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Antonio Vives headshot

Is Competition Between Sustainability Reporting Standards Healthy?

Competition in well-functioning markets tends to increase product innovation and quality and lower prices. But is this the case in the market for sustainability information?
By Antonio Vives

By Antonio Vives

Competition in well-functioning markets tends to increase product innovation and quality and lower prices.  But is this the case in the market for sustainability information?

This question is becoming more important with the increasing demand for relevant sustainability information by stakeholders, particularly by responsible investors and stock exchanges and by governments requiring or considering to make compulsory some form of reporting, on top of the traditional demands by civil society. The myriad of initiatives on reporting is putting a severe burden on companies, detracting from the business of being sustainable. Almost 400 reporting initiatives have been identified in 64 countries.*

Sustainability reporting (major) standard-setters

This question has acquired even more relevance with the announcement of the Exposure Draft of the GRI Standards to “compete” with the existing standards of the Sustainability Accounting Standards Board, SASB, and the Integrated Reporting Framework of the International Integrated Reporting Council, IIRC.


SASB made very clear from the beginning that its reporting recommendations were to be called “standards” by incorporating them in their name and playing on the name of the most well-known (financial) reporting standards, the FASB (Financial Accounting Standards Board) and the IASB (International Accounting Standards Board).  Good branding. There could be no doubt, by association.  At almost the same time came the Framework of the IIRC. Although it does not claim to be a reporting standard, the IIRC Framework is an extension of financial reporting, which are standards par excelence and could be considered standards by implication. Good branding.

GRI (the ol' Global Reporting Initiative) found itself “losing market share” or appeared as losing influence and power to the competition.  It started a rebranding strategy changing the logo, the name (abbreviating to just GRI), and its motto away from report preparation to use of the information (empowering sustainable decisions) as is already the case with SASB and IIRC. GRI created a Global Sustainability Standards Board, GSSB, (good branding) to direct the preparation of those standards

The Exposure Draft, which was launched for consultations at the 5th annual GRI conference in May 2016, are very similar to the G4 guidelines, with a few twitches in format, language and clearer requirements to conform better to traditional standards wording. (For a preliminary comparison of G4 and the proposed standards, see this excellent article by Elaine Cohen.)

Obviously all three will become standards when they are accepted by the “market of sustainability reporting." But in the meantime, they are all jockeying for market share (read: influence).

Is there indeed competition between standards?

In principle these standard-setters seem to be addressing different segments of the non-financial (sustainability) information market, i.e. emphasis on different users (read: stakeholders).  SASB is clearly focused on investors of all kinds, with standards for presentation of non-financial information in reports required by the SEC (Securities and Exchange Commission), facilitating the objective of comparability of information.


IIRC aims to standardize the additional non-financial information that would further the understanding of the impact of a company's overall strategy on its present and future financial condition as reported in its annual reports.  It is not a proposal to integrate the sustainability report with the annual financial report, as many believe, but to integrate financial and non-financial information (their impact on the six capitals that the company manages) to present an integral view of the prospects of the company.

GRI guidelines, and eventually the standards, have a goal to provide comparable information on performance on sustainability issues, their scope and the management approach to those issues (on this last issue there is some overlap with IIRC) to all stakeholders.  The G4 guidelines and the proposed standards are concentrating on the most material issues for the most material stakeholders, according to the determinations made by each company.

Each caters to a different market segment, but the instrument, the core, is the same: quantitative (indicators) and qualitative nonfinancial information to supplement financial information to assess the prospects of the company -- in the case of the IIRC as directly as possible, and in the case of SASB and GRI by implication and further analysis to be carried out by the user. The difference is in the user and uses of the information.

But, could not we, market participants, be better off if there was only one standard for non-financial information as there is for financial information? (I am already assuming that someday the FASB and IASB will have the same standards.)

Efforts at coordination between the three major players have not moved beyond declarations of intentions, coordination and exchanges of information.

Is this competition healthy? The need for integrated modular reports

With the proliferation of standards, companies have a bigger burden that leads them to concentrate more on providing information and detracts from concentrating on why are they doing it and how do they want to transform society.


Companies may end up preparing an integrated IIRC report to respond to some stakeholders’ pressures, another for the SEC (companies with interests in the U.S.), another following GRI, another to comply with the requirements of the stock exchange in which it is listed, another one to satisfy the demands of the European Union, and many others.**  Not healthy.

The bigger the reporting burden, the more report preparation is becoming an exercise in compliance, an end in itself because of the effort required and the resources expended. Many times the preparation of reports is outsourced, divorced form the core of the corporation and prepared on the margins -- underutilizing the power of the information to guide strategy preparation and execution throughout the company, enhance coordination, make goals and actions compatible, etc.  Many times it is the effort of a single unit.

These problems will become worse: The more standards there are, the more informational requirements are put on companies.

There is no antitrust national or international institution that would oppose a merger of these standard-setters, and the users would not lose because of reduced competition.  Actually, we would all gain by having a single set of standards incorporating the best of each.

This would allow this market to function better, by fostering responsible company behavior and in the transmission of sustainability performance into financial performance.  Consolidation of standards would reduce the administrative burden and allow companies to enhance their efforts to better define the purpose of their business, as well as their goals and actions for contributing to society’s development.  This could eventually lead to more authenticity in reporting.

Let's use the materiality and scope principles of the GRI and SASB (same principle as in financial reporting) as the bases, with their potential impact on the capitals of the company that would reflect its contribution to society (hopefully quantified and not just described). IIRC advocates reflection on how sustainability factors into an organization’s value-creation model, business strategy, performance and future prospects, which neither SASB and GRI consider. The industry-specific indicators of SASB and the sectoral guidance of the old G3 allow teams to prepare modular reports tailored to the need of each market participant.  With the merger of these standards companies could prepare information, almost like a “universal report” in a comprehensive online information dataset which would allow each stakeholder to pick and choose the information that is material to them and let the software compile the report, including qualitative descriptions and quantitative data or indicators.

From all of that we, the stakeholders, will determine what is material to us in our decision-making, which is the materiality that matters.

Utopian?  Maybe, but is shows the path that sustainability reporting should follow.  Each standard setter wants to preserve market share and its own branding.  But if these three, and many other current and future standards setters, continue to advocate different standards then non-financial (sustainability) information market participants will lose.

* There have been some recent developments in the push for sustainability reporting. The SEC issued a Concept Release in April 2016 with a call for public comments regarding potential adjustments, expansions and updating of mandated corporate financial reporting, including ESG disclosure (on pgs. 204-215).  The European Union is expected to make mandatory a form of sustainability reporting for large public corporations, starting in 2017.  In late 2015 The World Federation of Exchanges issued Enhanced Sustainability Guidance for member stock exchanges on the voluntary disclosure of some items of sustainability information for listed companies.

** The report Carrots Sticks: Global trends in sustainability reporting regulation and policy found almost 383 reporting instruments that requires or encourages organizations to report on their sustainability performance in 64 countries, of which 248 are mandatory and 135 voluntary.

Image credit: Flickr/GotCredit

Antonio Vives is Principal Associate at Cumpetere, a CSR consulting firm.  He is also Consulting Professor at Stanford University and a member of the Sustainability Advisory Panel at several multinationals.  He was the Sustainable Development Manager at the Inter-American Development Bank. Has published seven books, dozens of academic papers and more that 300 blog articles on CSR and financial management (www.cumpetere.blogsport.com) and is a frequent speaker at conferences and universities. Holds a Ph.D. in Corporate Finance from Carnegie Mellon University. Follow him on twitter @tonyvives


Antonio Vives headshot

Antonio Vives is the principal associate of Cumpetere. He's a former adjunct professor at Stanford University and a former manager, of the sustainable development department at the Inter-American Development Bank. He's currently a sustainability advisor to several multinationals.

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