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June 08, 2005
Canadian Corporate Sustainability Reporting In Its Infancy, Shows Signs of Growth
    by William Baue

A lengthy report released yesterday by the Certified General Accountants Association of Canada provides a primer on sustainability reporting as well as a statistical snapshot.


Measured by maturity, corporate sustainability reporting is in its infancy in Canada compared to its slightly more developed cousins in Europe and the US, according to a new report by the Certified General Accountants Association of Canada (CGA-Canada). Measured by page count (more than 100), the report reveals that Canadian sustainability reporting is much more significant than its developmental stage suggests. Actually, the report is several documents in one, an interpretation made manifest in how it is posted on the CGA-Canada website--divided into three parts to ease downloading.

The first part provides a fairly comprehensive overview of the history of corporate sustainability reporting in general and in Canada specifically. The third part takes up where the first left off, contextualizing sustainability reporting by expounding its uses, for example by socially responsible investment (SRI) practitioners, and projecting the future of sustainability reporting. A neophyte, say a corporate manager at a firm that is behind the curve but wants to get up to speed quickly, could come away with a solid handle on sustainability reporting after reading these two sections.

The second part, the meat of the report, presents in-depth findings of a survey conducted in late 2004 that cast a wide net.

"Much of the current impetus and literature on corporate sustainability reporting focuses on larger companies or existing sustainability reporters," states the report. "In the spirit of obtaining a broader Canadian perspective on corporate sustainability reporting, CGA-Canada has elected to solicit data from across the business environment."

Of the 3,176 companies on Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSX-V) surveyed, only a little more than 200 responded, creating a margin of error of +/- 5.5 percent, 9 times out of 10. While the majority of respondents were micro-cap (65 percent) and small-cap (18 percent) companies (compared to only 17 percent large-cap respondents), the majority of sustainability reporters amongst respondents were large-caps (63.1 percent).

"The substantial reporting difference between the large and small companies is, to a significant extent, influenced by the availability of resources required to produce stand-alone sustainability reports," the report states. "Also, given their relatively larger corporate footprints (defined as the amount of resource use, both natural and labour), larger companies are considered more likely to attract attention regarding social and environmental issues."

The small/large differential manifests itself throughout the findings. For example, about half of the survey respondents (49.8 percent) provide some disclosure on their social or environmental performance; isolating this criterion to large-cap companies raises the rate to 91.2 percent. Unsurprisingly, the small/large spread is evident when it comes to sustainability reporting expenditures. The percentage of reporting budget allocated to sustainability issues is miniscule for micro-cap (2.4 percent) and small-cap (3.6 percent) companies, and larger for large-caps (11.8 percent).

The small/large gap narrows when looking toward the future, at planned expenditure increases on sustainability reporting. While 13.2 percent of micro-cap respondents indicated intentions to up the ante, the same portion (20 percent) of small- and large-cap companies intend to spend more on sustainability reporting. Overall, however, these figures seem to show a relative paucity of commitment to enhancing sustainability reporting.

"It's not so much a lack of commitment as a question of timing," said Rock Lefebvre, vice president of research & standards at CGA-Canada, who corralled the report. "Companies and standards-setters are somewhat overwhelmed with new accounting rules and regulatory pronouncements (internal control and certification) at this time."

"Naturally, we believe that the absence of sustainability reporting requirements has impeded sustainable development as what gets reported gets monitored and managed," Mr. Lefebvre told SocialFunds.com. "In short, sustainability reporting does attract resources and costs but the idea is to create other value propositions which outweigh the costs of reporting."

Interestingly, companies are somewhat oblivious to the resources at their disposal to assist their sustainability reporting efforts. Only a quarter (24.8 percent) of responding companies are aware of the Global Reporting Initiative (GRI), the most widely-used sustainability reporting framework (here again the small/large gap shows up, with 61.1 percent of large-caps aware of GRI).

The relative obscurity of GRI in the eyes of Canadian corporations may be less a reflection of any inadequacy on its part, but rather an indication of the infancy of sustainability reporting in general.

"GRI is unknown to many as sustainability reporting is relatively new throughout the world and Canadian companies are only starting to migrate to the new standard," said Mr. Lefebvre. "While Canada may be behind the US and UK in adopting non-financial disclosure, it is evolving and has surpassed the performance of several developed countries in its reporting traditions."

"The breadth and quality of sustainability reporting is also growing," he added, though the report itself did not conduct a qualitative assessment of Canadian sustainability reporting.

 

 
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