Sustainability Reporting… So What?

Corporate Social Responsibility, Corporate Sustainability, Sustainable Development, Corporate Responsibility, Corporate Citizenship, responding to climate change, “the greatest moral, economic and environmental challenge of our generation“… There are many self-commitments by companies related to climate change, emissions management, sustainability, and a ‘green & clean’ image.

Sustainability reporting has become part of ‘good’ corporate reporting, demonstrating the “proactive stance” of companies towards fighting global warming, poverty, disease, and human rights violations. While some companies claim to have found value in practising sustainability, a large number of reports still are a response to external stakeholder pressures and expectations. So what does this mean for reporting? What is actually being reported in those sustainability reports? How meaningful are the commitments? How reliable is the information reported? And for whom are these reports written?

 

Some popular reporting guidelines/frameworks/indexes include:

• Global Reporting Initiative,
• Dow Jones Sustainability Indexes,
• Global Compact,
• FTSE4Good,
• Equator Principles,
• Carbon Disclosure Project,
• ICMM Principles,
• OECD Guidelines for Multinational Enterprises..

Take the Global Reporting Initiative (GRI) Guidelines for example. It has become the main point of reference for producing sustainability reports.  However, few companies are able to (or should) claim their reports – and therefore their actions – are ‘in accordance’ with the Guidelines. The issue here is that the GRI is a voluntary non-proprietary initiative, meaning that reporting `in accordance´ with the Guidelines is an option, not a requirement and self-declared by companies. So in a nutshell, a company producing a sustainability report based on the GRI Guidelines self-declares a reporting level (A, B, or C) based on its own experience of sustainability reporting and own assessment of its report content against the criteria in the GRI Guidelines. What’s more, a company can self-declare a “plus” (+) at each level (e.g., C+, B+, A+) if they have utilised an external assurance provider such as one of the big accounting firms – the same ones that until 4 years ago have declared climate change and sustainability a fad, but now are obviously “thought leaders”.

Or take the Dow Jones Sustainability Indexes. While one of the oldest sustainability reporting initiatives worldwide, it is has to be considered carefully. Similar to the GRI, it does rely on publicly available information, especially when it comes to environmental and social reporting. What is interesting here is that the allocation of vacant positions on those indexes is not always clear. BP has been recently removed from the Dow Jones Sustainability Indexes because of the oil spill in the Gulf of Mexico.  Halliburton took BP’s spot. This choice is not without controversy, as Halliburton has also been involved in the oil spill disaster and was less than transparent about it. Shell is no longer “on the list” -  , but companies such as Coca Cola or Dow Chemicals are. While having fancy sustainability statements on their website, Dow still refuses to clean up the site because – back then – it did not own or operate the plant. How does this go together with their sustainability reporting?

All that is not to say that there are a few good examples of corporate sustainability disclosure (e.g., Interface and Scandic Hotels), but the majority of companies still produce flashy PR documents with little content or significant commitment. Next time you read a sustainability report, be skeptical… be very skeptical. Do some background research. Don’t fall for the “frog-protection-scheme”, or the reduced office energy consumption of an Australian electricity generator. What targets has a company set? Is it significant? Is it an absolute or intensity target? What is the difference? How does this affect overall performance? How is a company performing in one country compared to another, and how is this reflected in reporting?

Sustainability reporting raises a lot of questions, but maybe they provide some food for thought. If all these companies are doing so great, how come we still have the same problems of pollutions, greenhouse gas emissions, poverty, exploitation, corruption, etc.? To use the BP example again – everyone was shocked to see the oil plumes, dying sea birds, communities losing their livelihoods. When BP (or any other petroleum company) drills for oil, and ships it to refineries where it is turned into fuels, plastics, etc., burnt and the emissions released into the atmosphere and plastic bottles filling up landfills, no one seems to care as long as we have a sustainability report.