L8. Tools& Techniques to manage sustainability: Sustainability reporting

Question 1

History of sustainability reporting

Answer 1

In the 70s, emergence of social reports (or “social balances”), in which firms informed stakeholders about positive and negative social impacts. These reports became less common at the end of the same decade.
In the late 80s, the first environmental reports were published, in response to hazardous accidents and environmental disasters. Mostly used by companies with serious issues (e.g. the chemical industry) or by environmentally-conscious pioneers.
In the mid-90s and in the following decade, attention shifted to sustainability reports that covered the impacts of corporate activities from different angles (economic, social, environmental).

Question 2

Types of sustainability reports

Answer 2

• Theme-specific reports: covering different stakeholders and issues (e.g. environmental reports, social reports, corporate citizenship reports)
• Stand-alone sustainability reports: in addition to financial reports, usually following the triple- bottom-line approach
• Integrated reporting: environmental and social information is published in financial reports

Question 3

Benefits for organizations

Answer 3

Sustainability reporting is usually voluntary, although some countries are making them mandatory. Others are asking firms to provide specific data (CO2 emissions for firms listed on the LSE). Audience: investors, NGOs and other external monitors

• gain, maintain, or repair legitimacy
• enhance reputation and risk management
• create transparency about responsibilities and accountability for activities
• compare themselves to benchmarks (e.g. competitors)
• support internal control
• raise organizational awareness of sustainability and promote improvements over time

Question 4

General issues

Answer 4

• Terrible quality of data
• Intangible nature of many social and environmental costs
• Attach economic value to variables (e.g. liters of water used, tons of CO2 emissions, etc.).
• Non-objective variables (e.g. quality of life of employees, relationship with communities) One needs to use “proxies”.
• A net “social” or “environmental” income is probably impossible to calculate.

Question 5

Specific issues

Answer 5

• Information asymmetry between the firm and the stakeholders, which reduces the credibility of the report.
• Information overload, since sustainability reports cover a wide range of issues and sometimes include irrelevant information.
• Limited comparability of the information published by different firms, even when the same guidelines (e.g. GRI) are adopted.
• The costs of producing state-of-the-art reports are exceedingly high, so private companies and SMES tend to avoid them.

Question 6

GRI: the dominant framework

history

Answer 6

1997: Creation of The Global Reporting Initiative (GRI); a non-profit organization, by Ceres (Coalition for Environmentally Responsible Economies) and Tellus Institute, with the support of the United Nations.
1999: First version of the Sustainability Reporting Guidelines.

Question 7

The GRI’s Secretariat acts as

Answer 7

a hub, coordinating the activity of GRI’s network partners. Its global network includes more than 600 organizational stakeholders, including consultants.

Question 8

GRI indicators

Answer 8

GRI Performance Indicators are organized into categories (Economic, Environment, Social), which are broken down further by Labor, Human Rights, and other sub-categories.
Indicators are assisted by protocols that define key terms in the Indicators, compilation methodologies, the intended scope, and technical references.
Sector supplements provide guidance on how to apply indicators in a given industry.