Sustainable reporting - the triple bottom line

23rd July 2006

It is no longer universally acceptable for businesses to provide their shareholders with the biggest possible financial return on their investment, if this is to the detriment of other stakeholders. The notion of a mandatory OFR may have fallen by the wayside, but the concepts of sustainability and corporate social responsibility will not disappear quite so easily. It is no longer universally acceptable for businesses to provide their shareholders with the biggest possible financial return on their investment, if this is to the detriment of other stakeholders. The notion of a mandatory OFR may have fallen by the wayside, but the concepts of sustainability and corporate social responsibility will not disappear quite so easily. 'I don't think the values the OFR tried to introduce will go away just because the prospect of a mandatory OFR has,' comments Nick Groves, a senior consultant with Deloitte who specialises in performance management reporting. Some organisations are producing an OFR voluntarily and others will use their redundant OFR preparation as the basis for their Business Review, because as he adds: 'Stakeholders still want to be able to see what's going on, and gain a clear insight into strategy and key performance indicators.'

 

Lesley Meall, FSN Contributing EditorWitness the activities of BSkyB, HSBC and Marks & Spencer - just a few of the corporates choosing to report on how sustainability issues as diverse as climate change and labour standards in factories affect, and are affected by, the way they formulate business strategy.

There are a variety of possible approaches to this, but many organisations look to the Global Reporting Initiative (an international multi-stakeholder body) for a template. The GRI published Sustainability Reporting Guidelines (in 2000) based on a triple bottom line reporting concept, which discloses three interrelated organisational imperatives: economic prosperity, environmental integrity and social contribution.

With Global Investment banks such as Goldman Sachs including environmental, social and governance criteria in their analysis of companies, increasing numbers are producing reports that focus on these performance measures. Although it is impossible to accurately estimate how many, CorporateRegister.com features more than 11,500 reports from around 3000 different companies across 112 countries - and the numbers are growing. 'Each week we add reports from companies that are publishing information on sustainability issues for the first time,' says Paul Scott, a director with Next Step Consulting, the organisation that has been publishing the Corporate Register since 1990.

'People who talk about the triple bottom line are not just a bunch of sandal wearing wierdos,' says David Benton, a chartered accountant who works for Forum for the Future, a UK charity dedicated to encouraging and supporting a more sustainable way of life. 'Businesses are becoming more and more globally aware,' he adds, 'so sustainability issues have to be considered within the context of doing business, in the same way as factors such as competitor activity.'

It's an approach that can produce more than just a nice warm glow, as Roger Adams, executive technical director at the ACCA explains. 'Organisations that pursue sustainability reporting sincerely and effectively are discovering that the process can inform every aspect of their activities,' he says. 'Not only can that deliver a better corporate reputation, but it can make them more attractive to the best talent, and – in the long run – help make them more sustainable organisations,' he suggests, adding: 'More organisations should understand that sustainability reporting is not simply public relations window dressing.'

This said, even those seriously committed to sustainability reporting seem to struggle to create reporting models that integrate it with financial reporting and stakeholder reporting. 'The question of how to do the reporting better is a significant one,' says Benton , and many shy away from it by producing a separate social responsibility report which makes it impossible to meaningfully connect their efforts to business performance. The key performance indicators included in sustainability reports and corporate responsibility reports are rarely the KPIs the board or the executive team look at when they're running the business.

'The accounting and information systems an organisation has in place are a reflection of the priorities and methods of the organisation,' says Benton . Taking a joined-up approach to the corporate reporting process simply calls for the same level of commitment as organisations have shown in their attempts to provide the increased accountability and transparency mandated by initiatives such as IFRS and SOX. 'Businesses are very good at doing stuff if it's important enough,' observes Benton wryly: where there's a will there's a way.

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