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Home > Business Ethics Viewpoints > The Growth of Sustainability Reporting

Business Ethics Viewpoints

The Growth of Sustainability Reporting

by Wim Bartels

Introduction

Wim Bartels has been global head of KPMG’s Sustainability Services Network since October 2007. He studied business economics and accountancy at Amsterdam’s Vrije Universiteit before qualifying as a chartered accountant in 1993. He has worked as an auditor and forensic accountant. In 2001 he became a KPMG partner, taking overall responsibility for the group’s sustainability services, including the provision of sustainability assurance services to multinational businesses such as BASF, DSM, Heineken, KLM, Philips and Rabobank. Wim is closely involved with initiatives including the UN’s Global Reporting Initiative and AccountAbility. In his spare time Wim sings and plays trumpet in a band that performs cover versions of 1970s and 1980s hits, for charitable causes. He is also involved in a foundation that supports children in Tanzania.

Sustainability Reporting

Social and environmental reporting has come a long way in the past decade. However it still has a long way to go.

Back in the 1990s, when sustainability reporting was still in its infancy, it was often seen to be used by corporates as a form of window-dressing or “greenwash.”

Responsibility for corporate social responsibility reporting was often handed to the communications department. In many cases, corporates were perceived to embark on the journey for largely cosmetic reasons—whereas their intentions may already have been different. In the wake of reputational disasters like the Brent Spar, the production of glossy corporate social responsibility (CSR) reports was seen as the perfect antidote to interfering non-government organizations (NGOs) and socio-environmental campaigners.

Today, all that has changed. Companies have now widely recognized that, in order to give themselves a long-term future, they are going to have to become more serious, accountable and transparent where sustainability is concerned.

This implies first of all a different way of structuring it and a proper approach to embedding it within the corporate management systems. Businesses are also recognizing that they will need a properly thought-out strategy to address pressing global issues such as global warming, resource depletion and demographic change—and find ways to accurately reflect such a strategy in their reporting.

For their part, investors are demanding greater access to transparent, accountable, robust, reliable, and comparable data from companies about their “nonfinancial” performance. And this is not just out of altruism or personal ethical curiosity; it is because asset managers increasingly believe that having such knowledge will enable them to make better investment decisions and achieve superior returns for their own clients. This means that the nonfinancial information has effectively become as important as financial information.

Moving Up the Corporate Agenda

Recent research by KPMG Global Sustainability Services confirmed that sustainability reporting is moving up the corporate agenda and is now mainstream.

The report, which assessed the sustainability reports of 2,200 companies across 22 countries worldwide, found that far from being put together for appearances’ sake, these are now regarded as an internal management tool that enables companies to prioritize issues likely to contribute to their long-term success.

For a growing band of larger, quoted companies worldwide, sustainability reporting has become a core part of their strategy development processes and business reporting cycles. The KPMG International Survey of Corporate Responsibility Reporting, published in October 2008, found that that 80% of Global Fortune 250 (G250) companies now disclose their sustainability performance in “sustainability” or “corporate responsibility” reports, a jump from 50% in 2005.

Reporting also increased on a national level, and a further rise is expected. Among the hundred largest companies by revenue in 22 countries worldwide (N100 companies), only 45% are reporting their own sustainability performance, albeit with marked variations between countries. Mexico was lowest at 18%, while Japan and the UK ranked highest, both scoring over 85%.

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Further reading

Article:

  • Becchetti, Leonardo, and Rocco Ciciretti. “Corporate responsibility and stock market performance.” Centre for International Studies on Economic Growth Research Paper Series. Working paper no. 79. March 2006.

Reports:

  • KPMG and SustainAbility. “Count me in—the readers’ take on sustainability reporting.” 2008.
  • United Nations Environment Programme Finance Initiative Asset Management Working Group and Mercer. “Demystifying responsible investment performance: A review of key academic and broker research on ESG factors.” October 2007.

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