ThinktoSustain.com: Though many leading MNCs from developed economies and progressive companies in emerging economies have adopted sustainability reporting principles, still there is a lack of a much needed “momentum”. What do you think is needed to make corporate come on board in a bigger way?
Ernst Ligteringen: The benefits of sustainability reporting for a company – the business case – has been demonstrated by thousands of companies that are reporting, and that continue to report because they have found value in doing so. On a planet that will soon be home to nine billion people and where we are today already consuming a planet and a half’s worth of resources every year, it is clear that we will have to reform our economy and business practice. Sustainability reporting could be an important instrument to help not just individual companies, but markets as well, if the information from these reports was generally available and not only from pioneering companies.
Public policy has a role to play to ensure accelerated growth in this practice. Experiences in other countries show that a so-called Report or Explain approach to policy can be very effective. Under this approach, companies retain the autonomy to make their own decision, but they are required to make a decision in the public eye; either present your report or present your reason for not reporting. This transparency provides useful information to markets and it has led many companies in other countries to make a considered decision and to discover how sustainability reporting can help them better see the opportunities and risks in the inevitable change that is evolving in the global and the Indian economy and in society.
It is, therefore, promising that the Securities and Exchange Board of India (SEBI) passed a resolution last year that requires the largest Indian businesses to report against the Ministry of Corporate Affairs’ National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business. The National Guidelines include a reporting framework which is to be used on an ‘apply or explain’ basis.
ThinktoSustain.com: From which quarters, initially, (countries/industry associations/other groups) do you think support for a sustainability reporting regime would be significant?
Ernst Ligteringen: In Denmark and France, the governments have passed laws regarding sustainability reporting. In France, the government has established a series of statutory social and environmental indicators to be included in the annual report. Denmark pioneered report or explain legislation for its largest companies. The European Union is currently drafting an update to its sustainability policy, due to be released towards the end of 2012.
In South Africa, the Johannesburg Stock Exchange adopted the King III Code as a listing requirement. The King III Code asks companies to produce an integrated report, or explain why not. In Brazil, the São Paulo Stock Exchange, BM&F Bovespa, has called on companies to report or explain. The newly established Sustainable Stock Exchanges Initiative too will underline the importance of effective sustainability disclosures.
The World Business Council for Sustainable Development (WBCSD) has also taken a clear stand in favor sustainability reporting in Rio, as signaled by the joint statement they released with GRI.
ThinktoSustain.com: What major challenges do you foresee for governments who plan to align their policies to encourage corporate to report on sustainability?
Ernst Ligteringen: There are many governments and other regulatory institutions that support policy on sustainability reporting. Yet there are governments that object to policy mentions of sustainability reporting, believing it will be a regulatory burden on companies. However, as a policy principle, report or explain is quite easy to implement, and it is flexible. Governments retain the choice of how exactly they want to see it implemented, and businesses retain the choice to report, as long as they account for that choice. There is also flexibility in the reporting framework to be used. The point is to enable a considered decision.
ThinktoSustain.com: We generally talk of sustainability reporting in the context of business organizations. Do you think these principles also need to be adopted by governments to bring transparency in governance?
Ernst Ligteringen: Sustainability reporting is for organizations. Naturally, we tend to consider mainly companies as first, as they can have a significant economic, environmental and social impact, and second, reporting by companies on financial performance is a common and long standing practice, and so extending the practice makes sense.
There is certainly room for sustainability reporting by government entities. The impact of government entities is different, as there are the sovereign political commitments they make and policies they set. Beyond that, as entities, they also have an impact on society. In many countries, the government is one of the biggest, if not the biggest, employer and purchaser of goods and services. GRI has developed a pilot Sector Supplement – tailored GRI Guidelines – for government entities.
ThinktoSustain.com: What has been the role of the private sector in sustainable development in the last 20 years? Do you see any need for interventions?
Ernst Ligteringen: At the original Rio Conference in 1992, the discussion was about the impact of companies, but no companies were present. In 2002 in Johannesburg, companies were at the table and important initiatives focusing on companies’ sustainability impacts were launched, including the UN Global Compact (UNGC) and the Global Reporting Initiative.
Now at Rio+20, business was everywhere. It was investor, business and civil society coalitions calling for a policy framework for sustainability reporting, calling on governments to create a level playing field. It was civil society and the private sector driving this issue. Governments’ role is to encourage and enable sustainability reporting, a key tool for the transition to a green economy, to happen.
About Ernst Ligteringen
Ernst Ligteringen is Chief Executive of Global Reporting Initiative (GRI), an international organization with a mission to make sustainability reporting standard practice, driving its vision of a sustainable global economy. Ligteringen has been Chief Executive of GRI since 2002, when GRI was established as an independent organization with an international Secretariat in Amsterdam. Ligteringen is a member of GRI’s multi-stakeholder Board of Directors.
Before joining GRI, Ligteringen worked for over 20 years at various non-governmental and international organizations. His positions included postings in Africa, the Caribbean, Latin America, Asia, the Middle East and Europe, as Executive Director of Oxfam International, Director of Programme Coordination of the International Federation of the Red Cross andRed Crescent Societies, and Consultant to the World Commission on the Social Dimension of Globalization at the International Labour Organization (ILO).
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