report or communication. When reporting is mandatory, the applicable disclosure standards and guidelines promulgated by regulatory bodies such as the Securities and Exchange Commission (SEC) should be followed; however, when reporting is voluntary companies and their professional advisors must consider the standards and expectations of the audience, practices by other companies engaged in comparable business activities and the legal risks of disclosing “too much.” Companies are generally admonished to disclose information that is “material” with respect to aspects of their business including environmental and social issues and risks, but Cleveland et al. pointed out that this is not necessarily a firm guide given the existence of differing concepts of materiality relevant to sustainability-related reporting that they summarized as follows⁵:

• Under the GRI reporting framework, information is considered material and should be included in a report if it “may reasonably be considered important for reflecting the organization’s economic, environmental and social impacts, or influencing the decisions of stakeholders.”

• The International Integrated Reporting Council (IIRC) deems information to be material if “it is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organization’s ability to create value over-the short, medium and long term.”

• For SEC reporting purposes and under the voluntary Sustainability Accounting Standards Board standards, information is deemed to be material if there is “a substantial likelihood” that a “reasonable investor” would view the information as “significantly alter[ing] the ‘total mix’ of information made available.”⁶

Regardless of the particular standard applied to a specific sustainability-related report companies must ensure that disclosures are accurate and complete and this means creating an effective sustainability reporting and communication management system with disclosure controls and procedures, internal education and training, external review of proposed disclosures by legal counsel, and other professional advisors and continuous assessment to improve the reporting process.

In determining materiality and what should be covered in the sustainability report and how, consideration needs to be given to the input received from the company’s external stakeholders. It has been observed that identifying poor quality and the costs associated with poor quality is a vital part of “triple bottom line” reporting and in order to do this companies must engage with each of their important stakeholders to understand the essence of the company’s relationships with those stakeholders and what the stakeholders are looking for as indicators of value, integrity, and quality.⁷ This means that companies need to take a hard and honest look at their impact on the communities in which they operate and quality of their relationships with employees, the products and services they offer to customers, their actions in the neighborhoods where their facilities are located, and footprint of their operations on the environment.

Jackson et al. counseled that companies should solicit comments and suggestions from individuals who were not involved in the original collection and assessment of the data used to compile the report and should ensure that all information that is proposed to be included in the report is rigorously checked for accuracy. Independent editing should be used to identify and remove details that are not vital to the report and any jargon that might confuse readers and the message that the report is supposed to convey. While the process of collecting data for a sustainability report is complex, the end product itself must be straightforward and understandable by all of the stakeholders, including stockholders, employees, community members, and business partners.⁸

When establishing plans for reporting and verification it is useful to obtain and review copies of reports that have been done and published by comparable companies. Reports of larger companies are generally available on their corporate websites and extensive archives of past CSR-focused reports can be accessed through various online platforms such as CorporateRegister.com, a widely recognized global online directory of corporate responsibility reports. It is also important to have a good working understanding of well-known reporting and verification initiatives such as the GRI Standards; the AccountAbility AA1000 series; the United Nations Global Compact; and the International Auditing and Assurance Standards Board ISAE 3000 standard. Country-specific information is also available through professional organizations such as the Canadian Chartered Professional Accountants, which has published an extensive report on sustainability reporting in Canada.

Reporting standards are also emerging for specific topics within the broader universe of CSR and stakeholder engagement. For example, while companies can use several of the disclosure categories in the GRI to describe their activities relating to community involvement, investment, and impact, they can also turn to a framework for reporting on corporate community investment promoted by the London Benchmarking Group (LBG) (http://www.lbg-online.net/), which is managed by Corporate Citizenship, a global corporate responsibility consultancy based in London with offices in Singapore and New York.⁹ The LBG framework has been touted as an effective tool for quantifying and organizing information about corporate community investment and, most importantly, assessing and reporting on the impact of their relationships with communities and how to manage it. Other tools for reporting on community impact have included return on investment (ROI) frameworks; the social, ecological, and environmental footprints; the Ethos Indicators developed by the Ethos Institute and work done by partnerships between NGOs and multilaterals that have attempted to conceptualize impact related to broader sustainability dimensions.¹⁰

The scope and sophistication of CSR reporting has come a long way since the idea first came up in the mid-1990s, when only a handful of companies reported on social responsibility issues and activities in addition to their regular financial reports. Today almost all of the largest global companies produce reports on their environmental policies and activities, often providing interested parties with a whole range of documents that can be accessed in a separate yet highly visible section of the company website. Other international standards, such as the UN Global Compact, explicitly incorporate reporting as a fundamental requirement for demonstrating a commitment to sustainability. Specifically, companies participating in the Compact are required to make an annual “Communication on Progress” that outlines the actions they have taken with respect to integrating the Compact’s ten principles and to make the communication publicly available to stakeholders through annual financial, sustainability, or other prominent public reports in print or on the company’s website. The Compact recommends that companies follow the GRI Standards when preparing their reports.

Sustainability reporting is tightly connected with efforts to achieve global sustainability goals and targets such as the Sustainable Development Goals (SDGs) in the 2030 Agenda for Sustainable Development and the aspirations in other international agreements such as the Paris Agreement on climate change act...

Inhaltsverzeichnis

• Cover
• Half-Title Page
• Title Page
• Copyright
• Description
• Contents
• Chapter 1 Introduction
• Chapter 2 Legal and Regulatory Considerations
• Chapter 3 Sustainability Reporting Frameworks
• Chapter 4 Global Reporting Initiative (“GRI”) Standards
• Chapter 5 SDG-Related Reporting
• Chapter 6 Report Formatting and Presentation
• Chapter 7 CSR Communications
• About the Author
• Index
• Backcover