Sustainability reporting and the global reporting initiative

First of all we should reflect on what sustainable development and sustainability are commonly assumed to mean. The most commonly accepted definition of “sustainable development” is that provided by the Bruntland Commission in 1987: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

“Sustainability” then refers to a state of operating whereby a public or private sector organisation (or a community such as a city) meet the three core requirements for sustainable development: ecological sustainability, economic equity and social inclusion. Sustainability reporting means reporting on the economic, environmental and social aspects of organisational performance. The Sustainability Reporting Guidelines issued in June 2000 by the Global Reporting Initiative aim to provide a framework for reporting that promotes comparability between reporting organisations.

The Global Reporting Initiative 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. ACCA has been a member of the GRI Steering Committee since late 1997.

Sustainability reporting is developing in the context of a global upsurge of interest in corporate social responsibility. ACCA’s own environmental reporting award scheme is now well established and enjoys high profile government endorsement. Reporting on the broader issues of corporate accountability – such as labour practices and human rights – is now becoming commonplace amongst multi-nationals, especially as NGO’s and lobby groups have begun to utilise the power of the Internet to place suspect organisations under the media microscope.

What is the current take up of sustainability reporting?
Recent work by SustainAbility Ltd and the United Nations Environment Programme (UNEP) identified about 200 companies issuing reports that could loosely be described as “sustainability reports”. In the UK, the leading sustainability reporters are BAA, Shell, the Co-operative Bank, BT, BP, TXU Europe and Vauxhall.

About 20 companies (mainly European, Japanese and US based) piloted the February 1999 GRI Exposure Draft guidelines and about 35 (with a wider geographical spread) are now committed to what GRI calls a “structured feedback process”, based on experiences gained from applying the full June 2000 GRI guidelines.

The European Commissioner for the Environment indicated her support for the GRI guidelines at the recent European environmental reporting awards presentations in Brussels. ACCA has recently carried out a commissioned project for the UK government exploring the feasibility of applying the GRI guidelines to the UK public sector in general and to the DTI in particular.

What is the Global Reporting Initiative (GRI)? What has it produced? What is ACCA’s involvement with the GRI?
The GRI Steering Committee is a loose consortium of like-minded organisations: ACCA, the Canadian Institute of Chartered Accountants, UNEP, the World Business Council for Sustainable Development (WBCSD), the World Resources Institute (USA), the Coalition for Environmentally Responsible Economies (CERES) and the Tellus Institute (both US), the Environmental Auditing Forum (Japan), the Centre for Science and the Environment (India), and others. GRI has issued two main documents thus far:

• Feb 1999 Exposure draft of the sustainability reporting guidelines.
• June 2000 Sustainability reporting guidelines V 1.0.

GRI’s intention is to issue V 2.0 of the guidelines in June 2002 and regular updates thereafter. ACCA’s commitment to exploring broader reporting (and verification) issues means that we are extremely supportive of the GRI initiative. From 2001 onwards, ACCA’s annual environmental reporting awards will become the annual Sustainability Reporting Awards.

The Sustainability Reporting Guidelines of the GRI
Through the June 2000 release of the Sustainability Reporting Guidelines, the GRI aims to help organisations report information:

• in a way that presents a clear picture of the human and ecological impact of business, to facilitate informed decisions about investments, purchases, and partnerships;
• in a way that provides stakeholders with reliable information that is relevant to their needs and interests and that invites further stakeholder dialogue and enquiry;
• in a way that provides a management tool to help the reporting organisation evaluate and continuously improve its performance and progress;
• in accordance with well-established, widely accepted external reporting principles, applied consistently from one reporting period to the next, to promote transparency and credibility;
• in a format that is easy to understand and that facilitates comparison with reports by other organisations;
• in a way that complements, not replaces, other reporting standards, including financial;
• in a way that illuminates the relationship among the three linked elements of sustainability – economic (including but not limited to financial information), environmental, and social.

Why Is There a Need for the GRI?
Private enterprise and global markets have emerged as powerful economic forces in the 21st century. To their proponents, these forces offer unprecedented opportunities for profitable investment, market expansion, and increased wealth and job opportunities for people around the world. To their critics, such trends are eroding the ability of civil society and governments to ensure that private sector activities serve the public interest while continuing to create wealth. The danger, it is argued, is that the failure of current governance structures to keep pace with changes in the global economy will lead to accelerating problems for humanity and for the biosphere. Disagreements over these matters have intensified in the press, in the halls of government, in the business community, and in a variety of international forums. Business, government, individual citizens, and civil society all share responsibility for managing impacts on humanity and the biosphere. However, it is business impacts that thus far have attracted most attention in governance and policy debates.

Spurred by such tensions along with the rapid growth of global capital markets and information technology, parties from business, government, and civil society are searching for new approaches to better align governance with the economic and social realities of the 21st century. Business managers, investors, consumers, governments, and others are all asking versions of the same question: how do we obtain a clear picture of the human and ecological impact of business, so that we can make informed decisions about our investments, purchases, and partnerships? Achieving such clarity in measurement and reporting holds the promise of delivering value both to business – by providing a critical management tool – and to external stakeholders – by providing timely, relevant, and reliable information on the reporting organisation.

Paradoxically, this shared interest in new approaches to measuring and reporting business impacts has produced a proliferation of inconsistent reporting approaches developed by business, government, and civil society. As diverse groups seek information, business encounters escalating demands in queries that are inconsistent, giving rise to even more confusion and frustration. The GRI is an attempt to resolve this paradox.

External non-financial reporting to date has not been guided by a widely accepted, common framework of principles and practices as to what should be reported or how, when, and where. Reporting organisations have been at liberty to report what they choose about the economic, environmental, and social aspects of their performance. Moreover, national and sectoral initiatives have produced diversity in reporting practices, making comparability, relevance, and reliability difficult if not impossible to achieve.

What do the GRI Guidelines contain?
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.

The Guidelines do not provide guidance for implementing data collection, information and reporting systems, or organisational procedures for preparing reports. Nor do they contain guidance on monitoring performance or on verification practices. These are matters left to the discretion of reporting organisations. Guidance on these topics is available through the efforts of other, related initiatives that focus on management systems, technical protocols, and on processes and procedures for indicator selection.

Finally, the Guidelines do not present standards for performance, although the performance of organisations publishing economic, environmental, and social reports is often evaluated by benchmarking organisations.

Recommended Report Content
Figure 1 summarises the contents of the ideal GRI report. To help readers working in the public sector, this table provides a public sector interpretation of how the GRI guidelines might need to be adapted for this purpose. Figure 2 sets out the main indicators that are required to be disclosed in a GRI-based sustainability report.

Conclusion – next steps in corporate reporting
This series of articles has described a number of recent developments in corporate reporting including:

• The environmental financial accounting and reporting requirements of the new EU Recommendation.
• The likely expansion of the UK Operating and Financial Review statement in future years to place more emphasis on non-financial data.
• The implications of environmental issues for the financial statement auditor.
• The emergence of a clearer link between the well-established concept of good corporate governance, and the much newer concept of corporate social responsibility.
• The development of stand-alone social and environmental reports.
• The impact of the ACCA’s environmental reporting awards.
• The sustainability reporting guidelines of the Global Reporting Initiative (the GRI).

Despite all this, we have not so far touched upon developments in the fields of management accounting, where the correct identification and allocation of environmental costs is becoming increasingly important as external factors increase the range and scale of environment-driven costs an entity has to face. Nor have we looked yet at the range of emerging finance-related issues flowing from environmental pressures on the capital investment appraisal decision and also from the growing number of market based instruments – such as the carbon trading regime – that now exist. Subsequent articles later this year will deal with these issues as well as with the role of the accounting firm in verifying stand alone environmental, social and sustainability reports.

What is certain is that the pace of development is unlikely to slow down, as national and international standard setters become more involved in examining the role and influence of non-financial issues in assessing corporate value. But they are only one element in the complex set of demands now being placed upon companies. Non-traditional stakeholders groups are becoming more powerful and the range of CSR-related legislative instruments is also increasing. Organisations and their advisers – whether internal or external – need to comprehend the accounting, finance and auditing implications of these changes. As a professional grouping, accountants – more than any other comparable group – are best placed to assimilate these changes and translate them into techniques and standards that benefit all parties concerned with societal progress and sustainable development.

References

• Download the sustainability reporting guidelines of the Global Reporting Initiative from www.globalreporting.org
• ACCA’s website carries a number of useful links and .pdf files relating to environmental reporting including the annual reports of the UK & European, as well as the ACCA booklet “Introduction to environmental reporting” which provides a good background on why and how to start reporting

Roger Adams is ACCA’s Technical Director