Navigating the challenges of multiple reporting frameworksJanuary 2015
Richard Kirby, technical director at CRedit360, explores the complex web of reporting standards
Making use of reporting frameworks to communicate and benchmark sustainability performance is increasingly the norm for leading global companies. However, while disclosing progress against social and environmental goals stands to deliver significant operational and commercial benefits, there is still no universal standard for companies to report their respective impacts. Navigating the complex web of ‘standards’, frameworks and analyst surveys can be confusing, or, worse, can create a heavy reporting burden, with some companies disclosing a multitude of information that may not be material.
Effective sustainability reporting can only be achieved by selecting the frameworks that correspond most closely to a company’s material issues and reporting in line with these frameworks in a structured, efficient way.
The GHG Protocol for reporting Scopes 1, 2 and 3 emissions is the only true non-financial reporting ‘standard’ devised to date, and enables a comparison between different companies’ carbon footprints. Covering multiple themes, the voluntary GRI framework is used by 80% of the world’s top 100 companies in 41 countries, according to a 2013 KPMG survey.
The new GRI G4 framework is intended to help companies focus on the aspects that are most important to their business and stakeholders. Companies also face a multitude of surveys, with CDP and the Dow Jones Sustainability Index (DJSI) among the most widely applied.
Moving towards a greater degree of standardisation takes time – the GAAP principles for financial reporting took decades to develop, for example. Policymakers can help to catalyse change by introducing legislation such as the new European Union law mandating non-financial reporting for major companies in Europe. In the meantime, we shouldn’t undervalue the work of the GRI in providing a comprehensive framework to help companies get started on this challenging journey.
One of the major issues arising from the lack of standards for non-financial reporting is the lack of consistency in reporting and the consequent lack of comparability between companies and sectors. It can also be hard to know how to select the right framework or approach overlapping questions. Establishing a common, universal dataset is fundamental – a comprehensive and organised base of information from which to draw for every framework or survey can significantly help to streamline the reporting process.
• Establishing clarity of purpose by looking within the business and deciding which aspects to measure, in line with corporate goals.
• Understanding how closely these themes fit with the frameworks to which you are considering responding and selecting those that are most relevant.
• Maintaining a ‘bedrock’ of hard quantitative data and applying best practice standards like GHG Protocol and OSHA whenever possible. We recommend integrating an underlying system of data capture with corporate reporting functionality, in order to ensure that collecting, reporting and auditing data is seamless and transparent.
• Using the underlying dataset, identify information that can be used across multiple frameworks and make adjustments as required for each survey. Repeat the process as frameworks or surveys are updated or new frameworks are introduced.
Software can play an important role in collecting and managing data, providing smart ways for users to organise, identify, and/or tag requirements for various frameworks. It is also possible to consolidate information from multiple data systems.
Non-financial reporting is certainly a challenging topic and it is likely to be some time before true ‘standards’ for sustainability reporting are established. Nonetheless, having an intelligent information management system in place to streamline the process can be a significant help in terms of improving efficiency and enhancing the quality of information required for reporting.
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