Chapter 2: Brief History of Sustainability Reporting PDF

GREEN ACCOUNTING AND REPORTING CHAPTER 2: BRIEF HISTORY OF SUSTAINABILITY REPORTING [email protected]  BRIEF HISTORY OF SUSTAINABILITY REPORTING 2.1 Historical Perspectives 2.2 Recent Development and Initiatives 2.3 Status of Business Sustainability a...

GREEN ACCOUNTING AND REPORTING CHAPTER 2: BRIEF HISTORY OF SUSTAINABILITY REPORTING [email protected]  BRIEF HISTORY OF SUSTAINABILITY REPORTING 2.1 Historical Perspectives 2.2 Recent Development and Initiatives 2.3 Status of Business Sustainability and Sustainability Reporting 2.4 Prospective Aspects of Sustainability Reporting  LEARNING OUTCOMES At the end of the topic, students should be able to: ▪ To outline the history of sustainability reporting from 1960s to present. ▪ To discuss the progress made in sustainability reporting. ▪ To identify the status of business sustainability and sustainability reporting and assurance. ▪ To list prospective aspects of sustainability reporting.  LET’S WATCH! https://www.youtube.com/watch?v=A7hfQ8mTVrU 4  2.1 HISTORICAL PERSPECTIVES Year Details 1960s -1970s Europe Organization started to recognize their roles in the 22 April 1970 United States society above and beyond profit maximization. (Earth Day) France, The acceptance of CSR in France and Netherlands Netherland, encouraged the introduction of Environmental reports in Austria, Germany, countries such as Austria, Germany and Switzerland. Switzerland 1987 United States The movement gained momentum with a 1987 UN report, Our Common Future (Brundtland Report) which promoted sustainability as a means of balancing economic and environmental issues and considering the tradeoff between short-term economic benefits and long-term impacts on future generations. 5 Year Details 1980s United The creation of U.S Environmental Protection Agency (EPA) and the States passage of the Clean Air, Clean Water, and Endangered Species Acts were big steps in the development of the environmental aspect of sustainability reporting. 1980s US & UK Ethical Investment funds promoted ethical and social performance by excluding the firms that operated in tobacco or alcohol industries. 1989 Boston Due to the 1989 Exxon Valdez disaster, the U.S.-based Coalition for Environmentally Responsible Economies (Ceres), a Boston-based nonprofit organization, establish the “Ceres/Valdez Principles”. The principles defined a set of environmental reporting guidelines on behalf of the Social Investment Forum (SIF). 6 Year Details 1990s Reporting on both financial and nonfinancial key performance indicators gained some acceptance through the introduction of values reporting, with a primary focus on social, environmental and animal protection issues. 1997 Ceres started a Global Reporting Initiative (GRI) aimed at developing a sustainability information disclosure framework. 1997 Finland Finland was the first country that adopted a mandatory sustainability reporting law in 1997. Other countries adopting similar laws are Australia, Austria, Canada, China, Denmark, France, Germany, Greece, Indonesia, Italy, Malaysia, Netherlands, Norway, Portugal, Sweden and the United Kingdom. 1999 UNEP joined with Ceres as a partner in the GRI project. 7 Year Details 2000 The first GRI Sustainability Reporting Guidelines were issued and almost 50 companies issued sustainability report using the guidelines. 2001 GRI became an independent organization and subsequently relocated at Netherlands. GRI was launched to establish reporting guidelines for the triple bottom line: economic, social and environmental performance. During this period, voluntary CSR reports gained momentum due to demands by socially responsible investors as well as managerial initiatives on brand reputation building and encouragements from policymakers, regulators and standard- setters. 8  2.2 DEVELOPMENT AND INITIATIVES Introduction of the sustainable stock exchanges initiative by United Nations Principles for Responsible Investment (UNPRI). Facilitates dialogues between exchanges and investors, companies and regulators to improve corporate transparency on sustainability performance by encouraging responsible long term and sustainable approaches to investment. This type of interaction can support sustainability initiatives. For example, in January 2011 a group of investors representing $1.6 trillion in assets under management sent a letter to top 30 global stock exchange requesting them to demand better internal corporate governance by their listed companies. The investors asked for disclosure of how the boards address sustainability issues and also for exchanges to consult with listed companies on how sustainability and integrated reporting can be infused into long term strategic decision making and corporate reporting. 9  Global Reporting Initiative (GRI) ○ GRI was launched in 1997 to bring consistency and global standardization to sustainability reporting. ○ GRI initially focused on incorporating environmental performance into corporate reporting and with its “Sustainability Reporting Guidelines” which were published in 2000, 2002, 2006 and 2011. ○ GRI is now considered the sole global standard-setter in sustainability reporting. ○ The current version,G4 Guidelines released on 2013 which cover economic, governance, social and environmental performance. 10  Securities and Exchange Commission (SEC) Report Feb 2010, SEC issued the report “Commission Guidance Regarding Disclosure Related to Climate Change”. This report requires public companies to disclose material financial and reputational risks associated with global climate change. This rule along with the BP Gulf of Mexico oil spill in April 2010, encourages regulators to establish rules requiring more disclosure on sustainability performance. 11  The International Integrated Reporting Committee (IIRC) ○ IIRC was formed in August 2010 ○ The primary goal is to establish a globally accepted integrated reporting framework to standardize reporting on sustainability performance information. ○ The IIRC promotes integrated reporting which is intended to make the link between sustainability and economic value by focusing on the interrelationships between all aspects of business sustainability. 12  The International Organization for Standardization (ISO) – ISO 26000 ○ In November 2010, ISO developed “ISO 26000”, guidelines for social responsibility reporting. ○ The guidelines focus primarily on relevance and the value of public reporting on social responsibility performance to both internal and external users. ○ ISO 26000 is a globally accepted guidance document for social responsibility relevant to all types and sizes of entities, from governmental to non-governmental organizations and private businesses to public companies, small to large. ○ ISO 26000 also covers a broad range of activities, including economic, social, governance, ethical and environmental issues. ○ ISO 26000 goes beyond profit maximization and social performance to cover all EGSEE dimensions of sustainability. ○ Social responsibility performance, as promoted in ISO 26000 correlates to sustainability performance because each requires the other. 13  The Singapore Exchange (SGX) – Sustainability Reporting Guidance ○ In July 2011, the Singapore Exchange (SGX) introduced a “Sustainability Reporting Guidance” framework, requiring the listed companies to disclose accountability for their operations and conduct business in a sustainable manner. ○ This framework provide the policy statement that sets out principles, questions and answers to assist listed companies in expanding their conventional financial reports to emerging EGSEE sustainability reports. 14  Adoption of sustainability reporting has made significant progress during the past decade. In 2000 about 44 organizations followed the GRI guidelines to report a range of sustainability information. In 2010, the number of organizations disclosing sustainability reports grew to 1,973. As of September 2011, more than 3,000 companies disclose sustainability information. The terms sustainability reporting, integrated reporting, environmental, social and governance (ESG) reporting, corporate social reporting (CSR) reporting, and risk compliance and governance (RCG) have been used interchangeably in the business literature to describe reports with a wide range of coverage and different degrees of focus on risk, environmental, social or governance issues. 15  2.3 STATUS OF BUSINESS SUSTAINABILITY AND SUSTAINABILITY REPORTING AND ASSURANCE Reporting of sustainability performance has been for most part voluntary, as more than 3,000 business organizations worldwide are now issuing stand alone sustainability reports. This trend is expected to continue as investors demand more sustainability information. An overall and comprehensive sustainability performance report can be achieved when organizations focus on satisfying the needs of all stakeholders, including employees, clients, the environment and society as well as investors. Business should balance the priorities of all stakeholders and protect their interests. According to economic theory, the primary goal of business is to maximize profit to ensure value creation for shareholders. As such any other activities that deviates from this goal (e.g. social, environmental) can damage investment value unless they contribute to the promotion of the business. 16  Sustainability reporting enables companies to disclose their strategies, commitments and performance in all EGSEE areas ○ therefore ensuring the achievement of long-term financial targets ○ while also mitigating negative social and environmental impacts. ○ The idea is that a company must extend its focus beyond making profits by considering the impact of its operation on the community, society and environment. 17 The 2011 annual sustainability global executive survey conducted by the MIT Sloan Management Review and the Boston Consulting Group reports the following trends: 1. Sustainability is gaining in importance. Over 75% of more than 4,700 executives said sustainability-related strategies are necessary to be competitive. 2. More than 68% of respondents stated that their commitment to sustainability has increased to 59% in 2010 (from 25% in 2009). 3. About 74% believe that their sustainability commitments will increase in the future. 4. Nearly 50% said that their sustainability commitments could influence their employment choices. 18  A need for new reporting and accountability reporting ○ The widening focus on sustainable performance and long-term, value adding strategies has driven the need Sustainability for new reporting and accountability structures Reporting ○ Which extend beyond financial statements into nonfinancial key performance indicators based on environmental impact and social responsibility GRI ○ GRI reporting process enables organizations to disclose sustainability information based on one of three application levels (i.e., A,B or C) depending on the extent of information provided. Assurance ○ GRI also recommends that external experts provide assurance which can be designated with a + added to the application level declared. ○ Alternatively, GRI can examine the declared content of sustainability reports and express an opinion on the extent of compliance with GRI guidelines, but not comment on the quality or reliability of the disclosed sustainability information. 19 2.4 PROSPECTIVE ASPECTS OF SUSTAINABILITY REPORTING sustainability reporting and assurance guidelines and practices should be advanced and promoted to create consistency in reporting of sustainability information. disseminate high-quality financial and non-financial information regarding all five EGSEE dimensions of sustainability performance to enable all corporate stakeholders to make sound decisions. 20 THE END 21  Class Activity! You are given an article related to Sustainability Reporting. From your reading, come up with a (mind map/slide/video) that consist of i. Introduction ii. Main points (depends on your article – Example: Status/Prospective of sustainability reporting/Development or Initiatives/Events) iii. Conclusion (Example: Summary/Recommendation/Expectation etc.) You are given 1 week to discuss and explore the case study. Each group will present their findings in 10 minutes presentation. 22