Report or Explain...
Teresa Fogelberg explains why we need to make sustainability reporting expected practice
How can markets, governments, companies and consumers together make the needed transition to a sustainable Green Economy? This is one of the key questions to be discussed during the last phase of the preparatory process of the Rio+20 conference. The negotiations need to aim at a bold and innovative decision; one which will be vital to the success of the conference, and contribute to the future we want. To this end, the zero draft represents a good starting point, referencing the disclosure of sustainability information by businesses.
Disclosure of sustainability information is increasingly the basis of good business conduct. Financial reporting alone is insufficient as a measure of value. It needs to be complemented with sustainability information – on economic, social and environmental performance – so that companies and investors can properly price risk, measure performance, and identify market opportunities.
Leading companies already recognize the value of sustainability reporting. Research from KPMG shows that 95 percent of the Fortune Global 250 companies currently provide information on their sustainability policies and performance.
A global decision to require companies to report their sustainability performance - or explain why if they don’t - will make sustainability reporting the expected practice. It would increase the number of reporting companies, enhance the volume and quality of data available, raise awareness about sustainability issues for business, investors and the public, and generally ensure a more level playing field.
The Report or Explain approach to sustainability reporting policy offers great flexibility: companies would still retain the choice of reporting frameworks and indicators, and even whether to report or not.
On the other hand, the Report or Explain principle can be introduced in several ways; for instance through smart ‘soft’ regulation, mandatory measures, or stock exchanges requiring listed companies to report.
Governments, international organizations, stock exchanges and a number of private initiatives have developed policy, regulation, requirements and guidelines to promote sustainability reporting and disclosure, while others are considering doing the same.
Among others, Australia, China, Denmark, the European Union, France, India, Germany, Norway, Spain, Sweden and the United States have developed governmental policy initiatives to promote sustainability reporting and/ or Environmental, Social and Governance (ESG) disclosure. Stock exchanges in Brazil, China, Malaysia, Singapore, Pakistan and South Africa are also playing a pivotal role in requiring or recommending listed companies to disclose sustainability/ESG information.
Come on a journey around the world to where our green economy hubs are mapping out the transition.