It is widely accepted that corporate worldwide have not only a responsibility but also a great ability to exert positive change on the state of the world’s economy, and the environmental and social conditions.
Corporate sustainability reporting or accounting, which basically means reporting the ecological footprint of any company, comes in when an organization publicly communicates its economic, environmental, and social performance. Such reporting means the organization has to measure, track, and improve its performance on specific issues. By taking a proactive role to collect, analyze, and report those steps to reduce potential business risk, the company can remain in control of the message it wants to convey to its shareholders. As a result, the shareholders can track the organization’s performance on broad themes – like environmental performance – or a particular issue – like labor conditions in factories.
The Global Reporting Initiative (GRI) is a network-based organization that pioneered the world’s most widely used standardized sustainability reporting framework for performance on human rights, labor, environmental, anti-corruption, and other corporate citizenship issues.
In an attempt to bring out the broader aspects of sustainability reporting, its future implications for companies, and various issues and challenges faced in its adoption, ThinktoSustain.com held an interview with Ms. Nelmara Arbex, Deputy Chief Executive – Guidance, Support and Innovation Team of GRI.
Global Reporting Initiative (GRI), as of today, requires a company to move forward from a ‘compliance mentality’ to a ‘voluntary approach’. However, there is a general tendency among a large number of companies to ‘just comply’ with only certain norms mandated by government authorities that are basic requirements for continuance of business. Recent public furor over environmental concerns involving big brands – Nestle, BP, and Vedanta Resources, etc. – has captured different negative impacts of business – on forests and wildlife, marine eco-systems and indigenous peoples’ rights respectively.
ThinktoSustain.com: When should a company start thinking of adopting the GRI framework? What should be the long-term strategy?
Nelmara Arbex: It is never too early to start thinking about sustainability and how to measure a company’s impacts. All companies should think about how to measure their impacts on the world, and one way of working to improve them is by measuring and reporting on sustainability performance. As we say, “what you can’t measure, you can’t manage and you can’t change”.
ThinktoSustain.com: Why do you think companies wait for a crisis before realizing the importance of a transparent approach in terms of sustainability reporting?
Nelmara Arbex: While this may be true of some companies, there are a great deal that are proactively transparent – they recognize the importance of sustainability and transparency to their business and include reporting as an integral part of their operations. It is important to remember that companies report much more than any other type of organization in society (more than trade unions, associations, NGOs and governments). However, some companies need a kick-start, so sometimes a crisis – be it financial or environmental, for example – may bring the importance of transparency to light because of the sense of urgency.
ThinktoSustain.com: How much do you think the ‘optional’ or ‘voluntary’ nature of GRI impacts quality of reporting?
Nelmara Arbex: The quality of reporting, which is the process of producing a report, is defined by several factors, including the process of defining what to report on, the accuracy of the measurements, and the traceability internal systems offer. These factors are described in the GRI Guidelines as “Principles”. The GRI network believes that if a company follows the Guidelines, the quality of the reporting process, and therefore, of the final report, can be improved.
GRI doesn’t believe that making reporting mandatory will necessarily influence the quality of reporting. It might be the opposite, the reporting process could become a bureaucratic “check list”, which would not help improve quality.
Mandatory approaches can definitively help increase the number of reports being produced, disseminating the practice of measuring and reporting on sustainability issues. This would be a huge achievement, as the majority of large companies in the world do not publish such reports.
GRI recommends a report or explain approach: to require companies to report on their sustainability performance or explain why if they don’t. This sets a minimum level of disclosure, resulting in a level playing field for businesses. It also leaves room for innovation in reporting practices.
ThinktoSustain.com: Many organizations believe that in the absence of a level playing field (i.e., mandatory GRI reporting), disclosures related to sustainability performance can lead to a disadvantageous market position. How much do you agree/disagree with this?
Nelmara Arbex: We can’t agree with that.
Any company of any size can prepare a sustainability report using the GRI Guidelines, global ‘standard like’ guidance. If a company is just starting the process of reporting, it can prepare a basic type of report, a ‘Level C’. This requires only a few basic activities to define what to focus on, and the company only needs to disclose information on 10 indicators.
And if the problem is the lack of sustainability responsibility or sustainability policies, which could be revealed in the reports, we do believe that this should count when defining market position. Those who report can also show how they want to improve their operations, improving their reputations, therefore, potentially putting them in a better position than their competitors.
ThinktoSustain.com: Which industry sectors would most likely see a mandatory reporting regime in the near future?
Nelmara Arbex: Firstly, it is important to remark that companies in general are being asked more and more for information about their non-financial performance by different groups, including regulators, investors and ranking agencies. This happens through questionnaires and other mandatory channels; and is even more remarkable for companies in sectors considered of higher financial, environmental or social risk. Sectors such as forestry, pulp and paper, oil and gas, pharma-chemicals, mining and food processing are already under specific regulation on delivering information on non-financial performance.
