What is sustainability reporting

CDSB stated mission is to "promote and advance climate change-related disclosure in mainstream reports through the development of a global framework for corporate reporting on climate change". Initially focused on risks and opportunities that climate change presents to an organisation's strategy, financial performance and condition, the framework is currently being expanded to included to encompass other types of environmental information related to climate change, in particular information about water and forest risk commodities.

We have a dedicated page for the CDSB. The Corporate Reporting Dialogue is an initiative designed to respond to market calls for greater coherence, consistency and comparability between corporate reporting frameworks, standards and related requirements. The Dialogue aims to:. Further information on the Corporate Reporting Dialogue is available here. The Financial Stability Bard FSB TCFD seeks to develop recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear, and efficient, and provide decision-useful information to lenders, insurers, and investors.

The Task Force will consider the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries. The joint initiative is designed to help businesses and finance professionals learn more about tackling climate change.

Therefore, the website offers video learning resources, setting out the impact that climate change is having on humanity and business equipping businesses to implement change, manage risks and take advantage of the challenges and opportunities created by climate change.

A key feature of the programme is learning about considerations for financial statements and how to translate climate change effects into tangible measurements. In addition, the website offers interviews with key drivers of climate action in business and links to additional resources and guidance. The Goal 13 Impact Platform is the result of a partnership between Deloitte, the CBI, Chapter Zero, A4S, Dell and the Met Office which aims to stimulate cross-sector collaboration by providing pragmatic and transparent information about the most impactful climate related initiatives in place, highlighting significant gaps in progress, and encouraging more ambitious commitments and action.

The Goal 13 Impact Platform serves as an international, free and open repository of climate commitments, actions, approaches to organisation, learnings and barriers, all based on interviews with organisation leaders.

Further information is available on the Goal 13 Impact Platform. The Strategic report is under the spotlight and is a constant area of FRC challenge. Companies within scope need to comply with the enhanced reporting under the EU non-financial reporting directive which was effective for annual reporting periods beginning on or after 1 January Further information is available on our Narrative Reporting resource page.

The Sustainable Development Goals SDGs are a collection of 17 goals set out by the United Nations within the Agenda for Sustainable Development; they call for urgent collective action towards global challenges, such as hunger, unemployment and climate change.

The Governments of the UN Member States have committed to achieving the SDGs and businesses can help bridge the gap towards achieving the SDGs by enshrining sustainable development in their purpose and core activities. Businesses are increasingly finding that there is an inextricable link between a commitment to sustainable development and enduring commercial success.

As a society, we need to make the right connections - combining the policy power of government with the convening power of civil society and resources of business - to better target and tackle obstacles to social progress.

Collective action is needed to scale and drive solutions that could improve wellbeing and help society achieve inclusive growth. A number of resources are available to find more information and support the use of the SDGs within a business:. The regulations, which amend the Companies Act , will take effect for periods commencing on or after 6 April In this regard, the formulation used in the EU Accounts Modernisation Directive discussed below is worth mentioning.

The Directive requires the disclosure of non-financial information 'in a manner consistent with the size and complexity of the business'. Mr Matheson of the Australian Investor Relations Association encapsulated the essence of the notion saying 'an approach that provides flexibility The size, complexity and operations of companies differ, and so flexibility must be allowed in the structures adopted to optimise individual performance.

That flexibility must, however, be tempered by accountability — the obligation to explain to investors why an alternative approach is adopted — the 'if not, why not' obligation.

The DEH noted 'there is a strong view in the community that inconsistency in [sustainability] reporting is limiting the maximising of the benefits that reporting can deliver. Some focus almost exclusively on charitable donations or philanthropic activities engaged in by the companies, whereas others engage in detailed reporting of material substantive risks and impacts that are relevant to the company.

This research, which examined sustainability reporting by Australian companies:. Without a common basis to reporting, users are unable to compare information across time and across companies and so penalise or reward companies.

This outcome is reflected in the failure of capital markets to value sustainability information and suggests that market forces are unlikely to drive future improvements to sustainability reporting and by association corporate practices. It would be folly to go down any route other than to have a global reporting standard. I just think it would be a waste of time So much of the investment markets that operate within Australia happen on an international level, so analysts need to be able to compare and contrast between sectors and between companies within sectors on a global basis.

They are competing for that investment firm's money with the same risk parameters, the same opportunities and the same uncertainties. They need to be able to compare and contrast on that level. According to DEH:. There are a number of frameworks available for non-financial reporting.

Over the past few years however it has become clear that the [GRI] is emerging as the most widely used international framework for reporting.

Currently, over organisations world-wide are identified as users of the GRI Guidelines for reporting, a dramatic increase over the approximately listed in Furthermore the GRI can be incrementally implemented over a number of years, allowing companies to prioritise important elements in the early years of reporting and then to expand the scope over time.

Different approaches will be needed to achieve this goal in different places, depending on the cultural context, legal and economic frameworks, and the level of understanding between stakeholders.

On balance however, the committee does not believe that there are sufficiently compelling reasons to move from a voluntary to a mandatory framework. As a result of these issues the committee believes that it is vitally important for companies to be encouraged strongly to engage voluntarily in sustainability reporting rather than being forced to do so.

The committee makes a recommendation to improve the cost-effectiveness of companies responding to requests for sustainability information and investors and stakeholders seeking out sustainability information in chapter 8 Recommendation The committee acknowledges the importance of moving towards an internationally recognised framework as the Australian voluntary sustainability reporting standard. In chapter 7 the committee makes a recommendation in relation to the GRI.

As noted above, sustainability reporting refers to the practice of corporations and other organisations measuring and publicly reporting on their economic, social and environmental performance. The sustainability performance information may be presented as part of an organisation's annual report, or in a stand alone report.

Non-financial information is also often presented less formally as part of a company's Internet website. The titles of these early non-financial reports, for example 'community impact report', 'stakeholder impact report' or 'environmental impact report' reflect their one-dimensional nature.

Today there is a worldwide trend toward greater use of sustainability reports instead of other types of non-financial reports, and this is also evident in trends across Australia.

There are obvious similarities between sustainability reporting, triple bottom line reporting and corporate responsibility reporting. They all refer to the practice of organisations reporting on their economic, social and environmental performance. In the committee's view the label 'sustainability report' is preferable for two reasons. Firstly, sustainability reporting is a broader concept than triple bottom line reporting. The concept of sustainability encompasses a long-term perspective which triple bottom line reporting does not.

Indeed, sustainability reports will often have forward looking elements as well as outlining past company performance. Sustainability reporting therefore takes into account a broader range of future non-financial risks. A recent CPA Australia's survey found that respondents were far more familiar with the concept of 'sustainability' than 'triple bottom line'. Across the entire range of survey participants, which also included shareholders, investment analysts and company directors the results were 95 per cent recognition of the term 'sustainability' compared to only 48 per cent of the term 'triple bottom line reporting'.

Throughout the remainder of this report the term sustainability reporting will be used. Broadly speaking the various forms of reporting frameworks can be divided into three main categories — codes, standards and reporting guidelines.

Arguably, codes and standards are equally relevant to how a company performs as to what a company reports. These two categories are included in this section because often it is a code or a standard that is the information being disclosed by a company.

The main examples of each of these categories are presented below. An increasing number of organisations are realising the importance and value of explicitly communicating their values and guiding principles in a published code of conduct. An important driver for this shift is the heightened concern resulting from corporate scandals and their impact on the capital markets and investors.

Questionable business practices and even individual incidents of improper conduct reflect, to some degree, the values, attitudes and beliefs of the organisation in which they occur. Unless they form part of a company's key performance indicators or reporting requirements, codes can be passive and ineffective documents. Ms Cox noted their practical limits stating:.

Codes of conduct can be useful but are limited where these attempt to specify behaviour which may not be owned or practiced. Sometimes these documents may be unknown to the organisations, others may be seen as either too ambitious or not practical, others may be too specific and therefore failing to give wider guidance. Each company should determine its own policies designed to influence appropriate behaviour by directors and key executives.

A code of conduct is an effective way to guide the behaviour of directors and key executives and demonstrate the commitment of the company to ethical practices. This expectation arises from the ASX Council Recommendations which are discussed in more detail in the following chapter.

It acknowledges that 'it is important for companies to demonstrate their commitment to appropriate corporate practices. For this reason both the NSW Young Lawyers and Mr Wishart expressed support for a legislative amendment to enable the introduction of a code of conduct to all entities governed by the Corporations Act The committee notes in this regard that there is already an Australian Standard, AS , which relates to organisational codes of conduct.

This standard sets out the essential elements for establishing, implementing and managing an effective organisational code of conduct and applies equally to listed and non-listed entities. The principles call for business to support and protect human rights, respect workplace rights, take greater environmental responsibility and work against corruption.

It does not enforce or measure the behaviour or actions of companies. Rather, the Global Compact relies on public accountability, transparency and the enlightened self-interest of companies, labour and civil society to initiate and share substantive action in pursuing the principles upon which the Global Compact is based. Companies are encouraged to develop their examples of corporate change into case studies and are expected to publish in their annual report or sustainability report a description of the ways in which they are supporting the Global Compact and its ten principles.

There are a range of publications to assist companies in implementing the principles. The number of Australian organisations that are signatories to the Global Compact is steadily growing, with the total currently standing at There are also a number of foreign-owned companies operating in Australia, the parent company of which is a signatory. World-wide there are around businesses and organisations that are participants. The OECD Guidelines establish principles of corporate responsibility covering a broad range of issues including human rights, information disclosure, employment and industrial relations, environment, combating bribery and consumer interests.

Guidelines have been prepared in consultation with business and trade union representative bodies, as well as non-government organisations. The OECD Guidelines apply to the operations of multinational enterprises, even in non-OECD countries, and require Multinational Enterprises MNEs to 'encourage, where practicable, business partners, including suppliers and subcontractors, to apply principles of corporate conduct compatible with the Guidelines.

Observance of the OECD guidelines by enterprises is voluntary and not legally enforceable. However, governments adhering to the OECD guidelines are committed both to promoting the guidelines and establishing National Contact Points to act as a forum for discussion of all matters relating to the guidelines, including the review of 'specific instances'.

An important aspect of the OECD guidelines is the formal review mechanism that allows parties to raise 'specific instances' in which the behaviour of enterprises may have been inconsistent with the guidelines. Moreover, the Australian [National Contact Point] is actively promoting the Guidelines with Australian business and seeking to diffuse information about the Guidelines and other CSR initiatives through a well-developed website. The International Standards Organisation ISO has developed an extensive range of standards, some of which are directly related to aspects of corporate responsibility such as the ISO series on environment management systems.

It forms part of a five-part suite of corporate governance standards AS Business Governance Suite. AS sets out the essential elements for establishing, implementing and maintaining an effective corporate social responsibility program within an entity, and then goes into more detail by providing guidance as to how these elements should be used. The AS suite is aimed at all companies, including the smaller non-listed companies, both for profit and non-profit, that are not covered by the ASX Council Recommendations.

Independent verification provides internal and external assurance that the data and content reported, and claims made, are validated by an independent party. It provides guidance on how to establish a systematic stakeholder engagement process that generates the indicators, targets and reporting systems needed to ensure its effectiveness in impacting on decisions, activities and overall organisational performance. It is a generic standard for assurance engagements including non-financial performance and conditions and behaviour, such as corporate governance and human resource practices.

There is also a range of reporting guidelines available in Australia that have been specifically tailored for the Australian context, which are discussed below. GRI stands for the Global Reporting Initiative, a multi-stakeholder process whose mission is to develop and disseminate globally applicable guidelines for sustainability reporting.

According to the GRI submission:. GRI's purpose is to make sustainability reporting as common and widespread as financial reporting so that it will be routine for companies and other organisations to account for the contributions they make to — and the impact they have on — the globe's natural resources, societies, and economies.

The GRI has a global network of experts from accountancy, business, civil society, investment, labour and others, who contribute on a voluntary basis to the governance of GRI and to the development and dissemination of the GRI Guidelines. The principles include transparency, relevance, accuracy, neutrality, comparability and timeliness, some of which have similarities and overlaps with those used in financial reporting.

Importantly, this section of the Guidelines includes a series of economic, social and environmental indicators that are broadly applicable to all organisations. The indicators are structured so that they elicit comparable information on the performance of many organisations. Not all indicators will be relevant to all organisations and the GRI encourages reporting organisations to consult with stakeholders and develop an appropriate shortlist of performance indicators to include in their reports.

These include:. The GRI Guidelines state:. GRI encourages the use of the GRI Guidelines by all organisations, regardless of their experience in preparing sustainability reports.

The Guidelines are structured so that all organisations, from beginners to sophisticated reporters, can readily find a comfortable place along a continuum of options.

Recognising these varying levels of experience, GRI provides ample flexibility in how organisations use the Guidelines. The options range from adherence to a set of conditions for preparing a report 'in accordance' with the Guidelines to an informal approach. One of the central features of the GRI Guidelines is the fact that participation is voluntary and organisations are permitted to report against any or all of the indicators.

The flexibility in the number of indicators to be reported allows an organisation to build capability over time. In a practical sense, companies that have not previously measured social and environmental performance need time and resources to build and manage the systems that will enable them to measure, benchmark and improve performance across non-financial dimensions.

GRI based reports are able to be customised in a number of ways. They are the primary audience for the presentation of the reporting as it contributes to an increase in employee retention and loyalty. This, in turn, positively impacts the workforce as a whole, which ultimately leads to better performances.

Reporting firms rank highly for sustainability and have Kaplan-Zingales Index scores that are 0. A lower score signifies fewer capital constraints. Here is a collection of sustainability reports of different companies and organizations from various sectors and industries.

Back to Glossary Page. What is Sustainability Reporting? The value of the sustainability reporting process is that it ensures organizations consider their impacts on these sustainability issues, and enables them to be transparent about the risks and opportunities they face. Stakeholders also play a crucial role in identifying these risks and opportunities for organizations, particularly those that are non-financial.