Sustainability reporting —
the time is now
Sustainability reporting — the time is now2
This report was produced by EY in association
with the Global Reporting Initiative (GRI).
The data included derives from the GRI
Global Conference on Sustainability and
Reporting 2013. Conference attendees had
the opportunity to respond to several different
polls and surveys by using the conference
mobile application sponsored by EY.
Sustainability reporting — the time is now 3
Sustainability reporting is becoming a mainstream
business practice							4
The drivers and benefits of sustainability reporting
are increasing in prominence						6
A range of stakeholders is driving organizations to implement
a more sustainable strategy						6
Sustainability decision-making is moving to the board 				 7
Responsibility for preparing the sustainability report is
not yet completely aligned with the strategic or executive function		 9
Valuation: a breakthrough for sustainability?					 10
Sustainability: improving operational performance				 11
Standards, regulations and transparency are making
sustainability practices more mainstream 				13
Sustainability frameworks and indicators 					 13
Growth of mandatory reporting 						13
Harmonizing sustainability frameworks and standards is key 			 15
The credibility of sustainability data is on the business agenda 			 16
Sustainability: the new “business as usual” 				18
The policy shift of sustainability 						 18
Sustainability reporting is an intrinsic element of integrated reporting		 18
The demand for reporting through the supply chain is on the rise		 20
Business: the main driver of sustainability action				 20
Conclusion 								21
Methodology 								22
Contacts								23
Contents
Sustainability reporting — the time is now4
Sustainability reporting is
becoming a mainstream
business practice
Sustainability reporting appears to be reaching a “tipping point,”
as it moves beyond the realm of the innovators and early adopters
and into the mainstream. Failure to engage with the reporting
process could have a negative impact on performance, reputation,
and even the ability to raise capital.
This report is an assessment of the current status of sustainability
reporting. The report features some of the insights and experiences
of participants at the GRI’s Global Conference on Sustainability and
Reporting. A survey and live polling at the conference enabled EY
and GRI to gather opinions on the changing nature of sustainability
as it moves rapidly into the boardroom and the investment
decision-making process — and into the minds of consumers.
There are two key aspects of sustainability in business: reporting
and strategy. Reporting demands measurement of the different
elements that are critical to effective sustainable business
operations. Strategy helps to build on sustainability reporting
as a tool to understand the internal and external impact on
the business, using the data to help address the challenges of
21st-century business and create a competitive edge in a world
increasingly shaped by the effects of resource scarcity and
climate change.
Sustainability reporting is the critical first step in implementing a
strategy that can help an organization understand the impact on
its stakeholders, and ways in which it might mitigate a negative
impact on the economy, society and the environment.
Once reporting has become standardized and easy to compare,
there is little doubt that performance indicators on sustainability
issues will become as important for business as financial
performance. High quality and comparable data on sustainability
performance and impacts will also be an essential requirement
as the concept of integrated reporting develops and increases
in popularity.
A number of trends emerged at the GRI Conference, and the
polling results back up the premise that sustainability reporting
is reaching a tipping point. These trends include:
•	The key drivers of a sustainability strategy cited by conference
participants were clients or consumers. This demonstrates
that there is demand from organizations’ key stakeholders,
those that use their products or services, for responsible and
ethical organizations.
•	Business objectives, rather than ethical ones, are now the key
reasons organizations implement a sustainability strategy, the
poll results show. The most frequent reasons cited were “to
add value” to their respective organizations and “to identify
and mitigate risks.”
•	Given that business reasons — as opposed to ethical ones — are
driving sustainability, the reason why sustainability reporting is
moving into the mainstream and into the C-suite is increasingly
clear. If a sustainability strategy is not already controlled at the
highest level of governance in an organization, the majority of
survey respondents believe it should be.
Sustainability reporting — the time is now 5
The GRI’s Global Conference on Sustainability and Reporting
from 22–24 May 2013 in Amsterdam saw the launch of the
next generation of Sustainability Reporting Guidelines, G4.
Of the 1,661 total registrants for the event, from 69 countries
and more than 30 sectors, 1,400 downloaded the app and
were therefore able to respond to both the pre-survey and the
live-voting questions. Further information on methodology is
on page 22.
Interviews with a number of experts have supplemented
the survey results included in this report: Ernst Ligteringen,
Chief Executive, GRI; Steve Waygood, Head of Sustainability
Research & Engagement, Aviva Investors; Ian Wood,
Vice President Community Relations and Sustainability,
BHP Billiton; and Jeanne Chi Yun Ng, Director, Group
Environmental Affairs, CLP.
Speakers at the conference also quoted include:
Paul Druckman, Chief Executive, International Integrated
Reporting Council (IIRC); Michel Barnier, EU Commissioner
responsible for internal markets and services; and Paul
Simpson, Chief Executive, Carbon Disclosure Project (CDP).
•	The number of companies that have truly embedded sustainable
practice into their operations may be small, but there is
a revolution taking place — particularly with regard to the
integration of financial and non-financial reporting. There was
consensus that if a value were placed on sustainability it would
push this issue into the boardroom and the mainstream.
•	Previously seen as the exclusive domain of multinationals,
there is a growing trend driving sustainability reporting
throughout the supply chain. Despite a slow start, growth
has been impressive, and there are a number of trends, from
improvements and harmonization in reporting standards to
a rapid growth in mandatory reporting legislation, that are
supporting the growth in reporting.
•	Just as financial reporting depends on reliable numbers,
there is a growing demand for non-financial data to be equally
competent and measurable to ensure maximum transparency
and ease of comparison.
Sustainability reporting — the time is now6
To date, much reporting of non-financial information has been
voluntary, or driven by increasing concerns within society as a
whole.1
As Ian Wood, Vice President, Community Relations and
Sustainability, BHP Billiton, says, “As a natural resources company,
we have exposure to the environmental agenda through our
social license to operate — unless we’re seen to be adding benefit,
we’re open to challenge. We need to minimize social impact and
maximize social benefit to our stakeholders. And unless we’re
effective in communicating performance, we run the risk of losing
our license to operate.” He continues, “Sustainability is about
having a license to enhance and grow the business — it’s a dynamic
process and it’s important to maintain leadership on these issues.”
One of the key drivers behind the increase in sustainability
reporting has been the acknowledgment that to be meaningful, a
sustainability strategy must be based on reliable, concrete data.
This can only be the case once the mechanisms and systems for
reporting the facts are put in place.
The process of reporting compels businesses to look at their value
chains and disclose material information. Collecting and analyzing
that data can help to identify risks, as well as the potential for
improving efficiency and finding new markets. This can have a
significant impact on overall performance, as well as investors’
perceptions and access to capital.
There is clearly a wide range of benefits from reporting. Jeanne
Chi Yun Ng, Director, Group Environmental Affairs, CLP, says that
sustainability reporting has provided multiple benefits for the
company. She says, “While these include a greater understanding
of the group as a whole, it also drives performance, as publication
of targets means we have a requirement to honor public
accountability … The process is helping companies to reshape
the way they think about a number of issues in the economy and
the way they operate. The debate about the interaction between
financial and non-financial issues (such as environmental, social
and governance risks) is changing thinking about the meaning of
value in the 21st-century economy.”
1
For example, in the extractives sector, with increasing public attention over mineral extraction,
child labor and human rights.
A range of stakeholders is driving
organizations to implement a more
sustainable strategy
Expectations that a company should have a sustainability strategy
come from a number of different places. The need for reporting
to support a sustainability strategy is driven by the divergent
needs and interests of an increasing number of stakeholders,
both internal and external. Ernst Ligteringen, Chief Executive of
GRI, says, “In today’s economy there’s a whole range of changing
expectations from stakeholders — be they investors, employees
or wider society. Different users look at sustainability information
from different perspectives, and therefore accrue different
benefits and insights. Investors may, for example, focus on the
cost of capital and brand value. When read by employees, the
information may particularly influence their motivation and have
an effect on retention rates. And wider society may look more
at companies’ license to operate. In this sense sustainability
reporting is both comprehensive and flexible because it meets
many needs, but without being rigid or prescriptive.”
Polling showed that 39% of respondents saw clients and/or
consumers as the group with the most influence on sustainability
strategy, followed by employees at 29%, the board of directors/
highest governance body at 25% and investors at 24%.2
While clients and consumers are seen as the most influential,
it is clear that concerns over the impact of human resource
issues, compliance and operational performance are becoming
more important.
2
Respondents were able to select more than one response to this question.
The drivers and benefits of
sustainability reporting are
increasing in prominence
Sustainability reporting — the time is now 7
Q1. Which group has the most influence on your
organization’s sustainability strategy?3
39%Clients/consumers
29%Employees
25%
Board of directors/those
charged with governance
24%Investors
15%Regulators
10%
Communities where
we operate
9%Civil society groups
9%Competitors
7%Supply chain/clients
1%Board of directors
Q: Which group has the most significant influence on your organization’s
sustainability strategy? Multi-select Shown: percentage of respondents.
Not shown: ‘Other’, ‘Not sure’. Base: All respondents (164); Asia-Pacific (21),
Eastern Europe (3), Latin America (18), Middle East and Africa (8),
North America (16), Western Europe (98).
Q.1 Which group has the most influence on your organization’s
sustainability strategy?
Sustainability decision-making is
moving to the board
Research recently released by EY and Greenbiz suggests that
the main drivers of a sustainability strategy are those individuals
within the executive function.4
The survey supports this
perspective. The majority of respondents identified adding value
and identifying and mitigating risks (at 59% and 57%, respectively)
as the key benefits of an effective sustainability strategy.
In addition, half of the respondents said a sustainability strategy
helped their organization to gain a competitive advantage.
3
Respondents were able to select more than one response to this question.
4
EY, “Six growing trends in corporate sustainability,” 2013, © 2013 EY.
Q2. What are the principal objectives of a
sustainability strategy?5
Respondents were able to select more than one response to
this question.
59%To add value
Q2 What are the principal objectives of a
sustainability strategy?
57%To identify and mitigate risks
50%
To obtain a competitive
advantage
35%
To attract customers
and/or investors
23%
To be responsive to
shareholder requests
21%To attact and retain staff
13%To comply with regulations
10%To identify cost savings
The majority of respondents said the mitigation of risks and the
potential to add value were the key objectives of a sustainability
strategy. This reflects why 42% of respondents also said the chief
executive had overall responsibility.
5
Respondents were able to select more than one response to this question.
Sustainability reporting — the time is now8
One of the key insights from the poll was the growing recognition
of where responsibility should lie within an organization. The
response from a clear majority was with the chief executive officer.
While in the pre-conference survey 42% of respondents said their
CEO was responsible for sustainability strategy, by the end of the
event 49% of respondents believed the CEO should be responsible.
There was an even higher increase in the number of respondents
who said responsibility should lie with the “highest governance
body,” from 11% pre-conference to 34% post-conference. Both
responses recognize the critical importance of sustainability
strategy in both governance and corporate performance.
Q3. Who has/should have overall responsibility for
sustainability strategy? Pre-and post-conference
responses.
Q: Who has overall responsibility for the sustainability strategy in your organization?
Base: All respondents (165); Asia-Pacific (22), Eastern Europe (3), Latin America
(18), Middle East and Africa (8), North America (16), Western Europe (98). After
having participated in this GRI Conference who do you think should have overall
responsibility for the sustainability strategy at your organization? Base: All
respondents (185); Asia-Pacific (30), Eastern Europe (3), Latin America (31), Middle
East and Africa (8), North America (22), Western Europe (91). Single select Shown:
percentage of respondents.
(Pre-conference) Who is responsible?
(Post-conference) Who should be responsible?
42%
49%
Chief executive officer
18%
8%
Sustainability team
11%
34%
Highest governance body
9%
5%
Chief sustainability officer
1%
2%
Chief financial officer
1%
0%
Marketing team
12%
2%
Other
6%
2%
Not sure
The drivers and benefits of
sustainability reporting are
increasing in prominence (continued)
Sustainability reporting — the time is now 9
Today a gap remains between the information provided by a
sustainability report and the effective analysis of its business
impact. What today’s sustainability reporting provides is a means
for stakeholders to develop an awareness of future performance
trends. While financial reporting is very much about historical
data, frameworks such as G4 allow organizations and their
stakeholders to learn about where they stand in the present and
dynamics that may shape their business in the future-factors of
critical importance for risk management and strategic planning.
Steve Waygood, Head of Sustainability Research & Engagement,
Aviva Investors, says that Aviva would like to see the chair and
CEO comment on sustainability performance in reports and
statements. He also says, “It’s important whether directors’ pay
relates to performance of non-financial indicators — if it does, we
know they’re taking it seriously.”
Sustainability creates an environment of accountability, and he
argues the standards themselves are not the issue, but rather the
thinking by the board and investors. He says, “The real question
is whether or not you’re changing your operational and strategic
decisions to reflect the way operations exist today, and are
set to evolve.”
Responsibility for preparing
the sustainability report is not
yet completely aligned with the
strategic or executive function
The majority of reporting organizations, 51%, have a specialized
department responsible for producing the sustainability
report. However there are still a number of organizations
that prepare no report at all (14% of respondents) and for the
remainder, sustainability reports were the responsibility of a
mix of departments, from environmental management, investor
relations, finance, community relations and others. This finding
was reported across countries and regions, in addition to across
organization type and sector. The result is that these differences
in responsibility can lead to the creation of non-standardized
approaches and a mix of different perspectives.
Sustainability reporting — the time is now10
Q4. Which group is responsible for the preparation of
your organization’s sustainability report?
Q: If your organization prepares a periodic sustainability report, which group is
responsible for preparing it? Single select. Shown: percentage of respondents.
Not shown: ‘Not sure’’. Base: All respondents (164); Asia-Pacific (21), Eastern
Europe (3), Latin America (18), Middle East and Africa (8), North America (16),
Western Europe (98).
Q5. Which group is responsible for the preparation of your
organization’s sustainability report?
51%Sustainability
14%No report prepared
13%Communications/marketing
4%
4%
Environmental management
Investor relations
2%Finance
1%Community relations
12%Other
The challenge lies in ensuring that reporting is done in conjunction
with strategic decision-making. That means that whoever is
responsible for preparing reports must ensure they align with the
strategic direction of the business and the sustainability strategy,
and that the CEO’s office or the highest governance body has
overall responsibility and sign-off. The long-term goal of reporting
should be to allow comparability of performance, and to support
the organization in understanding its risk-identification profile and
ensure adequate disclosure and transparency.
Valuation: a breakthrough for
sustainability?
Today the financial system fails to effectively measure or value
the use of public goods, and intangible value is not reflected in a
system which calculates return on capital minus costs. By looking
at pools of capital other than financial (natural, human, intellectual
and social capital) we can gain a broader understanding of the
long-term value of a company. Sustainability, and sustainability
reporting, is an attempt to overcome this imbalance which affects
the market, and the way in which we consume resources.
Part of the challenge is the investor mindset — time-investment
horizons (a focus on short-term capital return), and the availability
of tools to support decision-making and valuation methodologies
in areas that can prove highly complex. There are, however,
additional reasons for reporting non-financial factors. While
valuation methodologies may not yet include intangibles,
Waygood argues that sustainability reporting and targets are a
useful proxy for investors. He says they can help investors analyze
management’s ability to execute the strategy and hit targets.
He says, “If they can hit non-financial targets it tells you something
useful about their ability to hit targets overall.”
The majority of respondents polled believe the valuation of
sustainability could be a driver of change in an organization,
moving sustainability into the boardroom. Only 1% of respondents
thought such valuation would have no impact, with 94% of
respondents believing it would make a difference. Historically,
the environmental and social impact has been viewed as external,
but placing a value on such issues can transform thinking so
they are no longer seen as burdens; but rather opportunities for
value creation.
Q5. Would an understanding of the value and impact
of sustainability strategy help move responsibility to
the boardroom?
Q: Would an understanding of the value and impact of sustainability strategy help
move responsibility to the boardroom? Base: All (158); Asia-Pacific (20), Eastern
Europe (7), Latin America (28), Middle East and Africa (8), North America (16),
Western Europe (79).
Yes, 94%
No, 1% Not sure, 6%
The drivers and benefits of
sustainability reporting are
increasing in prominence (continued)
Sustainability reporting — the time is now 11
Can all sustainability impacts be monetized? Single select Shown: percentage of
respondents. Base: All (161); Asia-Pacific (20), Eastern Europe (7), Latin America
(28), Middle East and Africa (7), North America (16), Western Europe (83).
Can all sustainability impacts �be monetized?
Yes, most
likely, 24%
Maybe/not
sure, 34%
No,certainly
not, 43%
Respondents also said full monetization of the impact of
sustainability may be difficult. While 24% of respondents believe
the impact of sustainability can be effectively monetized, 43%
believed it would not be possible, with a further 34% not sure.
Today’s valuation methodologies are predominantly focused on
short-term capital return, so the majority of respondents are
unclear about the extent to which the valuation of sustainability
will result in its monetization.
Ligteringen says that we need to find an effective way of changing
social systems, economic systems and ecosystems. He believes
sustainability reporting will provide the tools for such change and
will lead to “better business, for better markets, for a better world.”
Sustainability: improving
operational performance
Companies need to understand risks, opportunities and
obligations over the short, medium and longer term as they affect
future earnings and competitive positioning. To perform, they
need to understand material issues for their business — those
issues that significantly influence the decisions, actions and
performance of an organization or its stakeholders. Embedding
critical and pertinent sustainable issues into corporate strategy
can help managers to meet non-financial performance objectives.
Research has shown a correlation between high performance in
a range of environmental, social and governance (ESG) indices
(including FTSE for Good, Dow Jones Sustainability Index, etc.)
and high overall performance. A 2011 Harvard Business School
paper reported that sustainability leaders are more likely to have
a better stock performance due to superior governance structures
and more constructive engagement with their stakeholders.6
A 2013 study by EY and Boston College7
reported that a large
institutional shareholder’s successful interventions in corporate
social responsibility increased share price by an average of 4.4%
a year. It also found that the most transparent companies tended
to have higher cash flows, innovation in processes, reduction in
waste and greater insight into where growth may come from.8
In addition, research from the Governance & Accountability
Institute9
revealed the number of S&P 500 and Fortune 500
companies managing and reporting performance on ESG issues
more than doubled from 2010 to 2011. Growth in reporting
has been driven in large part by the out-performance of those
companies that do report.
These findings highlight the impact that sustainability reporting
can have in terms of improving an organization’s overall
operational effectiveness. It also shows that companies with
strong sustainability approaches are significantly outperforming
their counterparts over the longer term, both in the stock market
and in terms of accounting performance.10
6
Eccles, Robert G.; Ioannou, Ioannis; Serafeim, George, “The Impact of a Corporate Culture of
Sustainability on Corporate Behavior and Performance,” Harvard Business School Working
Paper 12–035, 4 November 2011. www.hbs.edu/research/pdf/12-035.pdf
7
Boston College, “Valuation of Sustainability Reporting,” 2013.
8
E. Dimson, O. Karakas and X. Li, “Active Ownership,” Social Science Research Network, 2012.
9
Governance & Accountability Institute, “2012 Corporate/ESG/Sustainability/Responsibility
Reporting: Does it matter?,” 2012.
10
Eccles, Robert G.; Ioannou, Ioannis; Serafeim, George, “The Impact of a Corporate Culture of
Sustainability on Corporate Behavior and Performance,” Harvard Business School Working
Paper 12-035, 4 November 2011. www.hbs.edu/research/pdf/12-035.pdf
Sustainability reporting — the time is now12
Sustainability reporting — the time is now 13
A decade ago sustainability reporting was still in its infancy.
Now, 95% of the largest 250 companies in the world produce
a sustainability report.11
As interest in corporate sustainability
continues to grow, however, so do the number of standards,
guidelines and frameworks.
While the growth in interest is positive, the proliferation of
governmental, private, NGO and other frameworks has resulted in
an international reporting landscape that is increasingly complex.
There is also increasing evidence that regulators (governments
and stock exchanges) are looking to mandatory reporting
requirements to address heightened public and stakeholder
concerns on environmental and social issues.
Sustainability frameworks
and indicators
The GRI has identified 180 initiatives from 45 different countries
and regions relating to sustainability reporting, and the Climate
Disclosure Standards Board (CDSB) has to date identified 383
provisions that directly or indirectly affect the way in which
companies prepare sustainability disclosures.12
In the broadest
view, the Global Initiative for Sustainability Ratings (GISR) has
uncovered over 1500 indicators addressing almost 600 issues.13
Reporting frameworks can range from commonly used guidelines
to specific disclosure frameworks that enable companies, public
entities, cities, as well as other organizations, to share critical
environmental information and build awareness on the reporting
of carbon and climate risk.14
There are private standards,
accounting standards and frameworks for harmonization.15
11
Ernst Ligteringen, keynote speech at the GRI Global Conference on Sustainability and
Reporting, 22 May 2013.
12
CDSB, “The Case for Consistency in Corporate Climate Change-Related Reporting 2012.”
13
White, Allan, “Swamped by sustainability indicators that fail to drive transformation,”
Guardian Sustainable Business Blog, 7 August 2013, via http://www.theguardian.com/
sustainable-business/blog/sustainability-indicators-corporate-transformation.
14
Such as the Organisation for Economic Co-operation and Development Guidelines for
Multinational Enterprises, the UN Global Compact Principles or the UN Guiding Principles
on Business and Human Rights, the Carbon Disclosure Project (CDP) and CDSB.
15
Private standards such as ISO 26000 and 14000; accounting standards such as the SASB;
and a framework for harmonization such as GRI.
The difficulty is that this can result in great variability in the
quality, quantity, timeliness and relevance of information
disclosed, which can be the cause of considerable confusion
to reporters.
One of the drivers for increased specificity in reporting has
been a growing need to effectively communicate the financial
impact of sustainability. In late 2013, for example, the
International Integrated Reporting Council (IIRC) will release its
integrated reporting framework. In the US, the Sustainability
Accounting Standards Board (SASB) is developing industryspecific
sustainability accounting standards to fulfill the material
information disclosure requirements of the Securities and
Exchange Commission (SEC).16
The development of the SASB standards is part of a movement
where more and more regulators, governments and stock
exchanges understand the importance of corporate disclosure of
information regarding their non-financial performance. This is part
of a trend to move from voluntary disclosure to a more advanced
“report or explain” approach, which, while still voluntary, gives an
added incentive to organizations to be open and transparent about
their sustainability performance and impacts.17
Growth of mandatory reporting
The growth of mandatory reporting can be been seen in a number
of ways. Environmental impact reporting has been in place in many
jurisdictions for some time, and increasingly governments are
extending such reporting for state-owned companies. There is also
a growing trend toward extending this to listed public companies,
through the introduction of legislation to encourage non-financial
reporting. Stock exchanges have an increasingly important role to
play in this transition, as investor interest in material non-financial
disclosures grows.
16
SASB is modeled on the Financial Accounting Standards Board, which was set up in 1973 to
establish and improve standards of financial accounting and reporting in the US.
17
The GRI defines “report or explain” as an approach which requires companies to either report
on their sustainability impacts or report why, if they do not.
Standards, regulations and
transparency are making
sustainability practices more
mainstream
Sustainability reporting — the time is now14
Denmark, Finland, Japan, Korea, France, Pakistan, US, UK,
Malaysia and Canada, among other countries, have some form
of mandatory environmental reporting in place. In some areas
this has been extended to a more comprehensive sustainability
reporting requirement.18
The governments of Sweden and Russia
have already implemented requirements for the mandatory
reporting of environmental issues by state-owned enterprises.
Norway meanwhile has passed legislation requiring large
companies to report on how they integrate social responsibility
into business strategy.19
In India, the Companies Act (2012) introduces new rules on
boards, auditing and fraud specifically to address transparency
issues, and mandates companies in India to spend 2% of net profit
on corporate social responsibility (CSR) activities.20
Affecting
those companies above a certain value or turnover, the Companies
Act is expected to cover around 9,000 Indian companies in total,
each of which will have to set up a CSR Committee to recommend
and oversee CSR policy and activities.21
Other geographies are also considering such action, and in
Europe, the situation is under review. In April 2013, European
Commissioner Michel Barnier proposed a new regulation on nonfinancial
reporting which, if adopted, would affect 18,000 large
companies in Europe.22
This means that all companies with more
than 500 employees and either a balance sheet that exceeds
€20 million or a net turnover of over €40 million would be required
to report on ESG, anti-corruption and human rights, while listed
companies would also be required to report on diversity.23
18
Sustainable Stock Exchanges Initiative, “Sustainability Reporting Policies,” 2013, via http://
www.sseinitiative.org/sustainability-reporting-policies/.
19
Global Reporting Inititative, “Regulating for a more sustainable future: New Norwegian
CSR regulation entered into force,” 12 June 2013, via https://www.globalreporting.org/
information/news-and-press-center/Pages/Regulating-for-a-more-sustainable-future-New-
Norwegian-CSR-regulation-entered-into-force.aspx.
20
Companies Bill 2012. mca.gov.in/Ministry/pdf/The_Companies_Bill_2012.pdf
21
Zaman, Riaz, “Indian CSR Bill Promotes Environmental Management and Women’s Safety
in the Workplace,” Triple Pundit, 6 June 2013, via http://www.triplepundit.com/2013/06/
indian-corporate-social-responsibility-bill-promotes-environmental-management-safety-
women-workplace/
22
European Commission, “Accounting — Financial Reporting,” 25 September 2013, via http://
ec.europa.eu/internal_market/accounting/index_en.htm.
23
There are many ways in which to define diversity, but a key element is the gender, age and
race of employees. The EU regulation is focused on diversity at board level.
Stock exchanges are also responding to the growing importance
of material non-financial impacts. The global financial crisis
drew attention to sustainable business practices but there are
a number of forces highlighting the need for long-term action.
The confluence of resource constraint, climate change, and
the importance of increased transparency and governance,
means the investor community wants more information about
material non-financial issues. Indeed, the issue of sustainability
reporting has been added to the agenda at a meeting of the World
Federation of Exchanges for discussion in October 2013.24
South Africa was the first country to require an integrated report
from listed companies, when the Johannesburg Stock Exchange
(JSE) introduced a “report or explain” approach, using guidelines
based on the King Report III.25
More than 90% of listed companies
have provided a sustainability report following the introduction
of this approach. Other countries have followed suit, and the São
Paulo, Kuala Lumpur and Copenhagen exchanges now all require
companies to report on ESG issues or explain why not.26
In Brazil, BM&F BOVESPA launched its policy just before the
Rio+20 Conference, and the number of companies adhering to
“report or explain” rose from just over 45% in May to almost
58% in October 2012. By May 2013, 253 companies published
information in their Reference Form about social, environmental
and corporate governance factors, or explained why they had not
yet done so.
In the UK the government introduced new requirements for
listed companies (on the London Stock Exchange) on disclosing
greenhouse gases, and changes to the UK Company Act 2006
will require the disclosure of information regarding human rights,
diversity and greenhouse gas emissions.
24
Ceres, “Investors announce proposal for sustainability listing standard for global stock
exchanges,” 8 April 2013, via http://www.ceres.org/press/press-releases/investors-announce-
proposal-for-sustainability-listing-standard-for-global-stock-exchanges.
25
Institute of Directors Southern Africa, “King Code of Governance for South Africa 2009,” 2009.
26
EY, “Stock Exchanges and Sustainability,” August 2012,
ey.com/Publication/vwLUAssets/Stock_exchanges_and_sustainability_reporting/$FILE/
Stock_exchanges_and_sustainability_reporting.pdf
Standards, regulations and
transparency are making
sustainability practices more
mainstream (continued)
Sustainability reporting — the time is now 15
Following the Rio+20 Conference, the Sustainable Stock
Exchange Initiative (SSEI) was launched, “to enhance corporate
transparency, and ultimately performance, on ESG issues and
encourage responsible long-term approaches to investment.”27
NASDAQ OMX, which owns 24 stock exchanges across six
continents, has already expressed support for the process.
Vice Chairman for Nasdaq OMX, Meyer Frucher, said, “Creating a
corporate sustainability reporting standard across all exchanges
will encourage a shift in how companies assess the importance of
their efforts in environmental, social and governance issues.”28
While the majority of sustainability reporting to date has been
under a CSR regime, investors are now increasingly accepting
the need for non-financial disclosure. Many early reports were
about communications to a range of stakeholders, rather than
an analysis of material strategic issues. The proliferation of
the enormous, and growing, range of standards, frameworks,
guidelines makes assessing the right reporting approach for a
particular company a significant challenge.
Harmonizing sustainability
frameworks and standards is key
The growing number and complexity of disclosure requirements
for business could prove a burden, but the process is important.
Sustainability reporting is a two-way practice: it supports
understanding of the impact of business on the wider societal and
environmental stage; it also enables companies to appreciate the
impact of society and the environment on business.
27
Sustainable Stock Exchanges Initiative, “Home page” via http://www.sseinitiative.org/.
28
Ceres, 2013.
The complexity of the process has resulted in a range of
approaches as the materiality of impacts in different geographies
and industries are explored. There is, however, an increasing
number of bodies recognizing that the harmonization and
standardization of approaches will be key to increasing a universal
acceptance of sustainability reporting. There will always be
specific issues of material importance to different stakeholders.
The critical point will be ensuring that the information is reported
in a relevant, comparable and meaningful way.
Organizations such as GRI understand that harmonization is
both a goal and a challenge, and have increased their focus on
harmonizing standards. This activity has been reflected in the
GRI G4 Guidelines, which has enhanced linkages between GRI and
the CDP, the United Nations Global Compact and the forthcoming
integrated reporting framework of the IIRC.29
GRI’s Framework is
the most widely used and recognized multi-stakeholder approach
to disclose economic, environmental, social and governance
information about a company’s performance and impacts. As the
Framework is increasingly harmonized with other approaches,
there should be an increase in the usability and comparability of
sustainability information and reporting.
As there is an increase in the use of sustainability information,
especially with regard to material issues for investors, there is going
to be an increasing demand for the assurance of that information.
29
Global Reporting Initiative, “GRI strengthens strategic partnerships,” 12 June 2013, via
https://www.globalreporting.org/information/news-and-press-center/Pages/GRI-strengthens-
strategic-partnerships.aspx.
Sustainability reporting — the time is now16
The credibility of sustainability data
is on the business agenda
The sustainability challenge of how to turn insight from reporting
into practical action remains. To be effective, reporting should be
a driver of change that takes robust, verifiable data and helps an
organization implement sustainability practices to meet economic,
natural and human challenges. The majority of survey respondents
believe the assurance of data provided in a sustainability report
adds credibility.
Q6. Do you think assurance adds credibility to a
sustainability report?
3%
Strongly agree Agree
Neither agree nor disagree Disagree
Strongly Disagree Not sure
47%
11%
35%
2%
2%
While not all reports have assured data, a growing number of
organizations gain assurance on sections of their sustainability
report. The survey revealed that 82% of respondents either agreed
or strongly agreed that assurance provided increased credibility to
sustainability reports.
Ian Wood, Vice President Community Relations and Sustainability,
BHP Billiton, agrees there is a trend toward increased assurance
of data. There are two main levels of assurance: limited, where
a conclusion is expressed in a negative form; and reasonable
assurance, where the conclusion is expressed in a positive form.
BHP Billiton has assured its data to a reasonable level. Wood says,
“Our CEO was committed to ensuring that data was reliable. For
example, changing pricing in the carbon markets makes it very
important to get that right to ensure we’re paying the right price. It
can have a significant effect.”
According to Waygood, it is important for the information to be
verified externally, and, “that includes the process for getting
the numbers and the numbers themselves. You’d never get away
without the numbers in a financial report.” While assurance is not
yet a requirement for sustainability reporting, it not only adds
credibility to the data that is being reported, but ultimately the
sustainability initiatives of the organization, as the credibility that
assurance provides transcends data.
According to GRI, 38% of reports internationally have some level
of assurance, and 70% of those companies look to the major
accounting firms for assurance. In the US only 10% of reports are
assured, and of those that take that route, the results were split
between 40% seeking assurance from accountants, 35% from
engineering firms, and 25% from others.30
30
Speech by Mike Wallace, Director, Focal Point USA, GRI, GRI Conference 22 May 2013.
Standards, regulations and
transparency are making
sustainability practices more
mainstream (continued)
Sustainability reporting — the time is now 17
While independence of assurers is the single most important
quality sought by an organization, the poll results show that
a range of factors, including technical competence, industry
knowledge, use of professional standards, and existing knowledge
of the organization, are sought by almost half of respondents.
Q7. What is the most important quality you would like
to see in an assurance provider?
What is the most important quality you would you seek from an assurance
provider? Multi-select Shown: percentage of respondents. Not shown: ‘Other’, ‘Not
sure’. Base: All respondents (133); Asia-Pacific (25), Eastern Europe (3), Latin
America (21), Middle East and Africa (5), North America (16), Western Europe (63).
Q8. What is the most important quality you would like to
see in an assurance provider?
26%Independence
23%Technical competence
17%Industry knowledge
15%Use of professional standards
7%
An existing relationship and
knowledge of my organization
47%All of the above
These features are found in the larger assurance providers, as the
poll reported that 50% of respondents use these organizations to
act as assurance providers. Boutique specialists or sustainability
stakeholder panels were both listed as the second-most preferred
at 19% apiece.
Q8. What type of organization would you
consider or prefer for providing assurance on a
sustainability report?
What type of organization would you consider or prefer for providing assurance on
a sustainability report? Single select Shown: percentage of respondents. Not
shown: ‘Other’, ‘Don’t know’. Base: All respondents (134); Asia-Pacific (25),
Eastern Europe (3), Latin America (17), Middle East and Africa (3), North America
(17), Western Europe (69).
Q9. What type of organization would you consider or prefer
for providing assurance on a sustainability report?
Sustainability stakeholder panel 19%
50%Large accounting firm
19%Boutique or niche provider
3%An individual expert
2%Engineering firm
Sustainability reporting — the time is now18
European Commissioner Michel Barnier said, “We can’t afford to
return to business as usual. We need to eliminate the short-termism
that has dominated the corporate sector for too long.”31
He
continued, “Most importantly, the way these commitments are met
should be made public and transparent. Transparency is part of
the solution, not the problem. That’s why non-financial reporting
is such an important issue … it serves the interests of investors,
shareholders, employees and society at large.”
There is strong evidence in a wide variety of areas that the growth
and reporting of sustainable practices is set to increase further.
From regulation to investment decisions, to businesses driving
sustainability into their supply chains — if an argument is made that
sustainability has not yet reached the tipping point, these trends
show that it is only a matter of time.
The policy shift of sustainability
There was a strong sense among those surveyed that policy
frameworks are shifting toward mandatory reporting for
non-financial information.
Two-thirds of survey respondents expect to see non-financial
reporting regulated within their own countries.
Q9. Would you expect sustainability reporting to
become regulated in your country?
Yes, 69%
No, 20%
Not sure, 11%
Q10. Would you expect sustainability reporting to become
regulated in your country?
31
EU Commissioner Michel Barnier, speech, GRI Conference, 23 May 2013.
In addition, it seems the trend is gaining pace. Of those
respondents who believed that regulated reporting will be
implemented, more than half expect to see this happening within
five years.
Q10. If you expect sustainability reporting to be
regulated in your country, what is the expected
time frame?
If so, what is the expected timeframe? Single select Shown: percentage of
respondents. Not shown: ‘Not sure’
Base: All respondents (57); Asia-Pacific (4), Eastern Europe (1), Latin America (9),
Middle East and Africa (1), North America (6), Western Europe (36).
Q11. If you expect sustainability reporting to be regulated
in your country, what is the expected time frame?
19%
Within 2 years
35%
Between 2
and 5 years
23%
Between 5
and 10 years
9%
More than
10 years
Sustainability reporting is an
intrinsic element of integrated
reporting
Another important development within the sustainability space
is the much anticipated IIRC’s Integrated Reporting Framework
(IR Framework) due in December 2013.32
Integrated reporting
is expected to provide information on all aspects of a company’s
performance, highlighting the issues of most importance to
providers of financial capital. Paul Druckman, Chief Executive
of the IIRC, says, “The implementation of integrated reporting
would be a powerful tool for investors and would instill a culture of
transparency, reliability and stability so that investors can begin to
trust their money to longer-term investments.”
32
Integrated reporting is about understanding a company in terms of its pools of capital: financial,
manufactured, intellectual, human, natural (environment): social and relationship. It should
communicate a company’s performance in both financial and non-financial terms, focused on
how a company’s strategy, governance, performance and prospects lead to the creation of
value over time.
Sustainability: the new
“business as usual”
Sustainability reporting — the time is now 19
While there has been a degree of confusion with regard to the
relationship between sustainability reporting and integrated
reporting, the survey revealed that the majority of respondents
believe the two approaches are complementary. In fact,
the survey showed that the majority of respondents (81%)
believe that sustainability reporting is an intrinsic element of
integrated reporting.
Q11. Where does sustainability reporting fit in the
process of integrated reporting?
In your view, how does sustainability reporting fit in the integrated reporting
process? Single select Shown: percentage of respondents. Not shown: ‘Not sure’.
Base: All respondents (224); Asia-Pacific (43), Eastern Europe (6), Latin America
(26), Middle East and Africa (12), North America (28), Western Europe (109).
Q12. Where does sustainability reporting fit in the process
of integrated reporting?
81%
Sustainability reporting
is an intrinsic
element of
integrated reporting
6%
They have different
objectives and
are therefore
mutually exclusive
11%
I don't fully understand
the differences
between the two
What sustainability reporting can do is provide a platform for
gathering the sustainability data needed in an integrated report.
Jeanne Ng of CLP said, “Having published a sustainability report
for almost 10 years prior to our first attempt at an integrated
annual report, it meant we have the systems and assurance
processes in place to assure our senior management that we had
robust data to support putting together an integrated report.”
However, many respondents are concerned they do not yet have
the skill set to deliver such a complex report. Less than 25% of
respondents believe the department currently producing their
sustainability report has the capacity or skills to deliver such a
report. While this may be because the IR Framework is not yet
publicly available, it may also be a lack of knowledge about the
wider elements of financial reporting.
Q12. Could your current sustainability reporting team
produce an integrated report?
Could your existing sustainability reporting team produce an integrated report?
Single select Shown: percentage of respondents. Not shown: Not sure. Base: All
respondents (204); Asia-Pacific (41), Eastern Europe (5), Latin America (24), Middle
East and Africa (9), North America (26), Western Europe (99).
Q13. Could your current sustainability reporting team
produce an integrated report?
24%
Yes
14%
Yes, but it
would move
under Finance
26%
We would need a
new team with
a new skillset
20%
No
Sustainability reporting — the time is now20
The demand for reporting through
the supply chain is on the rise
The supply chain for many major manufacturers is becoming
globalized. Manufactured goods, especially complex products
such as computers or cars, are collaborative efforts, involving
numerous companies and are often cross-border projects with
virtual teams. That, combined with the growth in the export of
manufactured goods,33
is likely to result in increased pressures
for major corporations to address emissions in their supply chain.
Q13. What is your view on the scope of policy and
market regulation of sustainability reporting?
What is your view on the scope of policy and market regulation on sustainability
reporting? Multi-select Shown: percentage of respondents. Not shown: ‘Other’,
‘Don’t’ know’. Base: All respondents (94); Asia-Pacific (8), Eastern Europe (2), Latin
America (12), Middle East and Africa (4), North America (14), Western Europe (54).
Q14 What is your view on the scope of policy and market
regulation of sustainability reporting?
49%It should cover all organizations
31%It should cover large companies
23%It should cover listed companies
16%
It should cover
state-owned companies
2%
Policy makers should not
interfere on this issue
The poll also showed that sustainability reporting is set to expand
in scope, with regulation expected to drive reporting through the
supply chain. Nearly 50% of respondents said reporting should
cover all organizations.
33
In 2010, the latest year for which the World Trade Organization has calculated the data,
world exports of manufactured goods were worth $9.96 trillion, 18% more than in 2009.
Globalization means companies can cut costs, outsourcing
production or assembly to locations that are far cheaper than
their home markets. But reputation and overall responsibility
for products cannot be outsourced. The close interconnection
between developed country brands and their developing nation
suppliers creates leverage for consumers, governments and
campaigners, who want to ensure that branded products are not
tainted by human rights violations or environmental crimes in
vulnerable countries.
Business: the main driver of
sustainability action
Despite a growing consensus that global society should make
the transition to a sustainable and renewable resource-based
economy, there is a major gap between that consensus and action.
Governments experiencing economic constraint are increasingly
turning to the private sector for skills and investment. That leaves
business to spearhead the move toward industrial growth through
sustainable approaches.
Respondents to the survey certainly see business as having a
significant role to play, with 49% of respondents believing that
business will lead the transition to a sustainable global economy.
However, civil society and regulators also featured significantly (at
33% and 30%, respectively) reflecting the importance of all three
sections of a modern economy working together.
Q14. Who will be the leaders of the transition to a
sustainable economy?
Who will be leaders of the transition to a sustainable global economy? Multi-select
Shown: percentage of respondents. Not shown: ‘Other’, ‘Not sure’. Base: All
respondents (368); Asia-Pacific (61), Eastern Europe (6), Latin America (56),
Middle East and Africa (24), North America (44), Western Europe (177).
49%Business
33%Civil society
30%Regulators
7%Accountants
Sustainability: the new
“business as usual” (continued)
Sustainability reporting — the time is now 21
It is clear the need for transparency and the disclosure of
sustainability information is high on the agenda, not just for
business, but for a wide range of stakeholders including investors,
governments and civil society. Nonetheless there is still a long
way to go. There is increasing demand for sustainability reports
to be not only credible, reliable and robust, but increasingly also
relevant and strategic, which means they must contain the right
information for the right people. Publishing such information in a
sustainability report is only the start of a journey, and acting on its
findings may require changes throughout the organization.
The importance of sustainability reporting as the first step in
embedding sustainability strategy in operations remains critical.
The survey highlights the importance of strong leadership,
particularly from the business community and the leaders of
individual organizations. Leadership is needed to support the
sustainability strategy, embed it into the business and show that
it can provide value to both the organization and wider society.
Political leadership is also vital, as the increasing number of
mandatory reporting requirements will have a hugely significant
effect on the sustainability landscape.
Besides the business drivers, regulatory pressure is also growing.
There is a gradual convergence of frameworks, with GRI Guidelines
demonstrating how harmonization can be successful. The demand
for credibility is driving sustainability assurance up the agenda,
and business is finding that both sustainability and integrated
reporting are needed simultaneously, while there is also increasing
pressure through supply chains for sustainable performance.
There are also clear benefits to business by embedding
sustainability within strategic operations, both in the short and
long term. It is clear that increasing efficiency and cutting costs
improve the bottom line. An understanding of the impact of ESG
issues allows companies to anticipate market trends. The market
is increasingly responding to concerns about ESG issues, and a
strategic approach to managing these issues can give companies
a competitive advantage.
The mainstreaming of sustainability and sustainability reporting is
no longer in doubt. Perhaps Allen White, co-founder of the Global
Reporting Initiative, said it best: “Sustainability reporting has gone
from the extraordinary, to the ordinary, to the expected.”
Conclusion
Sustainability reporting — the time is now22
The survey was undertaken before and during GRI’s Global
Conference on Sustainability and Reporting, held in Amsterdam,
22–24 May 2013. Out of an audience of 1,661 thought leaders and
practitioners from around the world, 1,400 delegates downloaded
the app containing the conference survey.
Different questions were asked at different points before and
during the conference, which means the number of respondents
per session and per survey question differed.
The breakdown of the number of respondents was as follows:
Survey and
polls related to
certain sessions
at GRI’s Global
Conference on
Sustainability
and Reporting
Number of
possible
respondents
Number of actual
respondents
Results of survey
on page
Pre-conference
survey
1,400
downloaded the
app
374 Pages 7, 8, 10
Opening plenary approximately
1,400 delegates
in the auditorium
605 none featured
G4 launch approximately
1,400 delegates
in the auditorium
244 none featured
Plenary on G4 on
Thursday morning
approximately
1,400 delegates
in the auditorium
82 none featured
Survey and
polls related to
certain sessions
at GRI’s Global
Conference on
Sustainability
and Reporting
Number of
possible
respondents
Number of actual
respondents
Results of survey
on page
The role of
Assurance
for Better
Sustainability
Reporting
219 pre-registered
for this session
246 Pages 16 and 17
Sustainability
Reporting
Regulation Today
and Tomorrow
251 pre-registered
for this session
134 Pages 18 and 19
Sustainability
Reporting and
Integrated
Reporting
541 pre-registered
for this session
135 Page 19
Valuation of
sustainability
approximately
1,400 delegates
in the auditorium
182 Pages 10 and 11
Bloomberg
Business week
debate
approximately
1,400 delegates
in the auditorium
575 Page 20
Closing plenary approximately
1,400 delegates
in the auditorium
212 none featured
Methodology
Sustainability reporting — the time is now 23
For further information on EY
Sustainability Services, please contact:
Juan Costa Climent
Global, Europe, Middle East,
India and Africa (EMEIA)
T: + 34 9 1572 7381
Steve Starbuck
Americas
T: + 1 704 331 1980
E: stephen.starbuck02@ey.com
Mathew Nelson
Oceania and Far East
T: + 61 3 9288 8121
E: mathew.nelson@au.ey.com
Kenji Sawami
Japan
T: + 81 3 4582 6400
Contacts
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust
and confidence in the capital markets and in economies the world
over. We develop outstanding leaders who team to deliver on our
promises to all of our stakeholders. In so doing, we play a critical role
in building a better working world for our people, for our clients and
for our communities.
EY refers to the global organization, and may refer to one or more,
of the member firms of Ernst & Young Global Limited, each of which is
a separate legal entity. Ernst & Young Global Limited, a UK company
limited by guarantee, does not provide services to clients. For more
information about our organization, please visit ey.com.
© 2014 EYGM Limited.
All Rights Reserved.
EYG no. AU2091
EMEIA Marketing Agency
1000536
ED None
In line with EY’s commitment to minimize its impact on the environment, this
document has been printed on paper with a high recycled content.
This material has been prepared for general informational purposes only and is not intended
to be relied upon as accounting, tax or other professional advice. Please refer to your
advisors for specific advice.
ey.com
The views of third parties set out in this publication are not necessarily the views of EY.
Moreover, the views should be seen in the context of the time they were expressed.