BIG PAPER

Sustainability Reporting
May 14, 2014


For hundred years, up until very recently, companies operated with sole purpose, - profit
increase, which is a logical thing to do, if you ask me. However, with the growth and
availability of media such as TV, radio, and of course, internet, and such cases of labor
abuse in Nike
1
, Samsung
2
and Wal-Mart
3
, greedy executives scandals in Enron, Waste
Management and Tyco
4
(to name just few), and of course an environmental tragedies in
Niger Delta (oil spill), Exxon-Valdez (oil spill), and Bhopal (toxic gases accident)
5
, -
companies now have to face public concerns on social and environmental impacts
made by companies. Consequently, a new field of study is now getting its popularity-
sustainability development and reporting. This paper reviews concepts and regulations
on sustainability development, such as Triple Bottom Line and sustainability accounting,
already in place in many countries, with its challenges and benefits.

The underline idea of sustainably is to maximize benefits for current users without
compromising needs of future generations
6
. Public is urging companies to make careful
choices about the way they are affecting people
and planet through their operations.

The concept of sustainability emerged in early
1990s and since that time has been surrounded
by continues attention. Co-founder of the
business consultancy SustainAbility, John
Elkington, was the first one to coin the term of
triple bottom line in 1994 and suggested that
reporting of financial information only, does not

1
http://www.wsws.org/en/articles/2011/09/nike-s08.html April 1, 2014
2
http://www.chinalaborwatch.org/news/new-468.html April 15, 2014
3
http://walmartwatch.com/wp-content/blogs.dir/2/files/pdf/global_labor_violations.pdf April 1, 2014
4
http://www.accounting-degree.org/scandals/ April 1, 2014
5
http://www.businesspundit.com/the-worlds-worst-environmental-disasters-caused-by-companies/ April 1, 2014
6
http://www.iisd.org/sd/ April 4, 2014
give the whole picture of businesses performance. To accommodate for it, Elkington
argued that firms should also report their impact on social and environmental
performance. Triple bottom line is also called a 3P, - Profit, People and Planet
7
.

One of few leading organizations that showed initiative to provide clearly presented and
easily accessible, standardized objectives and reporting guidelines is Global Reporting
Initiative (GRI), - an international nonprofit organization, founded in 1997 in Boston.
Currently, GRI has regional offices in Australia, Brazil, China, India, South Africa and
USA, as well, as more than 600 other organizations around the globe that support and
make their expert input into the organization
8
. Corporate Responsibility Reporting
survey (2013) published by KPMG, states that 78 percent of reporting companies
worldwide refer to the GRI reporting guidelines, with the most references made by
South Korea and South Africa
9




7
http://www.ibrc.indiana.edu/ibr/2011/spring/article2.html April 4, 2014
8
https://www.globalreporting.org/information/about-gri/what-is-GRI/Pages/default.aspx April, 5 2014
9
http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/corporate-
responsibility/Documents/corporate-responsibility-reporting-survey-2013.pdf April 5, 2014
GRI produces Sustainability Reporting Framework, a generally accepted framework that
would help in providing a reasonable representation of an organizations social,
economic, and environmental performance; it is intended to be used around the world,
which increases international companies transparency through standardized guidelines
that could be used by any organization, - from small local business to international
massive corporation
10
. The Sustainability Reporting Framework includes The Guidelines
and Sector Guidance.

The Guidelines
Each report issued by GRI goes through multiple steps, in accordance with the due
process principles approved by GRI Board of Directors. Every report is developed by
consultations of international multi-sector stakeholders of various shape and size.
Because of extensive periods each report is open for public comments, of various
experts working on the reports and mandatory approval of each report, - it is ensured
that the new report would provide benefits to the broadest public
11
. The following is an
example of the Guidelines development process
12
.


10
https://www.globalreporting.org/resourcelibrary/G3-Sustainability-Reporting-Guidelines.pdf April 23, 2014
11
https://www.globalreporting.org/resourcelibrary/G4DevelopmentProcessOverview.pdf April 23, 2014
12
https://www.globalreporting.org/resourcelibrary/Due-Process-for-the-GRI-Reporting-Framework.pdf April 23,
2014
In May 2013, after two and a half years of development, GRI released its latest
Sustainability Reporting Guidelines, G4; Sustainability reports prepared by companies
using older versions of The Guidelines will not be accepted after December 31, 2015
since by that time everyone will be required to report under G4 Guidelines
13
.

As of 2014 the Guidelines has been translated into ten languages already, - Arabic,
Brazilian-Portuguese, Croatian, French, German, Japanese, Korean, Russian,
Simplified Chinese and Spanish; and Traditional Chinese, Bahasa-Indonesian,
Vietnamese, and Turkish are estimated to be published between April and June 2014.

The Guidelines is basically a user friendly manual to prepare a sustainably reports for
experienced as well as inexperienced companies, regardless of type of product or
service they provide, size or location.

The first step in reporting under G4 guidelines is to choose the preferred in
accordance option: Core, which includes limited but essential information, or
Comprehensive option which requires additional information on companys governance,
ethics, strategy and analysis
14
.

The next step is to disclose general standard disclosures; general disclosures could be
applied to all companies preparing the sustainably report and depends on the choice
made in the previous step. There are sever parts that needs to be reported
15

Strategy and Analysis
Organizational Profile
Identified Materials Aspects and Boundaries
Stakeholder Engagement
Report Profile

13
https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/g4-the-impact-on-
reporting-v2.pdf April 23, 2014
14
http://standingpartnership.com/blog/entry/gri-unveils-core-and-comprehensive-sustainability-reporting-
options-gri-g4-guidelines-part-2 April 23, 2014
15
https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-
Disclosures.pdf April 24, 2014
Governance
Ethics and Integrity
One more step is to disclose specific standard disclosures. Specific disclosures
organized into three categories: Economic, Environmental, and Social, with Social
category divided into Labor Practices, Decent Work, Human Rights, Society, and
Product Responsibility Sub-Categories
16
.

16
https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-
Disclosures.pdf April 25, 2014

Finally, the last step is to present the information prepared. GRI gives companies an
option to choose from electronic or paper reporting (or both), however it is required that
at least one medium should provide access to the complete information for the reporting
period
17
.

Sector Guidance
GRI Sector Guidance is created to make reporting for various types of businesses more
relevant and user friendly. As for 2014 GRI issued Guidance for the following sectors:
Airport Operators
Food Processing
Construction And Estate
Media
Electric Utilities
Mining and Metals
Event Organizers
Financial Services
Oil and Gas
NGO

Sustainability Reporting Worldwide
As it was mentioned above, an increasing number of countries becoming involved in
sustainability reporting with multiple countries, now, requiring some kind of corporate
governance and sustainability reporting.

The leading place in adopting sustainability reporting belongs to European Union, where
many countries governments require sustainability reporting for a while already, one of

17
https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-
Disclosures.pdf April 25, 2014
them is France with its Article 116 of 15 May 2001 Act (NRE Act) which mandates
companies to include social and environmental information in management reports
18
.
The following is a map with countries currently voluntarily or involuntarily disclosing
sustainability information
19
,

Challenges
In the past years many different frameworks and guidelines emerged on sustainability
reporting, making it difficult for companies to decide which standards to use (in case

18
http://www.reportingcsr.org/_france-p-22.html May 4, 2014
19
https://www.globalreporting.org/resourcelibrary/carrots-and-sticks.pdf May 4, 2014
where no mandatory guidelines is set in place), thus giving a first challenge to a
company that wants to start reporting.

Next issue that companies have is difficulty deciding who the audience for the reports is;
it is said that the reports should benefit stakeholders of a company, however an
average- sized company have shareholders, employees, customers, regulatory bodies,
all of those are the companys stakeholders. In order to make sustainability reports of
significance to every stakeholder, - the reports would be lengthy and inaccessible.

However companies and public face some even more serious challenges surrounding
sustainability reporting, some of them are quality and reliability, accuracy and
completeness of data reported, relevance to financial performance and cost of
reporting.

According to study by the Center for Corporate Citizenship and Ernst & Young LLC
(2013), most companies
struggle with data
availability since most
frameworks require
extensive data on social
and environmental
impacts which hard single
out and which usually
takes up extensive
amount of storage. Data
availability is followed by
accuracy and
completeness of data
20
.
How a recipient of the reports can be assured that he is getting the whole picture of the

20
http://www.ey.com/US/en/Services/Specialty-Services/Climate-Change-and-Sustainability-Services/Value-of-
sustainability-reporting May 1, 2014
companys performance and that the data was not manipulated in order for a company
to look better?!

For some businesses, a barrier to report is discomfort of that kind of transparency.
Companies fear that disclosing their performance levels in social and environmental
areas would make them lose their face, meaning it would compromise their
competitiveness
21
.

Most of the participant of sustainability reporting stated that cost to report is not one of
the most significant obstacles to report; the smaller a company, - the lower the cost to
prepare the reports, thus cost increases as the size of a company increases. Moreover,
it all depends on managements understanding of the sustainability reporting, if
management sees clear benefits of reporting, - then the cost to report is actually not a
cost but rather an investment
22
.

Benefits
According to Center for Corporate Citizenship and Ernst & Young 2013 survey, the most
perceived value of sustainability reporting is improved reputation and thus improved
financial position; companies openly disclosing social and environmental information
viewed by public as more trustworthy thus making them more competitive. According to
the study, more than 50 percent of issuers have seen a significant improvement in firms
reputation.

Second most important value of reporting is said to be an increased employee loyalty;
study suggest that communicating companies responsibility commitments and targets
increases employees productivity and also attracts new talented workforce, and
especially an increased number of voluntary activists
23
.


21
http://www.accaglobal.com/content/dam/acca/global/PDF-technical/other-PDFs/sustainability-roundtable.pdf
May 4, 2014
22
Ibid
23
Ibid
The following graph highlights the benefits founded by the study,

However, an overwhelming number of other studies showed the most significant benefit
of sustainability reporting is that it helps a company to think, indentify, work on, and
improve its long-term risks and opportunities. Companies become more aware of their
own sustainability performance and now could set up goals to improve it
24
.

Concluding, as companies are facing more and more pressure from the stakeholders
side, as well as from governmental bodies, sustainability reporting is becoming not only
unquestionable future, instead a quite real present for companies around the globe. The
value of the sustainability reporting is definitely evident; nevertheless, sustainability
reporting is still surrounded with its challenges to make it more reliable, accurate, and
user-friendly.

24

http://www.ey.com/Publication/vwLUAssets/Six_growing_trends_in_corporate_sustainability_2013/$FILE/Six_gro
wing_trends_in_corporate_sustainability_2013.pdf May 9, 2014