If you listen carefully during reporting season, you can hear the screams of sustainability and corporate responsibility (CR) practitioners as they slowly drown in the sea of proliferating reporting frameworks. From the Global Reporting Initiative (GRI) to the industry-specific guidance issued by the Sustainability Accounting Standards Board (SASB), the ESG (environmental, social and governance) reporting field—and what is expected of companies—is evolving at an accelerating pace.
“Companies can’t see a clear ‘winner’ emerging from the different frameworks and are in a dilemma — do they choose one, ignore them all, or hedge their bets by producing multiple reports, or one main report with multiple appendices?” said Paul Scott, managing director of Corporate Register in announcing this year’s CR Reporting Award winners.
Wesley Gee, director of sustainability at Works Design Communications, a Canadian firm specializing in sustainability communications and reporting, agrees. “It isn’t always easy to choose the perfect mix of frameworks, especially when companies have different needs to meet.” He adds that internal teams he works with often don’t have the time – or inclination – to address all of them.
To help, here is a breakdown of some of the most common frameworks and reflections from ESG reporting masters.
GRI, which offers reporting guidance for a range of economic, environmental and social impacts, remains the most popular framework for CR reporting with around two thirds of reports analyzed in the most recent KPMG Survey of Corporate Responsibility Reporting using it.
“GRI is a great place to understand how companies compare in general and to understand what issues are most important to you and your stakeholders,” Judy Sandford, senior strategist and managing director of sustainability and CSR at reporting firm Addison, told TriplePundit.
GRI continues to add to its framework, with a new standard for tax and payments to governments expected to be released by the end of this year.
In less than five years since they debuted, the U.N. Sustainable Development Goals (SDGs) have resonated strongly with businesses, with many attempting to connect their activities to them.
According to KPMG, 43 percent of reports in its study included the SDGs in some way. However, corporate narrative surrounding the SDGs remains rudimentary, some experts say.
“Many companies just show alignment with the SDGs, but do not talk about how they are making progress,” observes Sandford.
Business for Social Responsibility (BSR) agrees. A BSR insights memo summarizing 2019 reporting trends from earlier this year suggested that “companies should move from mentioning the SDGs and mapping their existing programs to them, to prioritizing those SDGs most relevant to their business and measuring their contributions and impacts. Ideally, this measurement should also inform company strategy—it creates an opportunity to link disclosure with performance.”
Fortunately, GRI and the UN Global Compact issued guidance last year to help companies measure and report on their impact on the SDGs: Integrating the SDGs into Corporate Reporting: A Practical Guide.
A key criticism of GRI and other reporting frameworks comes from investors who seek reliable non-financial data to incorporate into their asset management strategies and company valuation models to gauge if companies are managing sustainability-related risks and opportunities effectively. They say that, often, GRI-based reports do not contain material information that allows for company-to-company comparison.
Both the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations and SASB help companies identify and report “decision-useful” material sustainability information, either in sustainability or financial reports such as the 10K.
As of July 2019, more than 800 organizations had publicly voiced their support for the TCFD. Yet, according to Mardi McBrien, managing director of the Climate Disclosure Standards Board, only 4 percent of companies worldwide disclose information aligned with at least 10 of the 11 TCFD recommendations.
“We need to scale up high-quality disclosure across the board if we are to combat the most severe consequences of climate change,” McBrien said during the launch new climate disclosure e-learning courses on TCFD Knowledge Hub earlier this month.
While SASB’s Investor Advisory Group represents more than $30 trillion in investments and assets under management, its 77 industry-specific standards have been relatively slow to be adopted by corporations. Eight years after SASB was established, less than 90 companies are using the standards, according to the SASB website. Those that do, such as Diageo, Ford, Intel, JetBlue and Merck, can benefit from greater transparency, better risk management, improved long-term performance and a stronger, more valuable brand, according to SASB.
ESG experts predict more companies will report on how sustainability impacts their financial performance in the coming years -- and will need support from their sustainability and CR teams. “The merging of financial and ‘non-financial’ reporting will accelerate quickly in the next few years and it is the finance teams that will be expected to deliver the disclosures,” said Adrian King, KPMG global sustainability reporting and assurance leader. “…increased dialogue and collaboration between the finance and sustainability functions – which are too often separate and siloed – will be critical.”
What about integrated reporting? There are still few companies that publish true integrated reports.
Addison’s Sandford doesn’t see the numbers going up. “I don’t think we will see an increase in companies publishing truly integrated reports until there is regulation. Given that the current [U.S.] government is not focused on sustainability right now, I don’t think formal integrated reporting is likely to get much traction anytime soon [in the U.S.].”
Instead many experts believe that the top priority over the next five years will be to harmonize the various standards and frameworks. “Collaboration between reporting practitioners and standards organizations in a process of metrics harmonization and will help ensure that reporting standards evolve in ways that both simplify the reporting process and support the creation of decision-useful reports,” predicts BSR.
Wesley Gee and his team at Works Design Communications firm will share new findings from their research on CR reporting during next month’s 3BL Forum: Brands Taking Stands - What's Next, October 29-30 at National Harbor, MD, just outside Washington, D.C.
Don’t miss Works Design's Issue Table during the Forum, during which the firm’s leaders will share their insight on how to transform turning trends, issues and data related to CR reporting into action.
Together, the 80-plus speakers we will showcase on the Forum’s stage promise a two-day event that will be fast-paced, high-octane and invaluable with their perspectives on the latest in the environmental, social and governance (ESG) community.
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Maggie Kohn is excited to be a contributor to Triple Pundit to illustrate how business can achieve positive change in the world while supporting long-term growth. Maggie worked for more than 20 years at the biopharma giant Merck & Co., Inc., leading corporate responsibility and social business initiatives. She currently writes, speaks and consults on corporate responsibility and social impact when she is not busy fostering kittens for her local animal shelter. Click here to learn more.
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