Sustainability reporting becomes mainstream in South Africa

Source: KPMG, 2 December 2002

There is a marked improvement in the number of top South African companies who have reported on their non-financial performance, says professional services firm KPMG in its latest sustainability report released today.

And leading these other local organisations in this area were BHP Billiton, Umgeni Water, British American Tobacco and Rand Water.
Scored using the KPMG Sustainability Reporting Scorecard, these companies were seen as having highly appropriate reporting for detailing the extent of their companies social, transformation, ethical, safety, health and environmental management policies and practices.

The overall improvement in reporting core sustainability issues in the separate reports is encouraging, says KPMG director of sustainability services, Shireen Naidoo.

The pressure for improved disclosure in this area is not unique to South Africa, but reflects the rising global tide of corporate sustainability reporting. Sustainability, in this context, refers to the so-called triple bottom line of social, environmental and economic performance.

One of the most comprehensive surveys in this area, the KPMG Sustainability Reporting survey allows companies to benchmark their progress to date with other local organisations. This year, in collaboration with the University of the Witwatersrand, KPMG examined the content of sixteen non-financial reports using the KPMG Sustainability Reporting Scorecard.

As with the previous years, this survey shows that reporting on sustainability issues is still fairly superficial. However, it would appear that issues that have more direct impact on the operation of companies are receiving more attention in their annual reports. Other findings of the survey show that:

Almost half of the companies surveyed mention the environment in their annual reports. This was almost on par with reporting on social issues (45%). Health and safety issues were mentioned in 40% of the companies analysed, while only 31% of the companies analysed mentioned community issues in their reporting.
There has been a significant increase in the number of verified non-financial reports with more than half (56%) of the survey sample having their reports externally verified.
Regarding the core sustainability issues, companies surveyed provided, on average, the most information on sustainability management (38%) and operational performance (37%). This was followed by stakeholder management with just over one quarter (27%) disclosing information on this issue.
Economic issues have not been strongly incorporated in the non-financial reports. This is shown by the low level of disclosure of financial management issues (25%).
With the increased focus on providing sustainability information, there has been a corresponding call for ensuring that this information is independently verified. Companies are realising the benefits of external assurance in providing credibility to their claims and demonstrating to their stakeholders the seriousness of their intent. This had led to evolving reporting practices and underlying assurance frameworks, which demonstrate increasing accountability and transparency around important issues, says Naidoo.

She says that one of the major challenges facing companies that are involved in sustainability reporting is the whole issue of stakeholder engagement. If companies do not engage with their stakeholders and make an attempt to find out what is important to them from a reporting perspective, the credibility of the report hangs in the balance.

Good environmental stewardship and social responsibility are clear examples of good management and there is no disputing the clear link between good management and business performance. It is also becoming of increasing value to companies to be able to demonstrate responsible behaviour through transparent and credible reporting, explains Naidoo.