Global Reporting Initiative and Sustainable Reporting - Essay Example

?Global Reporting Initiative and Sustainable Reporting Organizational sustainability reporting, which could cover the economic, environmental and social aspects of business operations is critical for companies for several reasons. The most important of which is how it serves the need of various stakeholders in and out of the organization, affected by its operations and activities. Embedded in the wider sustainable development discourse, sustainability reporting is designed to help ensure the objective of achieving economic development without jeopardizing the ability of the future generations to achieve their own development. This objective, however, is not the only reason why organizations face increasing pressure to consistently release this type of information. The increase in regulatory scrutiny, the emergence of new standards and the heightened interest on the part of public and private policymakers are the reasons why sustainability reporting becomes imperative for organizations today. To demonstrate this, this paper will explore one of the most widely recognized sustainability standards, the Global Reporting Initiative. Reporting Standard The Global Reporting Initiative was established in the year 1997 and sponsored by the Coalition for Environmentally Responsible Economies; the Global Reporting Initiative (GRI) was formed for the purpose of outlining a set of guidelines that would deal with the economic, environmental and social consequences of organizational activity (Brown, 2005, p.90). Because of this objective, the initiative is often called as “sustainability reporting.” Its declared mission is “to create conditions for the transparent and reliable exchange of sustainability information through the development and continuous improvement of its Sustainability Reporting Framework” (GRI 2007). Essentially, the guidelines designed by the institution incorporates economic, social, environmental and governance performance – the so-called four key areas of sustainability - within a unified framework that provides a means of measurement, disclosure and accountability performance applicable for all types of organizations such as public and private or for-profit and non-profit organizations. Importance to Organizations The Sustainability Reporting Guidelines mandates that “a sustainability report should provide a balanced and reasonable representation of the sustainability performance of a reporting organization” (SRG, p.3). The significance of this initiative for companies rests on the determination of the sustainability performance. By defining, outlining and documenting the economic, environmental, social and governance areas for specific economic activities, an organization through the report, could identify its achievements in the context of its sustainability objectives. It is able to better benefit from the impact of its sustainability performance because the report contains correct and legitimate feedback. The benefits of a transparent organization, which will be explored further later on, is particularly maximized. This is the reason why companies release sustainability reports. In the International Survey of Corporate Responsibility Reporting in 2008, for instance, it was found that almost 80 percent of the companies in the Global 250 issued sustainability report (White, p.47). The same report cited numerous other reasons. They include ethics, economic considerations, brand reputation, innovation and learning (p.47). These variables reflect the changing dynamics of doing business today as stakeholder relationships changed. It appears that profit, which traditionally govern such relationship, is no longer the sole concern especially on the part of investors or that profit is no longer exclusively driven by purely economic activities. The case of AstraZeneca is an excellent example of how sustainability reporting could achieve a valid and acceptable sustainable reporting. The company has incorporated environmental and social aspects into its existing accounting and reporting system, which follows the GRI Guidelines. The latest report published in its website; for instance, show the organization’s performance indicators according to the GRI G3 requirements (AstraZeneca 2012). The report declared a B+ assessment level for the organization, which was verified by a 3rd party evaluator. It contained both positive and negative aspects of the organization’s sustainability performance. Along with its outline of unmet indicators, the company explained that its sustainability initiatives and reporting capabilities are still in development, accounting for the failures and shortfalls. Nonetheless, its performance according to the GRI guidelines has been exemplary. It prompted the 2011 Dow Jones Sustainability World Index to give AstraZeneca a total score of 85% a little short of the sector best score of 87% (AstraZeneca 2011). The organization has maximized the reputational value of sustainability performance. The sustainability report released consistently has reinforced the image of the AstraZeneca as caring, clean, safe and socially aware and sensitive organization. AstraZeneca’s position on sustainability reporting is not an isolated case. The current trend indicates that sustainability reporting is now a norm for large companies. Presently, there are more than 450 organizations spanning 45 countries that adopted GRI reporting framework either in whole or in part as a basis for their respective corporate sustainability reports (Brown p. 90). For shareholders, particularly, transparency is an emerging critical criterion for investment. The Need for Transparency Reporting is considered a core component of the best sustainability accounting practices today for organizations, with international bodies such as the United Nations endorsing methods and standards that guide the process. The significance of this aspect in business operation stems from one fundamental need – transparency. The Sustainability Reporting Guidelines of 2011 (p.2) stressed that transparency is crucial in ensuring “effective stakeholder relations, investment decisions and other market relations” towards achievable collective sustainability side by side increasing choice and opportunities. Simply put, transparency is crucial in cultivating shareholder confidence. This depicts the utility of sustainability report. Without it, an organization is considered undesirable and equated with a heightened investment risk, leading to higher risk premiums and imposes additional information costs on enterprises (OECD, 2002, p. 176). With a sustainability report, an organization “discloses the progress of all projects related to sustainability and by doing so demonstrates its accountability to internal and external stakeholders” (Kronenberg and Bergier, 2010, p.103). It is clear, hence, that even though transparency will not create or lead to a motive for investors, the lack of it discourages investing in an organization. Particularly, sustainability reports have become indispensable tools in evaluating the performance of organizations. Sustainability Report in Regulatory Environment The recent economic crises and scandals caused by corporate greed, mismanagement and malpractices have initiated a trend for greater regulation and control. This has led to the creation of new corporate governance codes, disclosure rules for publicly traded firms and numerous other statutes and regulations adopted in many countries (Oxelheim, 2006, p.1). These developments put pressure on organizations to make information regarding their operations open and accessible to the public. The pressure is aggravated by the fact that economic regulatory affairs today have become more stringent especially as economics form part of the political debate. Taking organizations to task in the context of social accountability emerges as a norm. It is best exemplified in the experience of many European countries. For example, the European Union has produced a regulation – the Community Eco-management and Audit Schemes (EMAS) – mandating that the participating entities should establish environmental goals and report on their performance in meeting these goals (Alexander, Britton and Jorrissen, p.202). The report as explained by EMAS is subject to an external verification and assessment. Recently, Sweden adopted the Guidelines for External Reporting by State-Owned Companies. It requires companies to release a sustainability report according to the GRI guidelines (OECD, 2010, p.109). The GRI model is also one of the frameworks recommended by the UK government as it promotes sustainability reporting because it serves as a tool to evaluate compliance and support for the UK Sustainable Development Strategy (UK Parliament, 2006, p.9). Governments are now legislating penalties on organizations who fail to comply with social and environmental initiatives and policies. The consensus is that this behavior is going to persist in the future especially as the cost of pollution and other environmental hazards brought about by the activities of organizations are finally being revealed not just with scientific and news reports but also with the increase in the consumer and the public vigilance and engagement. As Alexander, Britton and Jorrissen (p.202) explained, the “attention of the community is increasingly focused on the quality of life rather than money and if accountants do not attempt to produce useful information in this area then someone else will.” Ethics, hence, is not the only dominant rationale behind sustainability reporting. The current regulatory and business landscape makes the business case almost as important. Regulatory institutions and the public are increasingly concerned about accountability, quality of life, among other related factors beside money. Social Accounting Another driving force behind sustainability reporting is the increase in the demand for accountability. This is commonly known as social accounting, which according to Gray, Owens and Adams “involves extending the accountability of organizations beyond the traditional role of providing a financial account to the owners of capital” (in Alexander, Britton and Jorrissen, p. 202). One must remember that the world is operating within an increasingly integrated global community made possible by the global economic system, knowledge-sharing capabilities and the advances in communication technology. These empower not just states and institutions but also people – the public and the consumers – to hold organizations accountable for their activities. For instance, Royal Dutch Shell was forced to abandon its attempt to dump the Brent Spar oil platform at sea because of the pressure from environmental groups (Alexander, Britton and Jorrissen, p. 202). The Brent Spar incident involving Royal Dutch Shell’s North Sea oil storage is an interesting study of the dynamics between social accountability and public engagement. When the company decided to dispose of the facility in 1995, the environmental group Greenpeace launched a highly successful worldwide campaign against the company. Needless to say, the negative publicity generated for Royal Dutch Shell was very damaging. The company did not quite recover yet from the damaging effects of its experiences with the execution of Ken Saro-Wiwa and eight Ogoni Indians in Nigeria, activists who were hanged for being critical Shell’s activities in the Niger Delta (Hoffman, 2000, p.239). The company has since undertaken aggressive sustainability initiatives including the publishing of sustainability reports, the first of which featured a new management system with performance metrics to address its financial, environment and social performance in an integrated and quantifiable manner (Hoffman, p.239). Today, the organization follows the GRI Guidelines through the oil and industry guidelines developed by the International Petroleum Industry Environmental Conservation Association and stresses that the content focuses on the environmental and social challenges that most affect business performance and those issues that matter to their shareholders (Shell 2012). The organization boasts of an A+ reporting level for its sustainability report released in 2011 (Shell 2012). Here, it is helpful to remember that sustainability initiatives enhances an organization’s credibility so that it is in a better position to dissuade governments from further regulation or to gain goodwill from the public to prevent or minimize publicity problems which could harm the performance of products and services of an organization in the market. Sustainability reporting as a form of transparency measure promotes and builds trust, which becomes particularly useful when problems arise. Conclusion The feverish economic activities that transpired in the past decades have been inevitable as globalization, unprecedented knowledge-sharing capabilities, and advances in technology created numerous opportunities for growth. But this did not come without a price. Such activities created new risks and threats both to the human population and the environment. The corporate social responsibility and sustainability principles eventually emerged and gained support as the public and policymakers become more conscious about the impact of organizations on the environment and the quality of life. Sustainability reporting figures prominently in this issue. It is a tool available for all stakeholders involved. As demonstrated by the Global Reporting Initiative: 1) companies could disseminate information about its sustainability initiatives and benefit from it in the process; 2) organizations achieve transparency; 3) policymakers and regulatory institutions are able to effectively assess and measure sustainability activities and regulatory compliance for those who have legislated sustainability policies; 4) the shareholders and other stakeholders such consumers and the community are better informed and, hence, could effectively engage and participate in their relationship with organizations effectively. Sustainability reporting, therefore, allows organizations to effectively manage the impact and relationships involving stakeholders. References Alexander, D., Britton, A. and Jorrissen, A., 2011. International Financial Reporting and Analysis. New York: Cengage Learning EMEA. AstraZeneca, 2011. Dow Jones Sustainability Index ranks AstraZeneca among the industry leaders." AstraZeneca. [online]. Available at: [Accessed 10 June 2012]. AstraZeneca, 2012. GRI Content Index. AstraZeneca. [online] Available at: [Accessed 11 June 2012]. Blackburn, W., 2007. The Sustainability Handbook. London: Routledge. Brown, C., 2005. The Sustainable Enterprise: Profiting from Best Practice. London: Kogan Page Publishers. Global Reporting Initiative (GRI). (2007). "GRI Sustainability Report 2004-2007." GRI. [online]. Available at: [Accessed 10 June 2012]. Hoffman, A., 2000. Competitive Environmental Strategy: A Guide To The Changing Business Landscape. Washington, D.C.: Island Press. Kronenberg, J., and Bergier, T., 2010. Challenges of Sustainable Development in Poland. Krakow: Senzimir Foundation. Organization of Economic Co-operation and Development (OECD)., 2010. Corporate Governance Accountability and Transparency: A Guide for State Ownership. Paris: OECD Publishing. OECD, 2002. Foreign Direct Investment for Development: Maximising Benefits, Minimising Costs. Paris: OECD Publishing. Oxelheim, L., 2006. Corporate And Institutional Transparency for Economic Growth in Europe. Oxford: Emerald Group Publishing. Shell, 2012. Sustainability Report 2011: About our reporting. Shell. [online]. Available at: Accessed 12 June 2012]. Sustainability Reporting Guidelines (SRG): Version 3.1., 2011. Boston: Global Reporting Initiative. UK Parliament, 2006. Sustainable Development Reporting by Government Departments: Seventh Report of Session 2005-06; Report, Together with Annex, Formal Minutes and Written Evidence. London: The Stationery Office. Read More