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Finding your way through the frameworks

At the end of last month, yet another set of sustainability disclosure guidelines was published – this time from the European Union. Did you miss that?

It’s not surprising if you did, given the number of guidelines, frameworks, surveys/questionnaires and topic-specific guidance now available to support disclosure of material non-financial information by companies and other organisations. In fact this latest guidance, the EU Guidelines on non-financial reporting, lists no less than 22 guidelines, frameworks and recommendations that informed its development!

Finding your way through all these frameworks and guidelines can be daunting – should we choose just one to guide us? If so, what is the most relevant for our situation? Can two or more be used in conjunction? And how onerous will all this reporting be?

These questions become more urgent as the pressure on companies for more transparency around their non-financial risks steps up. Investors, and to some extent, consumers and regulators are more keenly interested in the impacts (both positive and negative) that companies have on the environment, labour practices, human rights, communities, and society in general as well as their governance policies and practices.  At least 27 stock exchanges around the world now recommend listed companies report on their environmental, social and governance risks and issues, according to the Sustainable Stock Exchanges initiative.

More evidence of investor appetite for information about companies’ sustainability credentials comes with a new start-up developing an app to make it easier for people to invest in ethical businesses and to match their portfolio to their values.

If you want to respond to these interests, using a sustainability reporting framework is a wise idea, because it will help you to understand expectations of the type of issues and data you need to include and the metrics that will help to ensure that your performance can be compared with your peers and with best practice organisations around the world.

The Australian Council of Superannuation Investors (ACSI), in its just released report on sustainability reporting by ASX200 companies, noted that “the best reporters use internationally recognised external standards and/or verification.”

So how to choose your framework?

It’s really a case of ‘horses for courses’. What do you need to achieve? At what stage of maturity is your sustainability approach? Who is your primary target audience? What sector do you operate in?

That same ACSI report I referred to earlier also notes an increasing number of ASX200 companies are using the Global Reporting Initiative (GRI) Standards. In 2016, 60 ASX200 companies used the GRI as a reporting framework. But GRI is not the only option. Here’s a quick rule of thumb, based on our experience at ACCSR helping clients with more than 100 sustainability reports over the years:

Our level of sustainability experience/maturityWhat do we want to achieve?
Primary audience
First timer or early years through to experiencedCommunicate approach and performance (baseline) to stakeholders of all typesGRI StandardsWidely used framework with detailed guidance on performance metrics.
Options to reference the Standards, use fully, or apply one or more appropriate Standards.
Communicate approach on environmental, labour, anti-corruption and human rights to all stakeholders UN Global Compact Widely used principles-based framework.
Communicate approach on corporate responsibility to a wide range of stakeholdersISO 26000Widely used guidance on social responsibility, especially useful for broader guidance on human rights and labour practices.
No specific performance metrics but can be used in conjunction with GRI Standards
Provide appropriate disclosure to the US Securities and
Exchange Commission to respond to mandatory filings
SASBUS-based framework to guide organisations on what topics are likely to be material and what information should be provided on those topics.
Useful guidance for non-US companies to check materiality assessments
More mature approach to sustainability through to experiencedShow progress on addressing the 17 sustainable development challenges set by the UN.SDGsThe UN Sustainable Development goals becoming more widely used as a framework for reporting and target-setting. Apply to all types of organisations including businesses. Useful to engage with the global agenda but may require a more mature sustainability approach to link goals to business activities and strategy.
No specific performance metrics but can be used in conjunction with GRI Standards
Mature approach to sustainability/ sustainability integral to how we conduct our businessCommunicate to investors how our business strategy takes into account both financial and non-financial aspects of our value creation Integrated ReportingRequires a relatively sophisticated understanding of how different types of capital (financial, manufactured, natural, relationship, knowledge and human) help the organisation deliver value. Primarily aimed at investors/providers of financial capital.
No specific performance metrics but can be used in conjunction with GRI Standards

This list is clearly not exhaustive and everyone’s circumstances will be different. And I haven’t even touched on some of the more specific guidance or questionnaire-based guides, such as CDP (formerly Carbon Disclosure project) or the Guidance for Responsible Agricultural Supply Chains from FAO-OECD, or the UN Guiding Principles Reporting Framework on Business and Human Rights.

However, at the heart of virtually all these frameworks is the concept of materiality – of understanding and reporting your most important sustainability issues.

More than ever, it is vital for organisations needing to respond to pressures for more disclosure and transparency around non-financial risks to have internal conversations about their real impacts on the environment, the economy and society throughout their value chain. Some of those conversations may not be comfortable but they are necessary to get a shared internal understanding of the non-financial risks, as well as opportunities, they face.

I can recommend the EU Guidelines on non-financial reporting for their concise and clear guidance about how to assess materiality – especially the need to undertake a very broad consideration of sustainability issues for your sector or locality and having a thorough understanding of your value chain in order to identify key issues.

Once you have mastered your material issues, the choice of framework will be easier.

Jackie Allender is a senior consultant with ACCSR and a GRI-nominated trainer. ACCSR offers GRI certified training in reporting using the GRI Standards and the IIRC approved Integrated Reporting course. For details of our training courses see here.

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One Comment

  • Great work by Jackie Allender – really like the collation of the various macro frames out there. Let’s not reinvent the wheel and no matter the size of your organisation there is an alignment (or two!)

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