Why companies and other organisation make Sustainability Reporting
Reporting on sustainability performance is an important way for organizations to mannge thier impact on sustainability development. The challanges of sustainability development are many, and it is widely accepted that organisation have not only a responsibility but also a great ability to exert positive change on the state of the world's economy, environmental and social conditions.
Reporting leads to improved sustainable development outcomes because it allows organizations to measure, track, and improve their performance on specific issues. Organizations are much more likely to effectively manage an issue that they can measure. By taking a proactive role to collect, analyse , and report those steps taken by the organization to reduce potential business risk, companies can remain in control of the message they want delivered to its shareholders. Public pressure has proven to be a successful method for promoting Transparency (behaviour) and disclosure of greenhouse gas emissions and social responsibilities
As well as helping organizations manage their impacts, sustainability reporting promotes transparency and accountability. This is because an organization discloses information in the public domain. In doing so, stakeholders (people affected by or interested in an organization’s operations) can track an organization’s performance on broad themes — such as environmental performance — or a particular issue — such as labor conditions in factories. Performance can be monitored year on year or can be compared to other similar organizations.
Why are the GRI the most-used guidelines and how are they created?
"The Global Reporting Initiative is the steward of the most widely used reporting framework for performance on human rights, labor, environmental, anti-corruption, and other corporate citizenship issues. The GRI framework is the most widely used standardized sustainability reporting framework in the world.”[3]
The Guidelines are the most used, credible, and trusted framework largely because of the way they have been created: through a multi-stakeholder, consensus-seeking approach.
This means that representatives from a broad cross section of society — business, civil society, labor, accounting, investors, academics, governments, and others — from all around the world come together and achieve consensus on what the Guidelines should contain. Having multiple stakeholders ensures that multiple needs and all stakeholders are considered. This contrasts to what might happen if, for example, just business representatives or just NGO representatives created the guidelines. It is also beneficial as it helps to increase the chances that all relevant sustainability issues are included, and the accompanying best measures are developed.
[edit]About the G3 and the Reporting Framework
The G3 are the so-called “Third Generation” of the GRI’s Sustainability Reporting Guidelines. They were launched in October 2006 at a large international conference that attracted thousands.
There is a “third generation” because the GRI seeks to continually improve the Guidelines. The G3 build on the G2 (released in 2002), which in turn are an evolution of the initial Guidelines, which were released in 2000.
The G3 Guidelines provide universal guidance for reporting on sustainability performance. This means they are applicable to small companies, large multinationals, public sector, NGOs and other types of organizations from all around the world. It is the way that the Guidelines are created (through the multi-stakeholder, consensus seeking approach) that enables them to be so broadly applicable.
The G3 consist of principles and disclosure items (the latter includes performance indicators). The principles help reporters define the report content, the quality of the report, and give guidance on how to set the report boundary. Principles include those such as materiality, stakeholder inclusiveness, comparability and timeliness. Disclosure items include disclosures on management of issues, as well as performance indicators themselves (e.g. “total water withdrawal by source”).
The G3 are the base of the Reporting Framework. There are other elements such as Sector Supplements and National Annexes that respond to the needs of specific sectors, or national reporting requirements. The Reporting Framework (including the G3) is a free and public good.
[edit]Global Reporting Initiative and the environment
[edit]Environmental reporting guidelines
The GRI aims to harmonise reporting standards for all organizations, of whatever size and geographical origin,[4] on a range of issues with the aim of elevating the status of environmental reporting with that of, for example, financial auditing.[5] Environmental transparency is one of the main areas of business under the scope of the GRI. As outlined in this section the GRI encourages participants to report on their environmental performance using specific criteria. The standardised reporting guidelines concerning the environment are contained within the GRI Indicator Protocol Set. The Performance Indicators (PI) includes criteria on energy, biodiversity and emissions. There are 30 environmental indicators ranging from EN1 (materials used by weight) to EN30 (total environmental expenditures by type of investment).[6]
[edit]GRI and environmental governance
The GRI is an example of an organisation that acts outside of the top-down power command structures associated with government (e.g., quasi-autonomous bodies and regulators). Environmental governance is a term used to describe the multifaceted and multilayered nature of ‘governing’ the borderless and state-indiscriminate natural environment.[7] Unlike major protected policy areas such as finance or defence, the environment requires sovereign states to sign up to treaties and multilateral agreements in order to coordinate action. Sustainability reporting is a more recent concept that encourages businesses and institutions to report on their environmental performance.[8]
Sustainable reporting is, by definition, a way in which organisations assess their own environmental accomplishments and failings, reflect on this performance and subsequently transfer this information into the public domain. This broad concept has been theoretically termed ‘reflexive environmental law’ by some academics. Reflexive environmental law is an approach in which industry is encouraged to ‘self-reflect’ and ‘self-criticise’ the environmental externalities that result as a product of their activity, and thus act on these negative social impacts in a way that dually safeguards growth and protects the environment.[9] There is also concern that the “exponential demand for disclosure”, as described by Park et al. 2008, undermines the legitimacy and prestige of the GRI. It is, in other words, operating in a saturated market counting on businesses to volunteer their information to competing agencies. More recent organisations include the Carbon Disclosure Project which has similar aims.[10]
[edit]The importance of the GRI in a globalising world
The collapse of the USSR and the augmentation of capitalist economic systems in Eastern Europe and more recently in ostentatiously self-styled ‘communist’ countries like China, coined “bamboo capitalism”,[11] suggests that this system of economic governance is likely to shape the world economy in the foreseeable future. Proponents of ‘sustainable capitalism’ or ‘conscious capitalism’[12] would conclude that organisations like the GRI effectively reconcile capitalism and the environment in an otherwise disjointed world. They concede that capitalism is not currently congruous with environmental aims, but it can be modestly redesigned where an emphasis on the GRI and its counterparts play a bigger, more innate role in business reporting.[13] However, academic criticisms of sustainable reporting in a capitalist context abound. Moneva et al. (2006) suggest that many organisations that subscribe to the GRI’s voluntary reporting regime do not improve their performance and can often manipulate the guidelines just to appear more transparent.[14]
[edit]Governance of the GRI
The “GRI” refers to the global network of many thousands worldwide that create the Reporting Framework, use it in disclosing their sustainability performance, demand its use by organizations as the basis for information disclosure, or are actively engaged in improving the standard.
The network is supported by an institutional side of the GRI, which is made up of the following governance bodies: Board of Directors, Stakeholder Council, Technical Advisory Committee, Organizational Stakeholders, and a Secretariat. Diverse geographic and sector constituencies are represented in these governance bodies. The GRI headquarters and Secretariat is in Amsterdam, The Netherlands.
Benefits of Sustainability Reporting
• Marketer: Improving branding and transparency with advanced reporting. Companies that fall into this category are either early in their sustainability maturity or just do what they have to do when it comes to regulatory compliance.
However, in common is that marketers use sustainability primarily to drive more awareness and transparency, which has a positive side effect on the company's branding and positioning. IT's role is helping to gather and report non-financial information, but these companies drive sustainability principally from their marketing and CSR departments.
• Transformer: Improving the bottom line with positive sustainability impacts. Companies in this category go further and use sustainability as a lever for increasing operational efficiency.
Lower energy consumption decreases both costs and carbon footprint. Hence, sustainability for these companies is seen as an opportunity to lower a company's cost base. IT is helping to identify opportunities to reduce costs, but is object of own improvement too.
Companies in this category are driving sustainability investments on an enterprise-wide basis, driven by the management of lines-of-business and owners of key processes like supply chain and real estate.
• Innovator: Improving the top line with a sustainable portfolio approach. Companies that fall into this category are the most mature, and have shifted their approach from cost to revenue.Innovators are looking to improve their top-line through a sustainable product/services portfolio approach to differentiate better in their existing markets or enter new ones. IT is helping here not only to design and produce greener products from scratch, but also to better manage the entire portfolio via integrated analytics and dashboards. The Boards and executive officers of companies in this category are pushing sustainability strategy from the top of the organization.
- Improved financial performance — there is a growing body of evidence which links financial and social performance of companies (According a CPA Australia report there is a correlation between sustainability reporting and low probability of corporate distress).
- Improved stakeholder relationships – the continuing engagement with various interest groups builds trust and improves communication.
- Improved risk management — this is a very important benefit brought about by a better understanding of non-financial material risks. Understanding risks and dealing with those risks appropriately saves companies time, money and avoids loss of reputation.
- Improved investor relationships — due to the growing demand for ethical investment funds, particularly but not limited to, by superannuation funds.
- Identification of new markets and/or business opportunities — this is a particular welcomed side effect of improved relationships with interest groups.
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