The role of the Corporate Sustainability Reports is to provide relevant information for stakeholders to understand a company’s long-term value and its contribution to achieving a sustainable global economy while taking into account the company’s economic, environmental and social performance and governance. Although sustainability reporting is not mandatory for all companies, it is an urgent mandate for those looking for growth and development. G&A announced that in 2019, 90% of the S&P 500 companies published sustainability reports. With increasing demands and stakeholder expectations for more information and transparency, we observe massive changes in the global sustainability reporting landscape.
Status of reporting
With a variety of frameworks, standards and initiatives, the sustainability reporting landscape has become complex. According to the World Economic Forum, one of the biggest challenges in the reporting system is the lack of consistency in sustainability reporting. The lack of common metrics to measure and demonstrate the long term value creation is a challenge for all reporters. Lack of comparability and consistency among reporting frameworks and standards have hindered companies from demonstrating progress on sustainability issues and their contributions to achieving the Sustainable Development Goals (SDGs).
There is broad consensus that current sustainability disclosure practices are sometimes ineffective. The importance of having consistent and harmonized standards is underlined, as stakeholders are increasingly pressing for more transparent, consistent and comparable sustainability information. Consistent and comparable standards will bring greater transparency and clarity and thus build stakeholder confidence in the company itself and in decision making. Besides, consistent standards will accelerate work to achieve SDGs and resolve global sustainability issues.
Progress towards comprehensive corporate reporting
To help achieve clarity and encourage alignment, the Global Reporting Initiative (GRI), CDP, Climate Disclosure Standards Board (CDSB), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) issued in September 2020 a joint Statement of Intent to Work Together Towards Comprehensive Corporate Reporting. The intent statement highlights their intent to work together towards a single set of comprehensive and global reporting standards. In December 2020, they followed up with a prototype climate-related financial disclosure standard, with the view to contribute to the achievement of a globally accepted comprehensive corporate reporting.
Last month, IIRC and SASB announced their intention to merge into a unified organization, the Value Reporting Foundation. The new entity will provide companies with an integrated and comprehensive reporting framework for sustainability reporting. It will also develop sustainability disclosure standards to streamline the reporting system, create value and drive global sustainability performance.
In September 2020, the IFRS Foundation published a Consultation Paper on Sustainability Reporting to “identify the demand from stakeholders in the area of sustainability reporting and understand what the Foundation could do in response to that demand” The deadline for comments is 31st December 2020 and we are awaiting for the results of the consultation.
In addition, the World Economic Forum International Business Council (IBC) launched a white paper titled Toward Common Metrics and Consistent Reporting of Sustainable Value Creation and “proposes a common, core set of metrics and recommended disclosures that IBC members could use to align their mainstream reporting and, in so doing, reduce fragmentation and encourage faster progress towards a systemic solution, perhaps to include a generally accepted international accounting standard”. The paper builds on the work done by initiatives such as the GRI, SASB, IR, CDSB, TCFD. The paper focuses on the more material aspects of these initiatives rather than inventing a new standard for creating sustainable value. These metrics and disclosures are organized according to four pillars aligned with the SDGs and principal ESG domains: Principles of Governance, Planet, People and Prosperity.
The efforts and developments in the reporting landscape are an important step towards comprehensive corporate reporting. Reporters and users of sustainability reports, disclosures and metrics have many and often complex and seemingly contradictory needs, which the sustainability standards need to address and facilitate. Business leaders will be soon urged to address sustainability disclosures and re-prioritize, as future metrics will be focused on comparability, accuracy of performance disclosures and materiality. These discussions, consultation papers, standard and regulation updates, as well as the introduction of new standards, and the new collaborations, acknowledge the profound impact of these instruments to enable, facilitate and achieve measurable value creation. All standard setters and regulators recognise the need to engage with stakeholders and emphasise on achieving a truly needed globally accepted comprehensive corporate reporting system.