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Looking to the future of sustainability reporting

With the world moving more and more toward sustainable development, there is a rising demand from the public and governments for big businesses to show that their walking the walk and not just talking the talk when they say that they take “corporate social responsibility” seriously.

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Corporate social responsibility is a process by which companies assess and take responsibility for the effects their activities have on the environment and on social welfare. A company engaged in C.S.R. devotes time and develops programs to limit their impact on the environment and the communities around it. They may also engage in social welfare initiatives to benefit the community at large.

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Standing accountable for their actions

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According to the Corporate Social Responsibility Institute, C.S.R. challenges the perception that economic activity and business exist solely to maximize profit and calls upon the business sector to consider the effects of its activities, stand accountable for their actions and work towards the betterment of society.

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With society itself becoming more conscious of the need for sustainable development, many companies are seeking to make their commitment to C.S.R. known by producing sustainability reports which let their stakeholders know about their environmental and social performance and achievements.

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One of the most recognized reporting guidelines for C.S.R. is that of the Global Reporting Initiative. The G.R.I. is a non-profit that promotes economic, environmental and social sustainability. Their sustainability reporting framework is widely used by companies and organizations around the world.

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According to the G.R.I., a sustainable global economy needs to combine long term profitability with social justice and environmental care. By reporting their sustainability performance, an organization can increase the trust that stakeholders have in them.

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Going beyond volunteerism

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Currently, most companies that do release sustainability reports do so a voluntary basis. While some might find this development encouraging, there are others that feel that sustainability reporting should be a requirement and not on a voluntary basis.

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“We are reaching the glass ceiling of volunteerism in C.S.R. Companies are not going to take C.S.R. reporting upon them based on a voluntary basis and it’s time to change our thinking,” Liad Ortar told EcoSeed.

Mr. Ortar has been working in the field of C.S.R. for some time now. He was involved in translating G.R.I.’s global reporting initiatives into Hebrew and launching them in Israel. Currently, he is the head of The Center for Sustainability Reports Assurance.

“We need to shift C.S.R. from the voluntary approach to the regulatory approach. Companies of a certain size should be compelled to publish every year their performance and management policies on the uses of corporate governance, the issue of social effects and the issue of environmental concerns,” said Mr. Ortar.

Slowly but surely, governments around the world are starting to see the value of compelling companies to publish C.S.R. reports. For example, in April of this year, the European Commission adopted a proposal for a directive that would require certain companies to include in their annual reports a non-financial statement containing information relation to environmental, social and employee maters, respect for human rights, anti-corruption and bribery maters.

The stated objective is to increase company’s transparency and performance on social and environmental matters in order to contribute effectively to long-term economic growth and employment in the region.

According to Mr. Ortar, many regions are mulling the same steps that the E.U. is considering taking, including Israel. Mr. Ortar is involved a push for legislation that could be passed in parliament that would require all government-owned companies to produce a sustainability report based on G.R. I. guidelines.

“Government-owned companies should be the first to set an example and produce a sustainability report and report to the public about their environmental and social concerns,” Mr. Ortar told EcoSeed.

He explained that a company producing a suitability report should always have in mind who their stakeholders are and what their concerns are. Stakeholder engagement is important from the very start as a sustainability report should reflect the expectations of the stakeholders.

In the case of a government-owned company, the stakeholders are the people of the country. After government-owned companies would come private companies.

“Private companies must report about their achievements and commitments to social and environmental issues because it has to do with the whole community and quality of life as well as the quality of life of future generations,” pointed out Mr. Ortar.

Building trust

Aside from an increase in government interest in seeing that companies produce sustainability reports, Mr. Ortar believes the next few years will see an increase in companies looking for external sustainability report assurance services.

“Assurance or external assurance is the way to include a third party verification procedure into the process of writing a sustainability report. It’s exactly like you have in a financial report, you have an external auditor or an external accountant who comes in and says the numbers are correct,” said Mr. Ortar.

In the case of a sustainability report, assurance services evaluate the report against the AA100 Accountability Principles of Inclusivity, Materiality and Responsiveness or the guidelines of the G.R.I. They basically look at the report and what’s in it and determine how accurate it is.

By getting outside assurance, a company’s sustainability report stands a better chance of appearing credible and this enhances the trust that stakeholders have in the report and in the company’s activities.

“One of the main benefits of assurance in a sustainability report is that it helps a company determine whether the issues that were included in the report are truly material to the overall operations of the company, whether they are really addressing their stakeholder’s concerns,” said Mr. Ortar.

The Center for Sustainability Reports Assurance, of which Mr. Ortar is the head, means to promote the practice of external assurance for sustainability reports. Based at The Center for Corporate Social Responsibility in The College for Law & Business in Israel, C.S.R.A. will operate as a service center for non-financial assurance and auditing projects.

“The whole issue here is around building trust, we would like a sustainability report to be a trustworthy document, getting outside assurance services can help with that,” said Mr. Ortar.

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