SustainAbility reports on sustainability reports

[Originally posted on the Fletcher INTERNet]

Have been in London for almost six weeks, working for SustainAbility, a consultancy and think-tank that works with the private sector to integrate the “triple bottom line” of social, economic, and environmental performance – along with financial performance – into core business strategy.

They’ve hired five of us interns to work on a specific project, the SustainAbility/UNEP/Standard & Poor’s Global Reporters 2004 bi-annual survey of corporate sustainability reporting. The survey benchmarks fifty reports that are considered to represent international good practice in sustainability reporting.

Corporate sustainability reports are increasing in number every year. This past May, for example, Gap Inc. made headlines with the release of its first-ever Social Responsibility Report, in which they discuss the working conditions of their garment factories. Other big-name companies who have begun serious sustainability reporting in the past few years include Starbucks, Ford, Shell, Hewlett-Packard… the list goes on. Interesting, too, to look at what companies are still not reporting. But that’s another entry.

So, what exactly is sustainability reporting? And why bother reporting on reporting… isn’t that a little meta?

Sustainability reporting is the “triple bottom line” equivalent of financial reporting (for example, the annual and quarterly reports that publicly held U.S. companies are required to file with the Securities Exchange Commission).

Financial reporting aims to give shareholders, and other interested parties such as equity analysts and financial journalists, the information they need to evaluate a business’s financial performance and prospects. Similarly, sustainability reporting is intended to give stakeholders the information they need to evaluate a business’s social, environmental and economic performance and prospects.

What makes a good sustainability report? Financial reports have been issued by companies for decades, so a common language and format has developed that allows readers to compare data across time and companies and to see if anything has been left out – up to a point ::cough:: Worldcom ::cough:: Shell.

The same is not yet true for sustainability reporting, but the Global Reporting Initiative (GRI), a “multi-stakeholder process and independent institution” begun in 1997 as a project of the Boston-based Coalition for Environmentally Responsible Economies (CERES) and the UN Environment Programme, aims to address that by establishing a common global framework for sustainability reporting. Socially responsible investment fund managers Calvert explain here why they regard the GRI as the “gold standard” for disclosure [PDF, 72 kb].

It’s important to be clear about what we are doing: we are not evaluating the social, environmental and economic performance of these companies. That is impossible, given that all we have to go on is what the company itself is disclosing. What we’re doing is evaluating the quality of their reporting. Ideally the quality of reporting should be a proxy for the quality of performance, but in any case the best reporting gives stakeholders the ability to judge for themselves, or to begin further inquiries.

To be useful and meaningful, then, sustainability reporting needs to be far from PR whitewash, or greenwash, as it’s known in CSR circles. There are big differences between:

  • a company who writes, “We believe that being green is good business,” illustrating their report with photographs of tree frogs and smiling children that have nothing to do with their core business of petroleum exploration and production;
  • a multinational auto manufacturer who writes, “We recognize that climate change is potentially an issue”; and
  • a sporting goods manufacturer who writes, “After consulting stakeholders, and based on studies analysing the environmental impact of PVC, we adopted a policy in 2000 to eliminate PVC from our products where possible.”

It’s not always easy to sustain the momentum of doing nothing but reading and benchmarking all day long for weeks, but I wouldn’t give it up – it’s been an excellent crash course in the issues that companies and their stakeholders struggle with. More generally, it’s been an opportunity to think deeply about what it means for a business to be sustainable, and what makes a report a good report, whether it’s a sustainability report, a financial report, or a government- or NGO- or media-issued report.

Almost over… two more days. Then off to The Climate Group on Tuesday.

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