Sustainability Reporting is Becoming More Streamlined

More companies are buying into sustainability reporting, but one common complaint is that with all the various frameworks, deciding on which one to use — or for many companies, which ones — can be bewildering.

Although sustainability leaders including the outgoing head of the Global Reporting Initiative (GRI), Tim Mohin, have insisted that the "perception" of issuing sustainability reports is more complicated than the process is in reality, many in the corporate reporting world still see all the various standards as overwhelming as they are complex.

News from last week may be welcomed by those in the environmental, social and governance (ESG) space, however.

The International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) have announced that they will merge into one sustainability reporting organization, the Value Reporting Foundation.

“The merger directly responds to calls from global investors and corporates to simplify the corporate reporting landscape, providing the market with a clear solution for communicating about the drivers of enterprise value,” said the two organizations in a joint e-mailed statement.

According to both IIRC and SASB, there is already strong alignment between the two groups’ reporting guidelines. But in the wake of an upcoming regime change in the U.S. that some observers say could result in ESG and sustainability funds becoming even more compelling to investors, intertwining these two sustainability reporting standards could make vetting companies across the globe more seamless.

Global inflows into ESG funds have surged in 2020 despite the global pandemic and economic crises, and the amount of assets held in socially conscious or impact funds have soared to $250 billion in the past quarter. But with such growth also comes more confusion, along with research indicating that companies can cherry-pick which ESG guidelines they wish to follow. One ESG research firm’s conclusion can vary from another’s, especially when it comes to comparing companies that are in different industries. An energy company may look spectacular on the sustainability reporting front when compared to its competitors, but it could pale when its numbers are lined up next to a corporation in the fast-moving goods sector.

In fairness, sustainability reporting is still a relatively new field, and the new Value Reporting Foundation has made it clear its framework will hardly be static. “This merger is a significant advancement toward building a comprehensive system of corporate reporting, as we work to ensure integrated reporting and sustainability disclosure have the same level of rigor as financial accounting and disclosure,” said Charles Tilley, CEO of IIRC. “But reporting should never be for reporting’s sake. Our focus is on ensuring businesses have effective governance over enterprise value creation factors and that investors are able to fulfill their role as stewards.”

Image credit: Karen Uppal/Unsplash