November 09, 2011
CR Reporting on Upswing, but Improvements in Implementation and Assurance are Needed
by Robert Kropp
KPMG surveys the state of Corporate Responsibility reporting among the world's largest companies,
and helps the Global Reporting Initiative produce a database of corporate sustainability
Corporate Responsibility (CR) reporting is on the increase among large companies throughout the
world, as a new survey by KPMG reveals. And while CR reporting by the 100 largest
US companies lags behind that of eight other nations, 83 of those companies now issue CR reports,
compared to 74 in 2008.
However, as the survey points out, "The Americas seem to
have focused so far on communication rather than CR processes. This is clearly an area of attention
for companies in these geographies, as an imbalance between reporting and actual implementation
might increase reputational risks." In other words, US-based companies have yet to fully
incorporate what they report into their business practices.
An area in which the imbalance
is clearly described is the use of assurance to verify CR data. "Companies without an external
assurance program not only run the risk of restatements in the future, but also send the message
that CR information is not held in as high regard as financial information, which is frequently
assured in most businesses," according to KPMG.
Only 13% of the largest US-based
companies conduct assurance activities on their CR reports; only Russia, also at 13%, and Singapore
(seven percent) fared as poorly as the US in the countries surveyed.
Why do companies
engage in CR reporting? More than half of the respondents list reputation or ethics as driving
forces behind the practice. Employee motivation, innovation, and risk reduction were also commonly
cited as drivers. "Somewhat surprisingly," the survey states, "Economic considerations, which had
ranked second in 2008, are now less frequently cited as a driver than either employee motivation or
innovation and learning."
The marked decline of economic considerations as a driver
suggests yet another imbalance between reporting and implementation, especially when considered in
light of the estimation that today, fully 80% of a company's value comes from what used to be
considered externalities. When such considerations as competitive advantage, regulatory
preparedness, and even cost savings are cited as drivers by less that one-quarter of respondents,
most companies still have a ways to go to "significantly change their processes and approach to
product development and supply chain efficiencies," as KPMG points out.
metrics are essential for developing effective benchmarks that measure performance against both
internal objectives and external competitors. In the years since KPMG published its 2008 survey,
the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI) have become the
platform of choice for reporting by a majority of the world's largest companies.
also been instrumental in the uptake by companies of integrated reporting, in 2008, four percent of
the world's largest companies had experimented with some form of the practice, a framework in which
financial information is reported alongside environmental, social, and corporate governance (ESG)
data. GRI is a founding member of the International Integrated Reporting Committee (IIRC).
Mervyn King, Deputy Chairman of the IIRC and Chairman of GRI, said that integrated reporting
"equips companies to manage their operations, brand and reputation strategically and to manage
better any risks that may compromise the long-term sustainability of the business."
its part, KPMG "supports the development of integrated reporting as the next step in improving the
value of corporate reporting. "At present, however, it is clear that most (62 percent) of those
that claim to integrate CR, only go as far as including a special section in their annual report,"
the report finds.
"While the growing percentages are encouraging," the report continues,
"In many cases, integrated reporting is largely approached by combining information into one
document rather than fully integrating it into the regular reporting framework of the
So while the widespread adoption of CR reporting by the world's largest
listed companies is encouraging (KPMG points out that privately-owned companies face less pressure
to produce CR reports, although "this does not exempt them from accounting for their positive and
negative impacts on society, particularly in the modern information age"), much work remains to be
done for the practice to become consistently meaningful to stakeholders.
between reporting and implementation, the lack of assurance, and the superficial nature of most
integrated reporting at present all have to be addressed before stakeholders can have confidence
that CR reporting accurately reflects the long-term risks and opportunities for companies.
A step toward improving the transparency of corporate sustainability disclosures was announced
today by GRI. Its Sustainability
Disclosure Database allows investors and other stakeholders to access the reports of more than
3,000 organizations. GRI describes its database as "a hub for sustainability disclosure, featuring
sustainability reports that use the GRI Guidelines and those that follow other guidance."
"Users can compare the level of transparency of companies, benchmarking by sector, size and
location," GRI stated. "People who are interested in organizational sustainability data can find
out what indicators companies are reporting on, and how their transparency compares to other
The database was built with the support of KPMG Spain. Describing the database
as "the most important transformation in corporate transparency and disclosure in recent decades,"
José Luis Blasco Vázquez, Partner in charge of Climate Change and Sustainability Services at KPMG
for the Europe, Mediterranean, and Asia (EMA) region, stated, "A significant percentage of the
hundred largest global asset managers already take into account non-financial criteria when
building investment portfolios. This database assists investors in accessing more robust and
comparable information, bringing sustainability data into closer alignment to financial reporting