Sustainability Reporting Challenges

Organizations are increasingly identifying sustainability material issues relevant to their business and addressing them strategically through sustainability programs.

sustainability-reportingSustainability reporting – in contrast to financial reporting – is a relatively recent trend. Alternatively presented as non-financial disclosure, it has increased to become the buzz word in the business today.

In order to make non-financial reporting possible, many different standards and frameworks have emerged in the past years. First, the vast amount of those initiatives made it difficult for reporters to decide which framework to pick. It has also become challenging for report readers to assess the quality and reliability of disclosed data.

Global Reporting Initiative (GRI) has emerged as the preferred international framework for reporting; a set of guidelines enabling organizations worldwide to assess their sustainability performance and show the results in a similar way to financial reporting.

According to GRI “95% of the world’s largest companies are already producing sustainability reports in 2012 up from around 80% in 2008 and 50% in 2005.” According to a 2011 KPMG report (Corporate Sustainability: A Progress Report) “62% of companies surveyed (378 global companies) have sustainability strategies in place. Almost 60 percent of China’s largest companies already report on corporate responsibility metrics.”

An October 2010 report from Thomson Reuters (ESG and Earnings Performance) concluded that, “U.S. companies with stronger ESG (Environmental, Social and Governance) scores consistently beat earnings estimates more often than those with lower scores.”

However, despite the fact that sustainability reporting is now the “de facto law for business” (as pronounced by KPMG in their 2011 survey of Corporate Responsibility Reporting) and even with all the progress we have seen so far, reporting continues to be one of the most challenging issues for sustainability executives and practitioners. This questions the relevance and its value to the business today.

The more I attend sustainability conferences and summits, the more this issue surfaces during discussion and debates

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It’s quite clear that companies now understand the worth of reporting and are trying to figure out how to use it in a smart way. Other companies have decided to drop the practice and work on developing creative and more effective ways to engage with their stakeholders and disclose information about their sustainability performance.

More than 6,000 reports are being published each year and this figure continues increasing. How much money, effort and time were invested to produce each one of them? Who’s reading those reports?

There are also questions about the accuracy and completeness of data reported, and its relevance to financial performance. For instance, if company X gets an A+ in GRI index does it rank better than company Y?

Most importantly, what will the future of reporting will look like and how can we revolutionize the disclosure practices to generate more value to reports? Is the next evolution of sustainability reports tied to the next repetition of the current frameworks including GRI?

I’m including some additional sustainability reporting information so you can judge for yourself where this is all heading. Continue reading this article here.

Monaem Ben Lellahom is a Co-founder and Head of Sustainability Consultancy services at Sustainable Square Consultancy & Think Tank. He focuses on developing Enterprise Sustainability and Responsibility strategies and programs and Social Return on Investment (SROI) analysis for clients across various industries. He also focuses on Sustainability reporting and has produced key successful Enterprise Sustainability reports and case studies in the Middle East region showcasing their social, environmental and economic performance. Monaem possesses expertise in Enterprise Sustainability strategy and implementation as well as the measurement systems, governance, capacity building and stakeholder engagement aspects of this agenda. Read other articles by Monaem.