An Analysis of Sustainability Reporting
This article is written in preparation for ISOS Group’s GRI Standards Training
In 2013, EY and Boston College Center for Corporate Citizenship surveyed 579 sustainability professionals who worked for 391 organizations that issue sustainability reports. They wanted to find out what motivated companies to develop sustainability reports, what challenged them the most, and what benefits they had realized from reporting. Their choice of topic for this survey was unsurprising given that sustainability reporting was already seemingly widespread and continuing to grow. For example, at that time, about 44% of capital in stock markets around the world were in stock exchanges that either mandated or encouraged sustainability reporting.
Findings from the survey were quite insightful:
- More than two-thirds of respondents reported using GRI standards (then GRI Guidelines)
- Companies were motivated to report for different reasons, mainly transparency with stakeholders, then for competitive advantage, risk management and then stakeholder pressure. Surprisingly, companies barely reported because of brand/reputation management reasons.
- Unsurprisingly, public companies were way more likely to be motivated by Transparency with Stakeholders than privately owned companies.
- Also unsurprisingly, large companies (more than $5 billion in annual revenues) used GRI guidelines more than smaller companies, while smaller companies used GRI-referenced guidelines more, probably because this required less commitment and resources.
- Several industries reported that they realized business benefits from reporting, particularly increased customer loyalty, increased employee loyalty, reduced waste, and improved risk management. However, it’s important to note that barely 50% of respondents in each industry reported such benefits. For example, manufacturing and utilities/mining industries for which reduced waste is important, only had about 22% and 7% respondents respectively report benefits of reduced waste.
- Data seemed to be the biggest challenge to sustainability reporting – its availability, accuracy, and completeness.
- Most private companies did not report primarily because no one is asking for the information. On the other hand, public companies who did not report mostly intended to, but had not mobilized the resources needed to prepare one.
- Some reporting trends included integrated reporting (where both financial and non-financial reports are represented in one document). Several countries and stock markets were already mandating this; for example, South Africa actually mandates that public companies produce an integrated report or if they cannot, explain why.
With this growth in reporting comes a corresponding growth in the demand for external assurance. At the time of the survey though, only 35% of respondents had carried out some level of external assurance. The survey also revealed that external assurance of sustainability reports was mostly requested for by investors – with 77% of them reporting the importance of assurance. Also, assurance carried out by larger accounting firms were more trusted as they have reputational risks to protect.
Ultimately, one cannot deny that sustainability reporting is growing, no matter the motivations driving it. Going further, it would be interesting to note if these motivations and challenges have changed in 2017. The recent progress of GRI from ‘guidelines’ to ‘standards’ buttresses this growth which was evident in 2013.
Given the continued rise of sustainability reporting, it is imperative for sustainability professionals to equip themselves to provide quality reporting services. Trainings such as the upcoming GRI and CDP course by ISOS Group (hosted by PWC Nigeria) can facilitate this.
ISOS Group, hosted by PWC, will be facilitating the training from the 3rd to 5th of April 2017 in Lagos, Nigeria. Two standards will be covered - GRI and CDP (Climate Disclosure Project), with certifications upon completion.
Find out more about the training here, and sign up. See you there!