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Looking for an entry-level route into sustainability reporting? Waikato Management School has come up with a set of minimal requirements, as Martin Kelly FCCA explains

This article was first published in the February 2012 International edition of Accounting and Business magazine.

The number of sustainable business reports has grown over recent years and the quality of reporting has also developed. This article suggests what minimal essential information should appear in a basic sustainability report. This minimum is much less than the comprehensive listings generated by such bodies as the Global Reporting Initiative (GRI) and Accounting for Sustainability (A4S).

Sustainable business practices encourage organisations to measure and report what effects their activities are having on the environment, their stakeholders in society, cultural development, ethical behaviour and the economy. Organisations that do so, it is suggested, will behave better in making decisions that benefit society.

A key element in sustainability practices is to ensure that businesses remain financially viable over the long term. Sustainable business practices are not offered as an alternative to profitable business practices, but they demand more of managers than an ability to maximise the organisation’s short-term profitability.

The 20th century business model resulted in severe damage to the earth’s ecosystems, as was made clear in the UN’s Millennium Ecosystem Assessment Synthesis Report 2005. It is essential that a shift in the 21st century business decision-making model is made if we are to avoid continuing damage to ecosystems and to societies. Sustainability reporting can help drive that shift.

What’s in a good sustainable business report?

What constitutes a good sustainability report is a matter of opinion, but GRI, A4S and other bodies have attempted to provide sets of detailed guidelines on what is required.

GRI-3 has become the widest used reporting system. Probably the next most used system has been that provided by A4S, which enjoys the support of the Prince of Wales.

On 12 September 2011 the recently formed International Integrated Reporting Committee (IIRC) issued a press release calling for improved reporting, because the world has changed and reporting must too. GRI, A4S and many other influential bodies are supporting IIRC.

In 2012 IIRC will be issuing an exposure draft of an international integrated reporting framework. In the short term – until the framework is up and running – IIRC is encouraging organisations to combine sustainability and management reports as a progressive step towards integrated reporting. IIRC hopes integrated reporting will evolve to encourage a future-based perspective, discourage bribery and corruption, and allow easier comparisons of ethical and conflict resolution practices.

In New Zealand, Waikato Management School (WMS) provides leadership in sustainable business practices. WMS has provided advice on minimal requirements for a sustainability report.

The team at WMS has become aware of many organisations that wish to start providing sustainability reports but find the broad requirements too onerous. WMS has tried to make it easier for such organisations to get started by limiting the number of issues that sustainability reports ‘must’ address to 10. Either immediately or over time, it is hoped that the organisations involved will extend their reports to include other issues that are particularly relevant to their operating environments.

The 10 issues

  1. The purpose of the organisation in society
    Organisations are human creations. All the powers they have, and support they are given, are in place because the societies they operate in permit this. It follows that organisations should recognise the rights afforded to them and behave as good corporate citizens. A sustainability report gives an organisation an opportunity to explain what it brings to society by way of profitability, employment, societal development, environmental care, cultural support, etc.
  2. How the organisation defines sustainability
    Unless a single and universally accepted definition of sustainability appears, it is incumbent on those using the word to explain what meaning they are attaching to it. Definitions of sustainability may vary greatly between different types of organisations in different countries. There may be huge differences put on the weights of various practices that fit generally under the sustainability banner. Readers must be informed exactly what an organisation’s sustainability objectives are.
  3. The reporting system that has been adopted/considered (such as GRI-3)
    Some organisations produce sustainability reports without making reference to any existing guidelines on what those reports should contain. It is poor practice for any organisation to choose to ignore this valuable advice.
  4. The individual in the organisation who is primarily responsible for sustainability, with contact details
    Readers of sustainability reports often wish to know more about some of the contents, but it is often difficult to make contact with anyone within an organisation who is prepared to respond to questions. As a courtesy, and a public relations measure, details of an accessible contact person should be provided.
  5. The stakeholder groups that are recognised
    Generally those organisations involved in sustainable business practices will have opted to be socially responsible organisations. Being socially responsible requires an organisation to identify the stakeholder groups it owes responsibilities to. It is helpful if readers are also made aware of the key stakeholder groups that have been recognised, and briefly what responsibilities are recognised.
  6. The balancing of stakeholder interests and compliance with legal and voluntary codes
    If responsibilities to several stakeholder groups are recognised, it becomes impossible to optimise returns to each stakeholder group simultaneously. Organisations should make it clear that they recognise this problem and inform their report readers of the machinery they have in place to address situations where conflicts are expected to arise among stakeholder groups, and with any legal/voluntary rules which the organisations feel they should adhere to.
  7. How adequate KPIs are identified
    Many organisations do not set adequate key performance indicators (KPIs) to ensure that their financial health is best protected. However, the absence of clear KPIs is much more prevalent when organisations are planning for healthy workers, contented customers, environmental respect, ethical practices, cultural recognition and other such ‘vague’ aspirations.
    Some organisations indicate that they have set clear KPIs for the past year but do no more than report against them. They fail to inform readers why (sometimes large) variances have occurred, and what actions have been taken to decrease the chances of such variances occurring in future years.
    Where future KPIs are shown, it is rare for them to extend beyond the next year. In some areas companies should be signalling what progress they wish to have made several years from now.
  8. Comparisons with external benchmarks
    Most organisations obtain information from trade associations, government bodies and elsewhere about how well similar bodies are performing in all areas where they have decided to set targets for themselves. This benchmarking should extend throughout all areas of sustainable business practices and comparisons reported in the sustainability reports. Where relative performances are poor they should be reported, along with details of the consequential changes in operating procedures.
  9. How sustainability aspirations have been embedded in the culture
    It is hard to describe what is required under this heading. Many organisations try to report on various sustainability issues, but often such reports seem like after-thoughts, something to be addressed after the separate and more important financial accounting element of sustainability has been completed. Few sustainability reports successfully integrate the reporting of their many other sustainable business practices with their financial reports. Financial reporting should complement other sustainable business practices rather than suggest rivalry between profit maximisation and other sustainable business practices.
  10. How the published information has been adequately verified by an external source
    In New Zealand most sustainability reports are published with no external verification attaching to them. If large organisations were to publish financial reports that had not been audited, many readers would not tolerate such a reporting omission. All the sustainability reports of large organisation should have some external verification attaching to them to improve their credibility.

A springboard

Some experts will undoubtedly argue there are other more important issues that should be included in any top 10 list such as this one. This list is a subjective one and all 10 issues listed here should be considered by any organisation trying to produce good sustainability reports.

Martin Kelly FCCA is an ACCA ambassador in New Zealand

This article is drawn from an academic research paper being created by the WMS team. That paper contains further discussion and a comprehensive literature review. Anyone wishing to obtain a copy of that report should contact the author of this article. 

WMS’s sustainability report must-haves

  1. The purpose of the organisation in society
  2. The organisation’s definition of sustainability
  3. The reporting system adopted by the organisation (for example, GRI-3)
  4. The individual in the organisation who is primarily responsible for sustainability, and their full contact details
  5. The stakeholder groups recognised by the organisation
  6. How the organisation balances stakeholder interests and complies with legal and voluntary codes
  7. The identification of adequate KPIs with evidence of forward planning
  8. The evidence of external benchmarking
  9. The integration of sustainability aspirations into the corporate culture
  10. Verification of the published information.


Last updated: 21 Mar 2014