Sustainability reporting has become increasingly common for companies as a way to publicly discuss issues related to climate change, resource use, community impact, and governance. While reporting provides opportunities to strengthen stakeholder relations and business practices, companies must work closely with legal counsel to ensure reports do not expose them to liability by being realistic about performance. Benefits of reporting include operating more efficiently and developing innovative products, while risks include potential litigation if reports misrepresent material information. Companies new to reporting should involve counsel throughout and focus on transparency, clarity, and accuracy to minimize legal complications.

1. Reproduced with permission from Corporate Accountability Report, 11 CARE 848, 8/16/13. Copyright ஽ 2013 by
The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
Sustainability
Greener Ledgers: The Practical Benefits
And Legal Risks of Sustainability Reporting
s Practice Tip: Companies should pursue corporate
social responsibility reporting to strengthen their rela-
tions with stakeholders and develop their business
models, but must also work closely with their legal
counsel to ensure that they are not exposing themselves
to liability.
C
ompanies in both the U.S. and abroad are likely to
face increasing pressure to engage in some form
of corporate social responsibility (CSR) or sustain-
ability reporting.
Such reporting, which is also referred to as environ-
mental, social, and governance (ESG) reporting, pro-
vides companies the opportunity to publicly discuss the
organization’s current status and future goals concern-
ing issues related to climate change, natural resource
consumption, community development, diversity, and
corporate governance.
Companies should approach this process as an op-
portunity to engage with stakeholders and develop bet-
ter business practices while also minimizing possible le-
gal complications by being realistic and honest about
their current performance and future goals.
Sustainability Reporting: Past, Present and Future. Sus-
tainability reporting’s underlying concepts can be
traced back to at least as early as 1984—the year that
stakeholder theory began to really take hold in the busi-
ness community following the publication of R. Edward
Freeman’s book, Strategic Management: A Stakeholder
Approach.
In the U.S., the practice has dramatically evolved
since ice cream maker Ben & Jerry’s Homemade Inc.
first substantively revolutionized the practice by com-
missioning an independent ‘‘social auditor’’ to produce
a stakeholder report in 1989.
In the wake of the new practices employed by Ben &
Jerry’s, other companies, such as The Body Shop Inter-
national Plc and Shell Canada Ltd., continued to drive
the evolution of the practice throughout the 1990s.
By 2000, the Global Reporting Initiative (GRI), which
at the time still existed as a project department of the
Coalition for Environmentally Responsible Economies
(CERES), released the first version of its comprehen-
sive reporting framework.
Following this initial release, the GRI became an in-
dependent institution and grew in importance as it de-
veloped succeeding generations of reporting guidelines,
which became the authoritative standards for sustain-
ability reporting in both the U.S. and abroad.
By April of 2012, more than half of the companies
listed on the S&P 500 were producing CSR reports, 63
percent of which followed the GRI’s framework, ac-
cording to a 2012 report by the Governance & Account-
ability (G&A) Institute, 2012 Corporate ESG/
Sustainability/Responsibility Reporting: Does It
Matter?. As the report noted, ‘‘[n]ow that 53% of the
S&P 500 and 57% of the Fortune 500 are reporting on
their Environmental, Social, and Governance impacts,
the non-reporters are now in the minority.’’
As articulated by Mervyn King, Chairman of the In-
ternational Integrated Reporting Council, at the 2013
GRI Global Conference, ‘‘[s]ustainability reporting has
become mainstream—as mainstream as financial
reporting.’’
As for the future of sustainability reporting, the in-
dustry trends in both the U.S. and abroad indicate an
‘‘increase in the amount of policy and regulation for or-
ganizational reporting,’’ according to a 2013 joint report
published by the GRI in collaboration with the G&A In-
stitute, UNEP, and various other global stakeholders,
titled Carrots and Sticks: Sustainability Reporting Poli-
cies Worldwide—Today’s Best Practice, Tomorrow’s
Trends.
Given that voluntary reporting practices drive man-
datory policies and vice versa, U.S. stock exchanges are
likely to make sustainability reporting a listing require-
ment. The NASDAQ OMX Group and the New York
Stock Exchange will be submitting ESG disclosure pro-
posals at the World Federation of Exchanges annual
meeting this October.
In a June 2013 post on Twitter, NASDAQ OMX Man-
aging Director, Evan Harvey, said ‘‘Our wish is ESG re-
porting becomes as standard, actionable & ubiquitous
as financial reporting.’’
Investors themselves increasingly care about compa-
nies’ sustainability performance. Commenting on a
2012 survey conducted by Bloomberg LP and Sustain-
Ability, titled Rate the Raters: Phase Five—the Inves-
tors View, SustainAbility Vice President Michael Sad-
owski wrote that, ‘‘[o]ver 60 percent of respondents say
they are using ESG data and information more today
than they were three years ago, while 63 percent say
they will use such data and information more three
years from today.’’
Benefits, Potential Pitfalls of Sustainability Reporting. In
addition to regulatory and shareholder pressure, com-
panies have other incentives to start engaging in sus-
tainability reporting.
COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC. ISSN 1542-9563
Corporate Accountability
Report®

2. As Kathrin Winkler, senior vice president, chief sus-
tainability officer at EMC Corp., a global leader in pro-
viding information infrastructure and virtual infrastruc-
ture technologies, solutions and services, stated in a
July 2013 email to BNA, ‘‘putting the rules aside, EMC
believes there are many strong business reasons for
sustainability reporting.’’
In Sustainability and the Board: EMC, a 2012 article
that Winkler co-authored with Rachel Lee, EMC’s se-
nior corporate counsel, Winkler further discussed the
ways in which EMC’s sustainability reporting has en-
abled the company to operate more efficiently by
streamlining processes, reducing costs, energy con-
sumption and greenhouse gas emissions, and develop-
ing more innovative product designs that use less mate-
rial and minimize packaging waste.
Winkler and Lee also detailed the ways that reporting
has encouraged transparency and accountability within
the corporation and served as a catalyst for driving the
company’s ongoing communications with its sharehold-
ers and stakeholders.
Sustainability reporting is not without its pitfalls. Par-
ticularly, reporting companies must work closely with
their legal department to ensure that reports do not
misrepresent material information that may lead to fu-
ture litigation.
At EMC, ‘‘[t]he Office of the General Counsel is one
of our key partners, providing content for the ‘Gover-
nance & Integrity’ section as well as reviewing the en-
tire report for transparency, clarity, and accuracy,’’
Winkler said.
He added that companies new to reporting should
‘‘[r]emember—it’s a journey, not a single event. Expect
to learn from each year’s report to make the next year’s
report better. Be honest about not only the accomplish-
ments, but also the challenges.’’
BY NICHOLAS HAWKS
AVOIDING PITFALLS
Involving Counsel in the Reporting Process
Companies new to sustainability reporting can
benefit from risk management strategies that focus
on:
s working with legal counsel from the earliest
stages of the reporting process;
s increasing counsel’s role in reviewing the re-
port’s transparency, clarity, and accuracy; and
s using third-party assurance organizations when
possible and/or feasible.
2
8-16-13 COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC. CARE ISSN 1542-9563