Can We Really Put Sustainability into Boxes?

Last week I attended the JustMeans conference "Refining Value: Integrated Reporting and Measuring Sustainability" in London, which brought together leading investors and top CSR executives, including the likes of BP and Nestle public affairs directors. Up for debate was the question of whether sustainability reporting should be aligned with financial reporting, but this led to more questions about whether sustainability should, and could, be standardised at all.

Giacomo Autino manages the Bloomberg Environmental Social and Governance Data (ESG) team, that provides analysis of ESG data for 4000+ companies in their system, whether or not those companies do a CSR report themselves. On the question of whether integrated reporting is feasible, his opinion was that non-financial reporting is not yet on a par with financial reporting. The main problem preventing non-financial reporting from being mainstream, he said, is a lack of standardisation, meaning that it was difficult to compare different companies' performances and metrics varied between reports. Part of the failure for standardisation was down to the fact that ESG data, and the performance indicators that underpin ESG scores, are specific to each sector.

Is the need for specificity a weakness of sustainability reporting? Claudia Kruse from APG Asset Management thought not. Instead, she said, having no standardisation opened up opportunities for business managers to make choices on which metrics to assess according to their own background and preferences. Yet just as Autino had noted that investors need to understand the ESGs, if investors have their own preferences for what they want assessed that possibly creates a battle of interests. BP's Head of Corporate Reporting Nicholas Robinson also spoke of the huge regional differences experienced when reporting on company activities and stakeholder interests across the world. For him, an approach appropriate to a country or region was necessary, albeit providing a certain reporting structure to ensure some consistency.

Can numbers accurately represent a company's environmental impact? Perhaps the methods for financial reporting are not appropriate here and sustainability reporting involves more than ESG scores that can be put into tables. For HSBC Advisor Francis Sullivan, while there are sustainability metrics that are quantifiable, there are others that are not. In terms of whether an integrated report is a likely future, he questioned whether financial and non-financial data could be correlated, saying that the kind of data in annual reports and in sustainability reports do not relate. According to Sullivan, it is premature to combine the two. However, he added that while it may not be incorporated into the annual report, the CSR or sustainability report should become just another report for professional audiences. It is for shareholders and stakeholders and is not relevant to a normal person. In this way, he said, the commercial aspect of sustainability can be relayed.

Sustainability metrics are becoming more robust, and compulsory sustainability reporting is on the horizon. In recent years, various tools and services have been developed for measuring and reporting sustainability, yet there is little consistency across the board and the debate on best practice continues. While the EU intends to back compulsory sustainability reporting, there are still a myriad of complexities faced by those reporting on sustainability.