Sustainability Reports - How Much Do They Say?

Sustainability reporting, understood as reporting on corporate economic, environmental and social impacts, has increased substantially over the last years. The interests of corporations in non-financial disclosure is more than welcomed but the main questions still remain: Are these reports simply a public relations exercise? Do they really help internal and external stakeholders to assess the corporation's organizational performance towards the goal of sustainable development? 

At least in theory, a sustainability report should be a representation of the sustainability performance of a reporting organization – including both positive and negative aspects. Moreover, stakeholders should be involved in the process of defining the type of information being reported. The information disclosed should be useful, easily available, easy to understand and timely. Unfortunately, recent studies suggest that few companies actually meet these standards for sustainability reporting. 

A recent study, “Measuring the Transparency of Environmental Transparency Reporting Through Websites of Fortune 50 Corporations”, done by the researchers from Brigham Young University and KDPaine and Partners has shown that the majority of Fortune 50 corporations use the Internet to disclose information on their environmental performance but only 38 percent offered evidence of stakeholder involvement in the development of the reports. Only 36 percent reporting some sort of unfavourable result but only 6 percent included an explanation. Most lacked context to help readers understand the results. The results of only 13 percent of companies included third party verification. 

Moreover, KPMG and SustainAbility's survey of readers of sustainability reports has shown that the beneficiaries, too, think that companies fail to demonstrate their commitment to sustainability for the same reasons. Stakeholders ask to be engaged in issue selection and want to see how their feedback is incorporated into strategy and targets. In order to improve the quality of reports and to gain credibility, readers think that reports should be based on globally-applicable reporting guidelines and should be reviewed by an independent assurance provider. It is true that much is to be done in order to improve the present reporting guidelines and assurance processes in order to allow to build comparability and trust through reporting. The reports should demonstrate how process and product innovation have been used to respond to sustainability needs. The accessibility of information should also be improved. Only these changes will determine and allow a larger proportion of readers to use reports for their active decision-making. 

It is hard to tell how long it will take to meet these standards for sustainability reporting as in fact this process still needs to prove that it can actually add real value to good corporations and to a broad range of stakeholders.