Framework for Sustainability Reporting Professor Doug Cerf
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Framework for Sustainability Reporting Professor Doug Cerf

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Framework for Sustainability Reporting Professor Doug Cerf Framework for Sustainability Reporting Professor Doug Cerf Presentation Transcript

  • Framework for Sustainability Reporting Professor Doug Cerf Donald Bren Graduate School of Environmental Science and Management Corporate Environmental Management (ESM 281) Spring 2010
  • This discussion is on—
    • how/where/why sustainable reporting is done
    • as opposed to…..
    • determining the sustainable performance of a firm through evaluation of sustainable reports
  • Sustainable vs. financial reporting
    • What is the driver for various stakeholders?
      • Financial reporting-related to investor and has a direct financial impact
      • Non financial (sustainable reporting)
        • long term business value financial impact to investors
    • Mandatory or voluntary
    • Guidelines for each type of reporting
    • Audit/assurance for each type of reporting
    • Frequency of each type of reporting
      • Sustainability reporting is less regular than financial reporting
    • Disclosure, income management
    • Public relations component
    • Distribution system for each reporting system
      • Implications of including environmental disclosures in required financial reporting
    • Both are evolving
      • Move to International Financial Reporting Standards for US Corporations
  • Global Reporting Initiative (GRI)
    • a multi-stakeholder process
    • mission is to develop and disseminate globally applicable sustainability reporting guidelines.
    • voluntary use by organizations for reporting on...
      • economic, environmental, and social dimensions of their activities, products, and services .
    • 717 organizations in 2008 from around the world report using the GRI
      • the world's de facto standard for reporting.
      • 60 US companies
      • List of companies reporting available on GRI website
        • http://www.globalreporting.org/GRIReports/2008ReportsList/
  • In October 2006 GRI released its second comprehensive set of reporting guidelines—called the G3 Reporting Framework
  • G3 categories
    • Defining Report Content
    • Defining Report Quality
    • Setting the Report Boundary
    • Profile Disclosures
    • Disclosure on Management Approach
    • Performance Indicators
    • Sector Supplements
      • G3 Link: http://www.globalreporting.org/ReportingFramework/G3Online/
  • Reporting Boundaries of Sustainability report
    • Organizations may have
      • complex internal structures, multiple subsidiaries,
      • joint ventures, and/or foreign operations.
      • significant use of outsourcing
      • Complicated supply chains
      • Distribution channels
    • Particular care should be taken to match the scope of the report with the economic, environmental, and social “footprint” of the organization (i.e., the full extent of its economic, environmental, and social impacts).
    • Any differences should be explained.
    • Is this too much to ask of firms?
      • Do the benefits of reporting outweigh the cost of the systems?
  • Reporting Boundaries Source: GRI boundaries exposure draft
  • Source:GRI-G3 online
  • Technical protocols
    • GRI has developed reporting protocols for some reporting categories
    • Reporters should use GRI technical protocols if they are available
    • If an existing GRI protocol is not used,
      • The reporting organization should clearly describe the measurement rules and methodologies used for data compilation.
    • If a GRI protocol is not yet available,
      • reporting organizations should use their professional judgment, drawing on international standards and conventions wherever possible.
  • Required Sustainable reporting
    • Denmark, France, Hong Kong, the Netherlands, Norway, South Africa and UK.
  • Integrated reports
    • Some firms are integrating their sustainability report with their annual (financial) report
      • Examples:
        • Novo Nordisk, Danish Pharmaceutical
        • Danisco, Danish producer of food ingredients
        • Dofasco Inc., Canadian Steel Company
    • Most important benefit of integrated reporting is the sustainability metrics are part of the financial reporting distribution system
    • “ The trouble with most reports is that they have no natural audience other than a handful of SRI analysts.”
            • Judy Kuszewski, SustainAbility Ltd.
  • Legitimacy Theory
    • The role of environmental disclosures as tools of legitimacy: A research note (Accounting Organizations and Society, 2007)
      • In general, the findings provide additional support for the argument that companies use disclosure as a legitimizing tool
      • Our tests document that total environmental disclosure is higher for worst environmental performers.
      • Such disclosure is also higher for firms operating in environmentally sensitive industries.
      • worse environmental performers made higher levels of non-monetary environmental disclosures than their better performing counterparts
  • Are the firms producing sustainable reports sustainable?
    • The companies with the best sustainability records produce sustainable reports
    • The companies with the worst sustainability records produce the best reports
    • Discussion
  • Earth in the Balance Sheet
    • CFO article
    • http://www.cfo.com/printable/article.cfm/10234097/c_10234153?f=options
  • Sustainability Reporting Project
    • Goal, obtain a solid understanding of:
    • scope (what portion of the entity is included in the report) and why.
    • geographic scope
    • impact of outsourced activities (if applicable)
    • the sustainable categories addressed
    • the technical protocols or other metrics used
    • assurance services used,
    • effectiveness of the report