Corporate sustainability reporting desperately needs to up its game in order to align company-level sustainability performance with the broader systems-level ambitions of the 2030 Agenda for Sustainable Development and COP21, the United Nations climate change conference, according to a new report from the United Nations Environment Programme (UNEP). For example, while 95% of the 108 companies researched in the report disclose their greenhouse gas (GHG) emissions, only a mere 8% set GHG emissions reduction goals in the context of the science-based target of limiting global warming to 2 degrees Celsius – the central goal of COP21.
In addition to researching 108 company disclosures, the report (entitled Raising the Bar: Advancing Environmental Disclosure in Sustainability Reporting) also interviewed 59 experts globally to identify promising trends and worrying shortcomings in sustainability reporting. On the former, the report identifies the emergence of “Collaborative Reporting” with upstream suppliers and downstream stakeholders to transform sustainability reporting from the current one-way, “broadcast” format to a more multi-directional, dynamic, ongoing exchange across the entire value chain. On the latter, the report – which launched at the Reporting 3.0 Conference in Berlin, Germany, a platform dedicated to exploring next-generation practices in corporate sustainability disclosure and integrated reporting – advances a set of recommendations for resolving the identified shortcomings.
Along the lines of the GHG example above, the report “reproaches” companies for failing to integrate the Sustainability Context Principle, introduced by the Global Reporting Initiative (GRI) in 2002 but still largely unheeded by corporate reporters, more than a dozen years later. That Principle calls for reporting “the performance of the organization in the context of the limits and demands placed on environmental or social resources at the sectoral, local, regional, or global level.”
“To this day in the reporting world, as you well know, Sustainability Context is incipient, uneven, and occasional,” GRI Co-Founder and inaugural CEO Allen White told me. “In the best of worlds, reporting would have evolved to supply Context-based disclosures. But this is not the case.”
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Accordingly, the UNEP report recommends that companies “apply a context-based approach to sustainability reporting, allocating their fair share impacts on common capital resources within the thresholds of their carrying capacities.”
“Corporate sustainability reporting needs to be rapidly elevated from focusing on incremental, isolated improvements to corporate environmental impacts. It should instead serve to catalyse business operations along value chains to achieve the kind of transformative change necessary to accomplish the Sustainable Development Goals and objectives by 2030,” said Arab Hoballah, Chief of UNEP’s Sustainable Cities and Lifestyles Branch.
Aligning company-level sustainability performance with systems-level thresholds brings not only the benefits of healthy ecosystems, but also tangible financial benefits as well. For example, the UNEP report includes a case study of Nedbank’s Fair Share 2030 strategy and report, which seeks to fulfill the bank’s social purpose by meeting societal needs within biophysical constraints.
“We believe this approach aligns with GRI’s Sustainability Context Principle, as spotlighted in UNEP’s Raising the Bar report,” said Brigitte Burnett, Head of Sustainability of Nedbank. “We find that a context-based approach to strategy development greatly enhances our ability to identify innovative funding opportunities and new markets. Through this, we are able to align the interests of our business with our clients and society at large, thereby helping to create a thriving future for all.”
The report applies the term “Collaborative Reporting” to describe several emerging practices, such as partnering with upstream suppliers to report on shared impacts and responsibilities, and engaging directly with stakeholders downstream to identify creative solutions to problems that impact them.
Looking downstream, the report identifies the rise of online platforms such as Convetit and 2degrees where companies are engaging directly with stakeholders, for example to identify material environmental issues that need to be reported, and to jointly brainstorm solutions to thorny problems.
The report identifies four key stakeholder constituencies with the most influence on the quality of sustainability reporting:
- Long-term investors;
- Stock exchanges;
- Governments; and
- Companies, through business-to-business relations.
“Investors rely on robust, accurate, contextualized and comparable information on company sustainability performance,” said Ole Buhl, Head - Environment, Social & Governance at Arbejdsmarkedets Tillægspension (ATP), the Danish pension provider. “The UNEP Raising the Barreport demonstrates the distance still needed to travel before sustainability reporting fits the bill on all these fronts; investors have a wide diversity of disclosure needs to inform their decisions, that are currently met only sporadically, so we are eager for reporting that more consistently and comprehensively meets investor and stakeholder needs.”
Interestingly, interviews with experts prompted UNEP to leave civil society off the list of influential stakeholders, as NGOs have a general stance of skepticism toward corporate sustainability reporting and so often do no use sustainability reports.
“It is in the best interests of companies to make these reports meet high standards of consistent quality that cover material issues core to the business and its stakeholders,” said Gine Zwart of Oxfam Novib, which analyzes company sustainability reporting as the basis for its Behind the Brands campaign targeting the food business. “For organizations like Oxfam, this is also an essential requirement to come to collaboration between companies and civil society organization to reach the sustainable outcomes we all want to see.”
In addition to these focal areas, the UNEP report also documents widespread shortcomings and dissimilarities in determining the Materiality of key environmental areas and in report Assurance, and so it urges harmonization of frameworks and guidance as well as strengthening of practice on both.
Disclosure: Bill Baue authored “The Need for Context” chapter in the report.