The launch of the Global Resources Institute’s (GRI) new G4 reporting guidelines has triggered a welcome debate on the future of sustainability reporting. One thing’s for certain: reporting is changing.
The last few years have witnessed a tremendous increase in the number of companies reporting their sustainability performance, especially in Europe.
In 2011 over 1,100 companies used the GRI’s guidelines compared to just 149 in 2004.
The rise in reporting is partly a result of increased regulation from governments and stock exchanges.
For example, Brazil and South Africa now require listed companies to report Environmental, Social and Governance (ESG) issues, while other major stock exchanges, led by the Sustainable Stock Exchanges Initiative, are considering similar changes too.
Nevertheless, reporting around the world remains largely voluntary with companies able to decide on the content and frequency of their reporting.
Preparing for Mandatory Reporting
The GRI guidelines dictate how many of the world’s largest companies report sustainability. The focus of the latest version (G4) is on ‘materiality’, which should make reporting more relevant and meaningful.
This is a welcome change and commentators have been broadly supportive.
Even so, companies should put greater emphasis on “sustainability context”, for example looking at how readily available certain crops are at the time of sourcing or the regional availability of freshwater in which a particular processing plant is located.
Without this most people are none the wiser as to what a company’s sustainability actually means.
But as Verdantix, an independent analyst firm, pointed out, the key feature of G4 is that “sustainability reporting is shifting from voluntary to mandatory, reflecting its move from reputation management to a risk management issue”.
Such changes are positive and are clearly transforming the nature of reporting for the biggest companies, but what do they mean for SMEs?
After all, the vast majority of businesses in the UK are SMEs, employing a total of 14.1 million people with a combined turnover of £1,500 billion.
How many of these businesses have the time or resources to get to grips with specialist sustainability management software and complex reporting guidelines?
Considering that around one million SMEs only have 1 – 9 employees, the likely answer is “not many at all”, meaning that a huge segment of the business community is effectively excluded from sustainability reporting.
I raised this point during a recent Guardian online debate, but my question asking how sustainability reporting can be made easier and more accessible for SMEs went unanswered.
This is exactly why there needs to be a free, easy-to-use system which enables these businesses to participate in sustainability reporting – a solution which amee has developed.
Another change which is fast approaching is a much greater integration of social media in the reporting process.
Such changes would surely increase consumer pressure on companies and help to make reporting more consistent, comparable, frequent and interesting.
Unless this happens we will be locked into the current system whereby mostly unconvincing and unengaging annual reports are produced by a select few companies.
This needs to change. The prospects that it will are promising.