Bringing Concrete Expression to Corporate Responsibility: The Fundamental Role of Sustainability Reporting

Mark Brownlie,
Global Reporting Initiative*

Companies looking for a quick fix to vexing corporate responsibility woes they might find themselves in, should look elsewhere. There is no single activity that will form the basis for a corporate responsibility (CR) strategy. Instead, an effective CR strategy requires a pairing of meaningful stakeholder engagement and an effective internal management system. Such a system should include policies, targets, procedures, and monitoring. But without a feedback loop, that system will ultimately fail. Sustainability reporting is an integral component of any CR management system. It is also a major impetus for stakeholder engagement.

In the past year, increasing calls for improved corporate transparency have emanated from: shareholder advocates in the United States; stock exchanges in Johannesburg and Paris; governments in Denmark, France, the Netherlands, the United Kingdom, and the European Union; the media; and just about every observer of corporate governance worldwide. Without objective disclosure of corporate social and environmental performance, investors, consumers and prospective employees are left guessing when it comes to factoring these matters into their decisions. As well, the voluntary and selective nature of CR initiatives leaves onlookers in the dark about how well companies are actually performing overall on such matters.

The Global Reporting Initiative

It is in this context that the Global Reporting Initiative (GRI) has emerged as the facilitating force in building a new reporting infrastructure, designed to complement rather than displace financial reporting. GRI is the steward of that infrastructure, reporting guidelines that address the non-financial aspects of economic, environmental, and social performance of organisations.

GRI is a long-term, multi-stakeholder organisation and process whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines ("Guidelines"), most recently revised and released in mid-2002. The Guidelines are designed to assist reporting organisations and their stakeholders in articulating and understanding contributions of the reporting organisations to sustainable development. Business, social and environmental advocates, labour, the financial community, the UN, and other stakeholders worldwide collaboratively developed the Guidelines.

GRI strives to elevate sustainability reporting to exceptional levels of comparability, credibility, rigour, timeliness, and verifiability of reported information. The GRI process, rooted in inclusiveness, transparency, neutrality, and continual enhancement, has enabled GRI to bring concrete expression to corporate responsibility.

By drawing thousands of partners and hundreds of organisations into its multi-stakeholder process, GRI continues to work toward excellence of CR disclosure, maximising the value of reporting for both reporting organisations and users alike.

Benefits of Sustainability Reporting

In a systematic approach to CR, a company does more than become involved in tree planting and educational programs. Articulating a vision, setting policies and targets, and monitoring performance are parts of an internally driven system. But CR is focused on people and issues outside the company as well. To gain more value, and to fully appreciate its stakeholders' information needs, a company needs to go beyond internal management and put its CR performance record out for public scrutiny and discussion.

A recent KPMG survey (International Survey of Corporate Sustainability Reporting 2002) indicated that businesses typically adopt sustainability reporting to:

• Reduce operating costs and improve efficiencies;
• Develop innovative products and services for access to new markets;
• Improve reputation and brand value;
• Recruit and retain excellent people;
• Gain better access to investor capital;
• Enhance the public value of the company;
• Reduce liabilities through integrated risk management.

According to an Environics International survey of more than 200 business leaders (A Globescan Survey of Business Leaders on Sustainable Development, August 2002), the top two benefits of sustainability reporting are improving stakeholder relations and improving management of sustainable development issues. The same survey noted that nine in ten business leaders either strongly (47%) or somewhat (43%) agree that the benefits to companies of reporting on their social and environmental performance outweigh the costs. Clearly, sustainability reporting is beneficial for external and internal reasons.

Getting There

Some companies have turned to sustainability reporting in a crisis control mode, after facing damaging accusations about sub-standard environmental and labour practices, for example. However, a company opting to report as a proactive measure gains benefits beyond burnishing its image. As a result of the soul-searching that often accompanies sustainability reporting, many companies strengthen their codes of conduct, policies, and practices. Sustainability reporting often evolves with, and accelerates, new management systems.

As more companies release sustainability reports based on the Guidelines, people who know that financial results tell only a portion of the story will have access to better information to make better investment, purchasing, advocacy, and employment decisions. And companies will reap a host of internal and external benefits.

Over the next few years, sustainability reporting will become a fundamental method for measuring, disclosing, and strengthening the contributions of business to sustainable development. Correspondingly, sustainability reporting will become an essential component of any integrated approach to corporate responsibility.

For more information:

Global Reporting Initiative

info@globalreporting.org

Tel: +31 (0) 20 531 00 00

www.globalreporting.org

^* The Global Reporting Initiative is an official Collaborating Centre of the United Nations Environment Programme, and is located in Amsterdam