The case for impact-focused reporting is as clear as black-and-white
By Eelco van der Enden, CEO of Global Reporting Initiative (GRI)
Last month saw the annual letter to CEOs from BlackRock’s Larry Fink land in our inboxes. It included some very positive language regarding the need for responsible business practices. To quote Mr. Fink, “a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders”. How is this to be achieved?
Here is where things start to become more complicated. Discussing the need for businesses to increase their contributions to the goal of net-zero, Mr. Fink states “It will not happen overnight” – which we can all agree to – but instead will “need to pass through shades of brown to shades of green”. The lack of a timetable here fails to reflect the pressing urgency of the climate crisis and the growing demands for companies to significantly increase their actions in support of net-zero.
The priority for many investors is, first and foremost, about enterprise value, not sustainability. However, guidance on what companies should report from the BlackRock’s of this world should also reflect multi-stakeholder needs for transparency on companies’ impacts on people and planet. And that is so far missing.
This is not to say the needs of investors for improved sustainability-related information on financial risk should be ignored. Indeed, the IFRS Foundation’s newly created International Sustainability Standards Board has this purpose. GRI is in full support of this development, as we have already made clear.
Meanwhile, the European Union, through the incoming Corporate Sustainability Reporting Directive, is preparing for sustainability disclosure requirements with a multi-stakeholder focus. This will see new EU standards based on the ‘double materiality’ concept: in addition to impacts on enterprise value, making sure companies are also accountable for their external impacts on society and the environment. The IFRS and European developments should be seen as complementary.
As set out in a paper on the GRI perspective, we believe sustainability reporting that informs the full spectrum of stakeholders is not only desirable. It is good for business. Tweet This! Well beyond simply fulfilling reporting expectations, it enables businesses, investors, policymakers, employees, customers and civil society to engage in dialogue and reach decisions which promote inclusive sustainable development. Indeed, explaining how a company’s actions seek not only to be profitable but also to safeguard stakeholder interests is a powerful way of demonstrating its contribution to people and planet.
We support Larry Fink’s drive towards a stakeholder-centric economic model. However, without considering the information needs of their stakeholders, companies are faced with a credibility issue. Besides, many large businesses already voluntarily report against financial reporting standards and GRI’s (voluntary) sustainability standards. Endorsing broad sustainability reporting, as supported by the GRI Standards, will greatly support Blackrock’s stated backing for stakeholder capitalism, while it will also be appreciated by the thousands of companies that already use our standards.
Preserving value and managing sustainability impacts is not, and should not be, mutually exclusive. To make sure that companies meet their social and environmental obligations, we need a strengthened corporate reporting system where financial and sustainability reporting are given equal status. In the words of Larry Fink, “this won’t happen overnight’’. However, the starting point for companies is not a shade of brown or green. It’s about committing now to comprehensive reporting on their impacts, and that is as clear as black and white.
78% of the world’s 250 largest companies report in accordance with the GRI Standards
SustainCase was primarily created to demonstrate, through case studies, the importance of dealing with a company’s most important impacts in a structured way, with use of the GRI Standards. To show how today’s best-run companies are achieving economic, social and environmental success – and how you can too.
Research by well-recognised institutions is clearly proving that responsible companies can look to the future with optimism.
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