Going to the basics: companies are mandated by national and international authorities or financial regulatory instruments to make annual reports. This sheds light to corporate instruments’ financial situations, and allows its stakeholder groups to have a peek into the company’s financial characteristics. Sustainability reporting, may be, but is not always, separate from this.
Sustainability reporting is the most appropriate tool wielded by companies to promote transparency and communicate to its stakeholders the company’s actions in relation to sustainability and sustainable development. There are several global, voluntary standards that a company may use to report its sustainability efforts. It is essential to unpack this statement as it will shed some light to the multiple dimensions of corporate sustainability reporting and its importance.
Bearing in mind our previous piece on the meaning of sustainability, it comes as no surprise to the reader that reporting does not solely involve environmental efforts. As this is a means of stakeholder engagement - the company’s engagement with various groups directly and indirectly impacted from its operations - it is only reasonable that the report oftentimes makes references to the UN’s Sustainable Development Goals and the ways that their operations affect their achievement. Corporate sustainability is often referred to as CSR and sometimes involves characteristics of Environmental, Social Governance - the notorious ESG trend that you have probably read about in every financial and business magazine.
Therefore, dependent on the standards that we will be discussing below, a typical sustainability report involves aspects of health and safety policies, community engagement, employee satisfaction and environmental actions. This is representative of the complexity and multidimensional nature of sustainability and sustainable development.
Global, voluntary standards for reporting:
Sustainability reporting - or non-financial reporting - is not the same as financial reporting, or a company’s annual report. This report relates to non-financial situations including the above mentioned elements in relation to sustainable development. Further, unlike financial reports, there are few mandatory reporting mandates globally due to the fine balancing exercise that is needed between public regulation and private interests, as well as the costs attached to sustainability - which would be unachievable for a small business. This is the reason why European regulation makes non-financial reporting mandatory for a small number of large companies, who often have a widespread impact on society (specifically, companies with more than 500 employees or public interest companies as defined by national regulatory bodies). This is bound to change with the new European policies in relation to corporate sustainability, and is likely to take effect in the next 5 years. The implications of this change in policy will mean that in comparison to 11,000 companies currently under an obligation to publish sustainability reports, 46,000 will now be obliged to report their progress.
To balance the lack of mandatory reporting and the desire of companies to publish such, several global, voluntary reporting standards have been set in place to provide guidance to aid companies in their efforts as well as to encourage newcomers to publish sustainability reports. The Global Reporting Initiative Standards (GRI) are the most widely used reporting standards globally.
In an attempt to balance public and private interests in the sustainability discourse, few sustainability reporting mandates have the impact that such initially envisaged. The ultimate result is, arguably, a reporting mechanism that has enabled companies to engage in professional greenwashing. While the initially objective to set an accountability mechanism in place has to a superficial extent been achieved, there is a long way to go: particularly in terms of mandatory reporting.