The harmonization of voluntary standards and mandatory regulation will lead to higher quality and more useful corporate sustainability reporting, according to new research released here today.
Carrots and Sticks for Starters, a joint report from the United Nations Environment Programme (UNEP) and KPMGs Global Sustainability Services, gives an overview and analysis of current trends and approaches in mandatory and voluntary standards for sustainability reporting and corporate responsibility.
Presented at an international conference to launch the new G3 version of the Global Reporting Initiative (GRI) guidelines on sustainability reporting, the report argues that balanced regulation should highlight the importance of a publicly recognised set of performance indicators, of which the GRI provides a global reference framework.
It also stresses the need for independent verification, stakeholder engagement, and the role of government in enforcing a level playing field and introducing incentives such as relieving reporting companies from obligations to report separately to individual government departments.
It is clear that regulation by itself cannot provide all the answers. It needs to be balanced by appropriate market measures and voluntary action, says Achim Steiner, UN Under-Secretary-General and UNEP Executive Director. There is both a public and a business case for non-financial disclosure and sustainability reporting in particular.
"Our research in eighteen countries highlighted more than a hundred examples of both voluntary and mandatory standards, says George Molenkamp, chairperson of KPMG’s Global Sustainability Services. These include voluntary initiatives and national legislation with reporting requirements on selected issues, including new mandatory requirements related to corporate governance. It is evident that this is not an either / or discussion, but that governments should be encouraged to find a careful balance between the two approaches, he said.
The new UNEP/KPMG report notes that convergence between financial and non-financial reporting raises the question of reporting on what? and to whom? It recommends governmental departments to take stock and harmonise reporting requirements in local legislation, comparing it with GRI requirements, accounting standards and company law trends in other countries.
"The idea of a sustainability report is still a novelty in many parts of the world, said Mr Steiner. Whilst the debate on the "ideal" sustainability report and its users continue amongst seasoned reporters, we still have some basic, foundational work to do in introducing to thousands of large companies the value of systematically quantifying non-financial performance, using it as a management tool and communicating about it publicly".
During the GRI Sustainability Reporting Conference in Amsterdam a new generation of reporting guidelines was released. The new G3 framework makes reporting simpler and includes requirements to describe management approaches and progress in areas such as environmental protection, labour standards, human rights and anti-corruption, areas addressed under the United Nations Global Compact. Its new online format is also aimed to make reporting and reported information more easily comparable for investors and financial analysts.
Whether by way of voluntary, mandatory, or mixed approaches, companies, other organisations, and their stakeholders need more clarity on their relation to the environmental and social challenges of our time, said Ernst Ligteringen, GRI Chief Executive. The new G3 Guidelines provide a robust and user friendly framework. Every company and public organisation will now have to decide the best fitting policy to advance its practice.
Accountability and transparency are vital ingredients for gaining public confidence and a societal ‘license to operate’, said Achim Steiner. From the global to the local, agreed frameworks for reporting are the basis upon which we build in moving closer to achieving these objectives. The GRI has played a leading role in helping all of us in addressing this challenge".