INT_A_sustainability

This article was first published in the October 2016 International edition of Accounting and Business magazine.

Pressure is increasing on companies to disclose their sustainability performance as a mass of voluntary and mandatory environmental reporting guidance emerges – but the lack of a standard terminology has led to confusion and complexity. This is the conclusion of a new report from ACCA and the Climate Disclosure Standards Board (CDSB), Mapping the sustainability reporting landscape: Lost in the right direction.

‘From the EU directive on disclosure of non-financial information to the recently created taskforce on climate-related financial disclosures, demand for effective sustainability reporting has never been greater, but the landscape lacks coherence and the resulting fragmentation could result in it failing to live up to its potential,’ ACCA senior manager Jimmy Greer told a roundtable in Brussels in June. ‘The report makes a set of common-sense proposals aimed at ensuring that sustainability reporting can continue to help companies deliver a prosperous future.’

The six proposals – leveraging shared objectives; mapping the landscape and agreeing its components; addressing technical challenges; linking, aligning and reciprocating standards; agreeing stewardship (or responsibility) for sustainability reporting; and developing a model convention – offer the corporate world a ‘sustainability compass to navigate the constantly shifting corporate sustainability landscape’, the report states.

Introducing the report, its author, Lois Guthrie, founding director of the CDSB, explained: ‘Sustainable reporting is moving in the right direction gradually, but the coordinates of the map in which it is going are not stable.

‘More work needs to be done across the value chain and technical dilemmas need to be addressed such as materiality, boundaries, language and characterisation. There is lots of commentary on these matters but efforts to address the technical dilemmas need to be coordinated,’ she said.

Guthrie chose to highlight proposal four – ‘reciprocity’, when compliance with one provision can satisfy obligations under another if the aims of both are compatible – and six, ‘the model convention’. She said that while it was important to cut down on clutter from too many related laws or requirements, companies should not just cut and paste; they should state such reciprocity to third parties in writing.

Call the whole thing off?

Secondly, referring to the famous George Gershwin song from the 1937 film Shall We Dance, starring Fred Astaire and Ginger Rogers, Guthrie said that if two approaches to sustainability reporting were not quite the same, you should not ‘just call the whole thing off’. Instead, companies should agree a ‘model convention’ embracing common aims, principles, reporting requirements and terminology to promote policy coherence: ‘Why not agree to say “soft red fruit”?’ Guthrie said, alluding again to the song where Astaire and Rogers proclaim incompatibility just because they pronounce ‘tomato’ in different ways. ‘We need to have a shared foundation on which to build corporate reporting in future.’

Others highlighted that while progress was being made, it was not enough, with Nicolas Bernier-Abad, policy officer for the European Commission’s directorate general for the internal market and services, saying the ‘headline takeaway’ from the climate reporting record of FTSE 350 companies was ‘patchy’.

Dutch liberal MEP Cora van Nieuwenhuizen argued that a major obstacle to effective sustainability reporting is the complexity of financial reporting standards. ‘Not everything that is measurable is of value and not everything of value is measurable,’ she said. ‘We must focus on relevant information for investors and society, and not add unnecessary additional administrative burden.’

Liz Newmark, journalist based in Brussels