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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.


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!"

 

 
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