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An EC Green Paper

Comments from the Association of Chartered Certified Accountants

December 2001

ACCA welcomes the Commission's invitation to comment on the Green Paper 'Promoting a European framework for corporate social responsibility'. Our comments and recommendations are set out below.

General Points

1. The activities of multi-national businesses have obvious international environmental and social impacts but businesses based only in Europe can also have international environmental and social impacts as these issues lack geographical boundaries. ACCA believes therefore that any framework created for European purposes should be aligned with, and complementary to, other international frameworks.
   
   
2. The definition of CSR used by the Commission in the paper should be clarified and widened. ACCA is concerned about the social bias throughout the Green Paper - CSR concerns environmental, economic and social issues. The Commission also implies that CSR is an 'additional, beyond compliance' issue. We disagree, and believe that CSR is integral to good business practice.

The role for the EU

What could the European Union do to promote the development of corporate social responsibility at European and international levels?

The Commission should be fully involved in CSR developments as it can influence businesses to increase levels of CSR via:

• its regulatory powers
• its endorsement of credible CSR initiatives
  and
• its support for leading CSR institutions.

ACCA believe the following are appropriate roles the Commission should adopt to promote CSR throughout Europe:

1. As a promoter of best practice the Commission should reward those companies who have integrated CSR principles throughout their business and report on their activities to stakeholders.
   
   
2. As a disseminator of CSR information to both business and the general public the Commission should update businesses on general, international and European CSR developments and Commission CSR strategy by disseminating the information regularly in an accessible format such as a newsletter or via the europa webpages. Supporting events such as seminars should also be organised in partnership with industry bodies and NGOs.
   
   ACCA publishes a bi-monthly web-based newsletter called 'Accounting & Sustainability' which attempts to disseminate timely accounting and sustainability news to business, NGOs, Government, academics and consultants. We have found it a very effective way of informing a large quantity of people on a range of issues. Please see http://www.accaglobal.com/publications/as_index/
   
   
3. To raise public awareness of CSR issues the general public, as stakeholders of business, should also be made aware of CSR to help drive the change needed in corporate behaviour.

Companies and CSR

How best can we take forward the invitation to business in the Commission's proposal for a sustainable development strategy to publish a 'triple bottom line' in their annual reports to shareholders that measures their performance against economic, environmental and social criteria?

Over the past decade, developments in environmental reporting have been swift. The European EMAS regime now has over 2000 accredited reporting entities and we have seen mandatory environmental reporting regimes introduced in Denmark, Netherlands, Norway and Sweden. In addition, in the UK, we now have almost half of the FTSE 350 issuing environmental reports and a series of guidance notes from the UK's Department of Environment, Food and Rural Affairs (DEFRA) on various aspects of environmental reporting (greenhouse gases, waste and water).

Demands for greater transparency and accountability have grown to such an extent that the UK Government has recently undertaken a serious consultation on the issue of whether or not the responsibilities of company directors should be extended to include an legal obligation to external stakeholders in respect of social and environmental issues. The outcome of these consultations will be known in 2002.

Sustainable development itself is a key feature of UK Government policy - and more and more companies are beginning to assess the net benefits (rather than the costs) that might flow from the adoption of more sustainable manufacturing and operating practices. This new focus on sustainability has itself led to new types of investment screening and portfolio building (e.g. the Dow Jones / SAM Index) and to demands for better information on the three linked aspects of sustainability - economic, social and environmental performance. The sustainability reporting guidelines issued in June 2000 by the Global Reporting Initiative (GRI) reflect this demand for a broader concept of accountability (www.globalreporting.org).

ACCA has been a member of the GRI Steering Group since its inception in 1997. GRI is a long-term, multi-stakeholder, international undertaking whose mission is to develop and disseminate globally applicable sustainability reporting Guidelines for voluntary use by organisations reporting on the economic, environmental, and social dimensions of their activities, products and services.

It is notable that increasing attention is being paid to the GRI guidelines simply because they represent an on-going and dynamic global benchmark - rather than many of the other guidance sources which are one-off local or sectoral initiatives, unlikely to be repeated or updated. The Guidelines provide a framework for reporting that promotes comparability between reporting organisations while recognising the practical considerations of collecting and presenting information across diverse reporting organisations.

ACCA has been an active supporter of corporate non-financial disclosures since the 1980's. ACCA initiated and organises the UK and European Reporting Award schemes, which are outlined in Annex One.

ACCA believe the Commission should continue to support environmental and sustainability reporting Awards and initiatives. We are encouraged to know that Commissioner Margot Wallström has endorsed the European Environmental Reporting Awards and that the Commission endorsed the CSR Europe reporting guidelines. As the GRI is the most advanced and inclusive reporting initiative, ACCA believes that the Commission should endorse the GRI and encourage businesses to follow it.

It may be helpful for the Commission to conduct a survey to investigate the extent of environmental, social and sustainability reporting across Europe. A comprehensive piece of research of this type should include details of which companies are reporting, best practice examples, national mandatory requirements and voluntary reporting initiatives. The results should then be used to decide how to progress and where in Europe the greatest encouragement is required.

Main actors and stakeholders

What are the best ways to establish and develop a process of structured dialogue between companies and their various stakeholders on CSR?

A number of companies are involving stakeholders in their reporting and decision-making processes via surveys, forums and detailed one-on-one interviews. It is a highly effective way of finding out the key issues of importance to stakeholders. Initiatives such as AA1000 (www.accountability.org) also provide the means for companies to include their stakeholders more actively. The UK's Environment Council (www.the-environment-council.org.uk) organises a series of stakeholder dialogue seminars and training sessions which could be reviewed by the Commission.

ACCA believe stakeholder engagement is an important part of CSR and should be encouraged by the Commission.

Evaluation and Effectiveness

What are the best means to develop, evaluate and ensure the effectiveness and reliability of CSR instruments such as codes of conduct, social reporting and auditing, social and eco-labels and socially responsible investing?

Reporting Award schemes and reporting frameworks have already been mentioned in this response. ACCA believe there is no added value in writing new reporting guidelines or introduce any new CSR-orientated initiatives: this would just confuse the marketplace, potentially confuse the message, and certainly overlap with what's already happening.

The Commission must endorse the best of what is available already in the reporting and Socially Responsible Investment spheres.

To improve the reliability of data in non-financial reporting practices, and to improve the credibility of reports published, reporters can opt to have their report verified. ACCA, as an accountancy professional body, encourage reporters to include a verification statement. There have been two recent developments in this area.

1. ACCA is a member of the Federation of European Accountants (FEE - Federation des Experts Comptables Europeens, www.fee.be), and sits on both the FEE Sustainability Working Party and the FEE Sustainability Assurance sub-group. In early 2002, FEE will publish a Discussion Paper on 'Providing Assurance on Sustainability Reports' which will address the issues raised by the EC.
   
   
2. A revised edition of the GRI Guidelines will be released in June 2002, and GRI is currently clarifying its position and involvement with current developments in the sustainability reporting verification area. They have produced the 'Overarching Principles for Providing Independent Assurance on Sustainability Reporting' document for consultation. ACCA, via the FEE Sustainability Assurance sub-group, has responded to this.

Annex

The ACCA UK Awards for Sustainability Reporting The UK ACCA Environmental Reporting Award (ERA) scheme was established in 1991 to support and encourage the development of environmental reporting techniques. The ACCA ERA has grown into a major national initiative that reflects the steady expansion of this practice over the last 10 years and the increased demand from stakeholders for corporate environmental accountability. The ACCA ERA's objective is to identify and acknowledge innovative efforts to communicate environmental performance (but not to judge on the performance in itself).

In 1999, the Association of Chartered Certified Accountants (ACCA) and AccountAbility launched the UK Awards for Social Reporting. This award' scheme was run in parallel with the existing ACCA Awards for Environmental Reporting which started in 1991.

The Awards are intended to recognise those organisations that measure and communicate their social performance and impacts, and the scheme is designed to encourage good practice in reporting the social issues that face all organisations. It also encourages non-reporters to start the process of measuring and communicating their social impacts.

To better reflect the current and future disclosure practices of UK companies and organisations, the ACCA Award scheme has been restructured under the title 'The ACCA Awards for Sustainability Reporting'. This new scheme will embrace three different award categories: the ACCA UK Environmental Reporting Awards, the ACCA/AccountAbility Social Reporting Awards and a new category, the ACCA Sustainability Reporting Awards.

The European Environmental Reporting Awards

1996 saw the launch of the first European Environmental Reporting Awards with the initial participants being the UK, the Netherlands and Denmark. Now in its sixth cycle, the European Awards have rapidly expanded to become a partnership of 15 accountancy bodies from 15 different European countries.

Winners from the 15 national schemes are entered into the EERA. A panel of judges consisting of representatives from each participating country and two further independent judges evaluates the entries.

Two years ago the scheme was endorsed by the European Commission and the 1999 Awards were presented by Margot Wallström, the European Commissioner for the Environment. In her speech, she voiced her support for the European Awards scheme and emphasised the importance of relevant, credible and consistent environmental reporting.

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