Shoddy practices must end if sustainability reporting to be trusted

Shoddy practices must end if sustainability reporting to be trusted

08 Jan 2008

Carol Adams
Email: c.adams@latrobe.edu.au

The incompleteness, inaccuracy and bias that we see in sustainability reports would not be tolerated in financial reporting. So why do we tolerate it when it comes to reporting on organisational impacts on our irreplaceable environmental assets? We would not have confidence in financial reports which were not audited, so why would organisations expect stakeholders to trust sustainability reports which are not independently assured?

Companies and public sector organisations alike are under increasing pressure to report on their social and environmental performance. A number are setting out to become Carbon Neutral — achieving zero greenhouse gas emissions through a combination of reducing consumption, increasing utilisation efficiency, and offsetting remaining emissions using carbon credits. This raises a number of questions.

Do stakeholders – employees, customers, suppliers, regulators, etc — trust companies to report honestly, without bias and with integrity? Most believe that corporate bias exists. Under the watchful eyes of the media and NGOs, the greenwash of the 1990s has been replaced or supplemented by a 'sustainability shine' — a 'glow' rather than a 'wash'. For example, rather than failing to report on a serious environmental incident, an organisation might report it, but with limited information about its negative impacts on human health and animal life. Or it might present its own (biased) take on the scientific evidence.

Do organisations have data collection systems which allow them to report accurately and completely? Our consulting and research work indicate that many, even large, well-established organisations, do not. Assurance of sustainability reports often reveals data collection systems at infant stages of development.

It is doubtful that this state of affairs is good enough to individual stakeholders making an effort to reduce their own energy and water consumption. The number of Top 100 Australian Stock Exchange (ASX) listed companies producing stand-alone environmental or sustainability reports has increased from about 14 in early 2002 to 40 in 2006 according to a study by Net Balance in partnership with the ACCA on Disclosures on Climate Change. However, only about 16 of these reports were independently assured.

Assurance using AccountAbility's AA 1000 Assurance Standard provides stakeholders with much more confidence about the reliability and completeness of sustainability reports. The AA 1000 Assurance Standard is a generally applicable standard for assessing, attesting to, and strengthening the credibility and quality of organisations' sustainability reporting, and their underlying processes, systems and competencies. It draws from and builds on mainstream financial, environmental and quality-related assurance, and integrates key learning with the emerging practice of sustainability management and accountability, as well as associated reporting and assurance practices (AA1000, 2002). An assurance process undertaken using the AA1000 Assurance Standard applies principles concerned with Materiality, Completeness and Responsiveness to stakeholders, enhancing the credibility of sustainability reports.

Sustainability assurance is a requirement of a number of investor surveys (Carbon Disclosure Project, Dow Jones Sustainability Index, FTSE4Good), benchmarking surveys (SustainAbility, Reputex) and awards such as those conducted by the ACCA and Ethical Investor and is recommended by the Global Reporting Initiative (GRI). More importantly it builds trusts with stakeholders and provides management with guidance on how to improve sustainability reporting processes and sustainability reports.

Carol Adams is Professor of Accounting and Sustainable Development Strategy and Deputy Dean, Faculty of Law and Management La Trobe University. She is a former Director and Council Member of AccountAbility.

Terence Jeyaretnam is a Director of Net Balance Management Group and a Lead Certified Sustainability Assurance Practitioner accredited by the International Register of Certified Auditors (UK).

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