Bridging the credibility gap on reporting

Here’s an aspiration: that soon, we’ll be able to read an organisation’s sustainability report and be able to trust the statements on CO2 emissions contained therein. There are many companies that take their CSR activities and reports very seriously, but the lack of legally-binding, consistently-applied standards that allow comparisons within and between sectors is emerging as a major obstacle to progress in this area.

The conclusions of a study of more than 4,000 CSR reports over the last ten years by Leeds University and Euromed Management School are pretty dismal.

You can read the full story on page 6, but one of the standout findings was that Italian energy company Enel reported that its carbon emissions amounted to an eye-watering 122,089 million tones, four times the total emissions of planet Earth. Fewer than one sixth of companies on the FTSE All World Index between 2005 and 2009 produced emissions reports covering all their activities.

There have, however, been some recent positive moves. The EU’s white paper, covered on page 1, is a step in the right direction in that it states the issues in a clear manner, but progress is painfully slow and the result will still be an essentially voluntary code. More is expected over the coming months, including the release of sector-specific reporting standards covering, for exampe, IT, mining and agriculture. Some countries, notably Spain and Australia, have also introduced laws on reporting emissions.

In 2012, the International Integrated Reporting Committee is expected to establish a framework that combines financial with CSR and sustainability data, and the Global Reporting Initiative is working on its G4 guidelines, due to be published in 2013. And then there’s the GRI’s proposed XBRL  (eXtensible Business Reporting Language, an open, global standard for exchanging business information) guide. Any of these could provide a basis on which the data that organisations publish can be compared.

Another good sign is the Compact’s new tiered reporting regime, which eases companies into the process so it’s much easier for new companies. And the Aqueduct project, being developed by the World Resources Institute with the support of an alliance founded by General Electric and Goldman Sachs, is an initiative designed to measure and map water-related risks, a serious issue that tends to get lost in the discourse on climate change.

So there’s plenty in the mix, but these will still remain voluntary standards. And, given this, the key question is how the economic downturn is affecting reporting. Could it be, for instance, that third-party assurance is becoming less prevalent as companies seek to minimise costs?

What is reported, how it’s reported and to what standard is certainly going to be a thorny issue for some years to come.