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November 13, 2006
Sustainability Reporting Improving, But Not Necessarily Contributing to True Sustainability
by Bill Baue
The biennial survey of global reporters by SustainAbility assesses disclosure on sustainability
performance, but refrains from directly assessing corporate sustainability performance.
SocialFunds.com --
The quality of sustainability reporting is progressing rapidly, according to the fourth biennial survey
conducted by SustainAbility, the
UK-based sustainable development consultancy, along with the United Nations Environment Programme
(UNEP) and Standard & Poor's. The report, entitled Tomorrow’s
Value, was released last week in London and also at the Business for Social Reponsibility (BSR) Conference in New York. It ranks 50
sustainability reporting "leaders" by assessing reporting by a 100 percent scale on four aspects:
governance and strategy, management, presentation of performance, and accessibility and assurance.
 "The 2006 results show BT head-and-shoulders in front of
the main pack of leading reporters . . . breaking the 80 percent threshold for the first time,"
states the report. BT comes "in seven percentage points ahead of the second group--Co-operative Financial
Services, BP, Rabobank, and Anglo Platinum--all of which
achieve impressive scores of over 70 percent."
The ranking does not rate
sustainability performance but rather sustainability reporting, with disclosure on
sustainability performance amongst the issues assessed. This is an important distinction, as it
helps explain why BP, which has a stellar track record on both sustainability reporting and
sustainability performance, continued to rank high despite a year beset with major environmental
and safety problems. In March 2005, an explosion at a BP refinery in Texas killed 15 people and
injured 170, and in March 2006, a rupture in a BP pipeline in Alaska resulted in a 200,000-gallon
oil spill.
"We expect reports to be transparent on the issues companies face--we expect
them to present measures of performance and describe the steps they are taking to remedy problems
and improve," said Matt Loose, manager of the Global Reporters project. "The Texas City incident
is a huge focus of BP's report and disclosure there is very candid and detailed."
"BP does
not yet report on the Alaska spill, but I would expect this to be a focus in their next report," he
told SocialFunds.com, pointing out that this event occurred after BP's most recent reporting
period.
SustainAbility revised its ranking methodology for this
year’s assessment. One of the changes involved making it complementary with the Global Reporting
Initiative (GRI)--particularly
the Reporting Principles of the new G3 guidelines launched last
month. The revised methodology also shifts the focus to consider the extent to which business
processes take account of sustainability impacts and performance.
The methodology
references "sustainable development" explicitly in four of its 29 criteria. However, the report
acknowledges the inherent limitations of sustainability reporting in reflecting the actual degree
to which companies are achieving true sustainability.
"[T]he reported integration of
sustainability targets, however good the metrics and however accurate the reporting, does not
guarantee that a company is making a net positive contribution across the triple bottom line of
sustainable development," states the report.
SustainAbility has been placing increasing
importance on the financial implications of sustainability reporting by accentuating the importance
of materiality, value creation, and the business case for sustainability. This emphasis helps
increase the relevance of sustainability considerations amongst corporate executives, mainstream
institutional investors, investment analysts, and even rating agencies such as Standard & Poor's.
"The Holy Grail is to convince investors that sustainability issues are material to both
the bottom and the top lines," the report states.
However, UNEP Executive Director Achim
Steiner expresses concern that the financial focus loses sight of the forest for the trees.
"One of the G3's ten reporting principles is that of 'sustainability context,'" Mr. Steiner
states in the report's foreword. "With leading companies putting greater emphasis on value
creation in their reporting, let us remind ourselves of the importance of putting reported
activities in context."
Mark McElroy, executive director and chief sustainability officer
of the Center for Sustainable
Innovation that created the Global Warming
Footprint methodology for assessing whether companies' greenhouse gas emissions are truly
sustainable, takes this notion a step further.
"Achim Steiner's emphasis on the importance
of sustainability context is, if anything, understated--despite its relevance, it is conspicuously
missing from most sustainability reports," Mr. McElroy told SocialFunds.com. "Unfortunately, that
means most reports fail to achieve the one thing they set out to do, which is help their readers
understand how sustainable their operations are--in the absence of context, there is no way to
know!"
©
SRI World Group, Inc. All Rights Reserved.
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