Tag Archives: CDSB

Celebrating Climate Week & Earth Day 2021 – Global Leaders Gather in “Climate Summit” Hosted by the U.S. – Kumbaya for Paris Agreement Goals Refresh

Posted on by
Reply

April 30 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

A highlight of the numerous celebrations of the 2021 Climate Week / Earth Day around the world was the hosting of a “global summit” of leaders from 40 nations and sub-governments, the investment community, the corporate community, NGOs, and advocates, the E.U., multilateral organizations, indigenous communities, and others – hosted this year by the United States of America.

We could describe the enthusiastic presentations and panel discussions over the two days by global participants a kumbaya gathering to refresh and update the 2015 Paris Agreement (or Accord) moments as the world leaders then set out ambitious goals to limit global warming.

The big news – the USA is back in the global effort to address climate change challenges.

President Joseph Biden and Vice President Kamala Harris were the primary hosts over the two days of digital meetings, along with former Secretary of State John Kerry (now the White House climate envoy), present Secretary of State Antony Blinken, cabinet officers, and others in the administration making presentations and leading discussions.

Sovereign leaders joined the two days of discussions to present the strategies and actions (current and planned) for their respective nations (including China, UK, Russia, France, Canada, Australia, India, Japan, Germany, South Korea, Indonesia, Mexico, South Africa, Marshall Islands, and others).

The measures sovereign governments (large and small!) are taking to address climate change challenges – with the foundation of the Paris Agreement of 2015 as guide – are sweeping; some initiatives are now in partnership with other nations (the USA and India, or EU nations and African nations, as examples).

We have included for you the Fact Sheet issued by the White House in our Top Stories for this week. “

The USA is Back” on climate issues is the general messaging of the Biden-Harris Administration, with many specifics set out during the two-day conference.

Some examples of the “whole of government” climate approaches in the United States — and an ambitious agenda for helping developing nations around the world:

  • The United States will double the nation’s target for overall reduction of carbon emissions (NDC) by 50 percent by 2030 compared to 2005 levels. This “underscores the commitment to lead a clean energy revolution”.
  • To assist other nations, a Global Climate Ambition Initiative was launched to support developing nations in establishing net-zero strategies, to be led by the US Department of State and USAID (the US Agency for International Development).
  • These efforts will need funding; the US International Development Finance Corporation (DFC) commits to achieving a net zero investment portfolio by 2040 with one-third or more of the new investments made having a “climate nexus” by FY 2023. The DFC will work with the Rockefeller Foundation to support distributed energy and other innovations offshore.
  • The USA and Canada are chairing “The Greening Government Initiative” to lead by example in helping developing nations implement their respective climate change plans to “increase resilience and mitigate emissions from their government operations and collaborating on common goals”.
  • The North American partners will seek to develop net zero economies, using 100 “clean electricity” and zero emissions vehicle fleets (as examples of climate leadership in action).
  • President Biden announced an international climate finance plan, making use of his country’s multilateral and bilateral channels and institutions to help developing countries; this will include directing the flow of capital toward climate-aligned investments and away from high-carbon investments.

There is much more for you to digest in the sweeping range of current and planned initiatives in the White House Fact Sheet in the Top Stores.

Considering the announcements from Washington DC in the context of the actions of other nations and organizations that we are sharing in the newsletter. We have news from the European Union, the Global Reporting Initiative, United Nations Global Compact, CDP (formerly the Carbon Disclosure Project), and the International Integrated Reporting Council (IIRC).

Important: We can all give a nod of thanks to the media who today are covering the many aspects of climate change challenges (and solutions) – including Forbes, Associated Press, CNN, The Guardian, and many others whose coverage of CC topics & issues we share with you each week.

Bravo, editors and journalists, for keeping us informed of the progress made as well as the societal challenges we still face.

TOP STORIES

Climate Summit

EU Regulations: Corporate Sustainability Reporting Directive

On Corporate Risk Strategy, Sustainable Actions & Outcomes – What’s the Best Ways to Report on ESG to Stakeholders?

Posted on by
Reply

April 2021

by Hank Boerner – Chair & Chief Strategist, G&A Institute

Buzz… Buzzz… Buzzzzz! The current buzz among key stakeholders – investors, corporate boards & management, NGOs, government regulators, stock exchanges, ESG raters & rankers, ESG corporate disclosure standards and frameworks managers – is centered on “Quo Vadis”…where do we go from here!

The good news is that the lively discussions underway appear to be indicating progress in the global drive to achieve more holistic, meaningful, accurate, comparable, understandable corporate ESG disclosure approaches.

One, to help publicly-traded company managements understand and provide transparency for the data sets, metrics and narratives that asset owners and their managers, and (2) to help creators of sustainable investing products in their expanding analysis of companies of all market cap sizes.

Influential players are part of the discussion.

Example: The World Economic Forum (WEF) published a White Paper in January 2020 to set out a framework to bring sustainable reporting frameworks & standards into a common and consistent system of metrics. This, to help investors and companies attain sustainable value creation and accurately disclose on same. WEF suggests a set of 22 Core metrics and a range of Expanded metrics to start with.

At the same time the “Big Five” of the global corporate sustainability disclosure and reporting frameworks and standards organizations are collaborating and recently published a shared vision of the elements necessary for achieving more comprehensive and holistic corporate sustainability reporting.

The five organizations are: CDP; the Climate Disclosure Standards Board (CDSB); Global Reporting Initiative (GRI); International Integrated Reporting Council (IIRC); Sustainability Accounting Standards Board (SASB). Plus TCFD, the Task Force for Climate Related Financial Disclosure, created by the Financial Stability Board (FSB), a G20 nations organization.

Joining the effort: The European Commission; IOSCO (global government securities regulators organization); WEF’s International Business Council; and IFRS.

Each issue of the G&A Sustainability Highlights newsletter we bring you information about the above and much more related to the increasing tempo of the buzzzzz on corporate sustainability disclosure and reporting.

The discussions are taking place worldwide as leadership in public sector, private (business/corporate) sector and social sector address a widening range of ESG issues that will over time determine what kind of world we’ll live in.

See: meeting the challenges of climate change multiple issues, diversity & inclusion, populations deciding on democracy or authoritarianism, having ample food supplies or facing starvation, providing equality of opportunities & outcomes, pandemics to come, rapidly disappearing natural resources, political financing, a range of labor/workforce challenges…and more.

The content silos in our newsletter are designed to help you scan and select the news and perspectives we gather for you each issue.

The G&A Institute’s “Sustainability Headquarters” (SHQ) web platform has many more items selected by our editorial team led by EVP Ken Cynar for you. He’s assisted in these efforts by G&A’s Amy Gallagher, Reilly Sakai, Julia Nehring, Elizabeth Peterson, Lucas Alvarez, Lou Coppola, and Hank Boerner. All of this is team effort! Check the expanded related contents not in the newsletter on SHQ!

We constantly monitor all of the above issues — the global ESG disclosure buzz! — and participate in certain of the conversations as guiding the ESG disclosure and reporting of our corporate clients is at the core of the G&A Institute mission.

TOP STORIES

Eyes on Financial Accounting and Reporting Standards – IASB & FASB Consider “Convergence” and Separate Actions

Posted on by
Reply

by Hank Boerner – Chair & Chief Strategist – G&A Institute

March 2021

Investors Call For More Non-Financial Standards for Corporate Reporting, Less Confusion in “Voluntary” Disclosure.

Should there be more clarity in the rules for corporate sustainability accounting and reporting as many more investors embrace ESG/Sustainable analysis and portfolio management approaches?

Many investors around the world think so and have called for less confusion, more comparability, more credible and complete corporate disclosure for ESG matters.

Accounting firms are part of the chorus of supporters for global non-financial disclosure standards development.

Where and how might such rules be developed? There are two major financial accounting/reporting organizations whose work investors and stakeholder rely on: The International Accounting Standards Board (IASB) and in the United States of America, the Financial Accounting Standards Board (FASB). Both organizations develop financial reporting standards for publicly traded companies.

There are similarities and significant differences in their work. The US system is “rules-based” while the IASB’s approach has been more “principles-based” The differences have been diminishing to some degree with the US Securities & Exchange Commission more recently embracing some principles-based reporting.

By acts of the US Congress, FASB (a not-for-profit) was created and has governmental authority to impose new accounting rules — while the IASB rules are more voluntary.

The US system has “GAAP” – Generally Accepted Accounting Principles for guidance in disclosure. The adoption of IFRS is up to individual countries around the world (144 nations have adopted IFRS).

The IASB standards are global; these are the “IFRS” (International Financial Reporting Standards) issued by the IASB.

The FASB standards are used by US-based companies. For years, the two organizations have tried to better align their work to achieve a global financial reporting standard – “convergence”.

The IFRS Foundation is based in the United States and has the mission of developing a single set of “high-quality, understandable, enforceable and globally-accepted accounting standards (the IFRS), which are set by IASB.

In 2022 IASB and FASB will have a joint conference (“Accounting in an Ever-Changing World”) in New York City to “…strengthen connections between the academic and standard-setting communities…” and explore differences and similarities between US GAAP and IFRS Standards.

Consider that the Financial Stability Board (FSB), which launched the TCFD, is on record in support of a single set of high-quality global accounting standards.

Convergence. In the USA, the “whole of government” approach to the climate crisis by the Biden-Harris Administration may result in encouragement, perhaps even rules for, corporate ESG disclosure. The IASB is not waiting.

The IFRS Foundation Trustees are conducting analysis to see whether or not to create another board that would issue global standards for sustainability accounting and reporting.

A proposal will come by the time of the UN Climate Change Conference this fall. Should the IFRS foundation play a role? The International Federation of Accountants (IFAC) thinks so.

Many questions remain for IASB and FASB to address, of course. This is a complex situation, and we bring you some relevant news in the newsletter this week.

TOP STORIES

Here’s an update from the IFRS Foundation and what is being considered:

Meanwhile, the European Commission separately is exploring how to strengthen “non-financial” reporting – there’s the possibility that there could be EU standards developed:

Helpful information about the FASB-IASB differences:

About “Stakeholder Capitalism”: The Public Debate

Posted on by
Reply

Here is the Transition — From the Long-Dominant Worldview of “Stockholder Capitalism” in a Changed World to…Stakeholder Capitalism!

by Hank Boerner – Chair & Chief Strategist – G&A Institute

October 2020

As readers of of G&A Institute’s weekly Sustainability Highlights newsletter know, the shift from “stockholder” to “stakeholder” capitalism has been underway in earnest for a good while now — and the public dialogue about this “21st Century Sign of Progress” has been quite lively.

What helped to really frame the issue in 2019 were two developments:

  • First, CEO Larry Fink, who heads the world’s largest asset management firm (BlackRock) sent a letter in January 2019 to the CEOs of companies in portfolio to focus on societal purpose (of course, in addition to or alongside of corporate mission, and the reasons for being in business).
  • Then in August, the CEOs of almost 200 of the largest companies in the U.S.A. responded; these were members of influential Business Roundtable (BRT), issuing an update to the organization’s mission statement to embrace the concepts of “purpose” and further cement the foundations of stakeholder capitalism.

These moves helped to accelerate a robust conversation already well underway, then further advanced by the subset discussion of Corporate America’s “walking-the-talk” of purpose et al during the Coronavirus pandemic.

Now we are seeing powerful interests weighing in to further accelerate the move away from stockholder primacy (Professor Milton Friedman’s dominant view for decades) to now a more inclusive stakeholder capitalism.  We bring you a selection of perspectives on the transition.

The annual gathering of elites in Davos, Switzerland this year — labeled the “Sustainable Development Impact Summit” — featured a gaggle of 120 of the world’s largest companies collaborating to develop a core set of common metrics / disclosures on “non-financials” for both investors and stakeholders. (Of course, investors and other providers of capital ARE stakeholders — sometimes still the inhabiting the primacy space on the stakeholder wheel!)

What are the challenges business organizations face in “making business more sustainable”?

That is being further explored months later by the World Economic Forum (WEF-the Davos organizers) — including the demonstration (or not) of excellence in corporate citizenship during the Covid-19 era. The folks at Davos released a “Davos Manifesto” at the January 2020 meetings (well before the worst impacts of the virus pandemic became highly visible around the world).

Now in early autumn 2020 as the effects of the virus, the resulting economic downturn, the rise of civil protests, and other challenges become very clear to C-suite, there is a “Great Reset” underway (says the WEC).

The pandemic represents a rare but narrow window opportunity to “reflect, reimagine, and reset our world to create a healthier, more equitable, and more prosperous future.”

New ESG reporting metrics released in September by the World Economic Forum are designed to help companies report non-financial disclosures as part of the important shift to Stakeholder Capitalism.

There are four pillars to this approach:  People (Human Assets); Planet (the impact on natural environment); Prosperity (employment, wealth generation, community); and Principles of Governance (strategy, measuring risk, accounting and of course, purpose).

The WEF will work with the five global ESG framework and standard-setting organizations as we reported to you recently — CDSB, IIRC, CDP, GRI, SASB plus the IFAC looking at a new standards board (under IFRS).

Keep in mind The Climate Disclosure Standards Board was birthed at Davos back in 2007 to create a new generally-accepted framework for climate risk reporting by companies. The latest CDSB report has 21 core and 34 expanded metrics for sustainability reporting. With the other four collaborating organizations, these “are natural building blocks of a single, coherent, global ESG reporting system.”

The International Integrated Reporting Council (IIRC, another of the collaborators) weighed in to welcome the WEF initiative (that is in collaboration with Deloitte, EY, KPMG and PWC) to move toward common ESG metrics. And all of this is moving toward “COP 26” (the global climate talks) which has the stated goal of putting in place reporting frameworks so that every finance decision considers climate change.

“This starts”, says Mark Carney, Governor, Bank of England, and Chair of the Financial Stability Board, “with reporting…this should be integrated reporting”.

Remember, the FSB is the sponsor of the TCFD for climate-related financial disclosure.  FSB is a collaboration of the central banks and treasury ministries of the G-20 nations.

“COP 26 was scheduled for November in Glasgow, Scotland, and was postponed due to the pandemic. We are now looking at plans for a combined 26 and 27 meeting in November 2021.”  Click here for more information.

There is a lot of public dialogue centered on these important moves by influential players shaping and advancing ESG reporting — and we bring you a selection of those shared perspectives in our Top Stories in the Sustainability Highlights newsletter this week.

Top Stories On Davos & More

And then there is this, in the public dialogue on Stakeholder Capitalism, adding a dash of “reality” from The New York Times:

Corporate Sustainability Reporting: Changes in the Global Landscape – What Might 2021 Bring?

Posted on by
Reply

by Hank Boerner – Chair & Chief Strategist, G&A Institute

Change is a-coming – quite quickly now – for corporate sustainability reporting frameworks and standards organizations.  And the universe of report users.

Before the disastrous October 1929 stock market crash, there was little in the way of disclosure and reporting requirements for companies with public stockholders. The State of New York had The Martin Act, passed in 1921, a “blue sky law” that regulates the sales and trades of public companies to address fraud issues.  That was about it for protecting those buying shares of public companies of the day.

Under the 100 year old Act, the elected New York State Attorney General is the “Sheriff of Wall Street — and this statute is still in effect. (See: AG Eliot Spitzer and his prosecution of the 10 large asset managers for analyst shenanigans.)

President Franklin Delano Roosevelt, elected two-term governor of NY before his election to the highest office in November 1932, brought along a “brains trust” to Washington and these colleagues shaped the historic 1933 Securities Act and 1934 Securities Exchange Act to regulate corporate disclosure and Wall Street activities.

Story goes there was so much to put in these sweeping regulations for stock exchanges, brokerage houses, investor protection measures and corporate reporting requirements that it took two different years of congressional action for passage into law in the days when Congress met only briefly and then hastened home to avoid the Washington DC summer humidity and heat.

The Martin Act was a powerful influence on the development of foundational federal statutes that are regularly updated to keep pace with new developments (Sarbanes-Oxley, 2002, updated many portions of the 1934 Act).

What was to be disclosed and how? Guidance was needed by the corporate boards and executives they hired to run the company in terms of information for the company’s investors. And so, in a relatively short time “Generally Applied Accounting Principles” began to evolve. These became “commonly accepted” rules of the road for corporate accounting and financial reporting.

There were a number of organizations contributing to GAAP including the AICPA. The guiding principles were and are all about materiality, consistency, prudence (or moderation) and objectivity like auditor independence verifying results.

Now – apply all of this (the existing requirements to the Wild West of the 1920s leading up to the 1929 financial crash that harmed many investors — and it reminds one of the situations today with corporate ESG, sustainability, CR, citizenship reporting.  No generally applied principles that all can agree to, a wide range of standards and frameworks and guidance and “demands” to choose from, and for U.S. companies much of what is disclosed is on a voluntary basis anyway.

A growing chorus of institutional investors and company leaders are calling for clear regulatory guidance and understanding of the rules of the road from the appointed Sheriffs for sustainability disclosures – especially in the USA, from the Securities & Exchange Commission…and the Financial Accounting Standards Board (FASB), now the two official keepers of GAAP.

FASB was created in the early 1970s – by action of the Congress — to be the official keeper of GAAP and the developer of accounting and reporting rules.  SOX legislation made it official; there would be two keepers of GAAP — SEC and FASB.  GAAP addressed material financial issues to be disclosed.

But today for sustainability disclosure – what is material?  How to disclose the material items?  What standards to follow?  What do investors want to know?

Today corporates and investors debate the questions:  What should be disclosed in a consistent and comparable way? The answers are important to information users. At the center of discussion: materiality – everyone using corporate reports in their analysis clamors for this in corporate sustainability disclosure.

Materiality is at the heart of the SASB Standards now developed for 77 industry categories in 11 sectors. Disclosure of the material is an important part of the purpose that GAAP has served for 8-plus decades.

Yes, there is some really excellence guidance out there, the trend beginning two decades ago with the GRI Framework in 1999-2000. Publicly-traded companies have the GRI Standards available to guide their reporting on ESG/sustainability issues to investors and stakeholders.

There is the SAM Corporate Sustainability Assessment (CSA), now managed entirely by S&P Global, and available to invited companies since 1999-2000. (SAM was RobecoSAM and with Dow Jones Indexes managed the DJ Sustainability Indexes – now S&P Global does that with SAM as a unit of the firm based in Switzerland.)

Since 2000, companies have had the UN Global Compact principles to include in their reporting. Since 2015 corporate managers have had the UN Sustainable Development Goals (SDGs) to report on (and before that, the predecessor UN Millennium Development Goals, 2000-2015). And the Task Force on Climate-Related Financial Disclosure (TCFD) recommendations were put in place in 2017.

The Securities & Exchange Commission (SEC) in February 2010 issied “guidance” to publicly-traded companies reminded corporate boards of their responsibility to oversee risk and identified climate change matters as an important risk in that context.

But all of these standards and frameworks and suggested things to voluntarily report on — this is today’s thicket to navigate, picking frameworks to be used for telling the story of the company’s sustainability journey.

Using the various frameworks to explain strategy, programs, actions taken, achievements, engagements, and more – the material items. Profiling the corporate carbon footprint in the process. But there is no GAAP to guide the company for this ESG reporting, as in the example of financial accounting and reporting.

Institutional investors have been requesting more guidance from the SEC on sustainability et al reporting.  But the commission has been reluctant to move much beyond the 2010 risk reminder guidance even as literally hundreds of publicly-traded companies expand their voluntary disclosure.  And so we rely on this voluntary disclosure on climate change, diversity & inclusion efforts, political spending, supply chain management, community support, and a host of other ESG issues. (Human Capital Management was addressed in the recent Reg S-K updating.)

We think 2021 will be an interesting year in this ongoing discussion – “what” and “how” should companies be disclosing on sustainability topics & issues.

The various providers of existing reporting frameworks and standards and those influencing the disclosures in other ways are moving ahead, with workarounds where in the USA government mandates for sustainability reporting do not yet exist.

We’ve selected a few items for you to keep up with the rapidly-changing world of corporate ESG disclosures in our Top Stories and other topic silos.

There are really important discussions!  We watch these developments intently as helping corporate clients manage their ESG / sustainability disclosures is at the heart of our team’s work and we will continue to keep sharing information with you in the Highlights newsletter.

More about this in The Wall Street Journal with comments from G&A’s Lou Coppola: Companies Could Face Pressure to Disclose More ESG Data (Source: The Wall Street Journal)
TOP STORIES

Lively Discussions: The Move Toward Harmonized Corporate ESG / Sustainability Reporting

Posted on by
Reply

September 22 2020

by Hank Boerner – Chair & Chief Strategist – G&A Institute

There are lively discussions going on, centered on improving publicly-traded company disclosure and reporting – and especially ESG reporting…that is, storytelling about the company’s “non-financials” (in accounting-speak).  And the story of the corporate sustainability story for those-in-the-know!

The proliferation of ESG / sustainability reporting frameworks, standards, information platforms, industry guidance, stock exchange guidance and much more has been astounding in recent years.

We think of all this as about the organizing of the storytelling about a company’s sustainability journey and what the enterprise has accomplished. 

And why the story matters to society…to investors, employees, customers, suppliers, communities…and other stakeholders.

And it has a been a long journey to the state of today’s expanding corporate ESG disclosure.

The start of mandating of periodic financial and business mandated disclosure goes back to the 1930s with passage of landmark federal legislation & adopted implementation (compliance) rules for publicly-traded companies in the United States.

Corporate financial disclosure in concept is all about providing shareholders (and potential investors) with the information they need to make buy-sell-hold decisions.

The sturdy foundations of mandated corporate disclosure in the U.S. are the laws passed after the 1929 stock market crash – the 1933 Securities Act and 1934 Exchange Act.  These laws and the bodies of rules deriving from them have been constantly updated over the years, including with Sarbanes Oxley legislation in 2002 and Dodd Frank in 2010. These mandate or guide and otherwise provide the rules-of-the-road for financial disclosure for company managements.

Disclosure has steadily moved well beyond the numbers – Sarbanes-Oxley updated the 1930’s laws and addressed many aspects of corporate governance, for example.

Voluntary Disclosure & Reporting – ESG Issues & Topics
Over the past 40 years, beyond the financials, corporate voluntary non-financial disclosure has been steadily increasing, as investors first embraced “socially responsible investing” and moved on to sustainable & responsible & impact investing in the 21st Century.

Asset owner and asset manager (internal and external) requests for ESG information from publicly-traded companies in portfolio has steadily expanded in the depth and breadth of topic and issue areas that institutional investors are focused on – and that companies now address in significantly-expanded ESG disclosures.

Today, investor interest in ESG / sustainability and related topics areas is widespread throughout asset classes – for equities, equity-focused products such as imutual funds and ETFs, fixed-income instruments, and now credit risk, options and futures, fixed assets (such as real estate), and more.

With today’s dramatic increase in corporate sustainability & ESG reporting, the maturation of reporting frameworks and standards to help address the internal need for better organizing non-financial data and information and accompanying ESG financial disclosure.

And all of this in the context of trying to meet investor demands.  Today with expanded ESG disclosure, corporate executives find that while there are more resources available to the company, there is also more confusion in the disclosure process.   Investors agree.

Common Complaints:  Lack of Comparability, Confusion, Demand for Change
The result of increasing demand by a widening range of investors for accurate, detailed corporate ESG information and the related proliferation of reporting frameworks and standards can and has resulted in confusion among investors, stakeholders and companies as to what is important and material and what is frill.

This especially as corporate managements embrace various elements of the available frameworks and standards and industry guidance and ESG ratings for their still-voluntary ESG reporting.

So where do we go from here?  In our selection of Top Stories for you, we bring you news from important players in the ESG reporting process as they attempt to move in the direction of more uniform, comprehensive, meaningful and decision-ready corporate ESG reporting. That investors can rely on.

The news for you is coming from GRI, SASB, GSSB, IIRC, CDSB, and CDP (among others) – all working to get on the same page.

The aim: to benefit corporate reporters – and the users of the reports, especially capital market players.

Because in the end, ESG excellence is all about winning in the competition for access to capital. Accurate, timely, comprehensive comparable ESG information is key!

Top Stories

1st in Series: The Software / IT Services Industry – GRI & SASB Standards In Focus – Perspectives on Alignments & Differences

Posted on by
3

SERIES INTRODUCTION 
GRI & SASB In Focus – Perspectives on Alignments & Differences

Notes from the G&A Institute Team on the series of commentaries by members of the G&A Sustainability Report Analyst Interns…

With the recent publication of the much-anticipated “Report on US Sustainable, Responsible and Impact Investing Trends 2018” issued by US SIF showing that ESG has really hit the capital markets’ mainstream — with $1-in-$4 in the US (by professional investment managers now incorporating ESG).  And, with the recent petition urging mandatory ESG reporting — submitted to the Securities & Exchange Commission by institutional investors  — he need to develop a more standardized framework for corporate ESG reporting is more pressing than ever before.

A recent discussion paper — “Investor Agenda For Corporate ESG Reporting” — with inputs from the CFA Institute, ICGN, PRI, CERES, GSIA, GIIN, and the UNEP-FI — further highlights this issue.

Among other things, the discussion paper emphasizes the need for participants of the Corporate Reporting Dialogue (participants include reporting standard setters – GRI, SASB, CDP, IIRC,CDSB, ISO, FASB, and IFRS) to deliver on their promise to work together to develop a more unified agenda on ESG reporting.

As part of our company’s role as the GRI Data Partner in the USA, UK and Republic of Ireland, G&A Institute’s Sustainability Report Analyst-Interns analyze thousands of sustainability reports each year and contribute the information to the GRI’s Sustainability Disclosure Database. This is the largest publicly-accessible sustainability disclosure database in the world (with now over 50,000 sustainability reports included, dating back to the start of the GRI).

Many of the corporate reports the G&A analysts process use the GRI Standards — and a number have now started to implement aspects of the SASB Standards as well in their disclosure and reporting process, depending on their sector and industry categories.

In their ongoing work, G&A’s Sustainability Report Analyst-Interns have been comparing the two standards for disclosure in specific industries as they carefully examine the corporate reports, and consider two standards’ alignment, similarities and differences.

In this series G&A’s Sustainability Report Analyst-Interns share their own perspectives as they have analyzed reports and noticed similarities and differences.

* * *

We begin our series of shared perspectives with the perspectives of Minalee Busi, looking at the Software and IT Services Industry.

Comments by Minalee Busi – G&A Sustainability Report Analyst-Intern

Discussion regarding sustainability reporting is usually more focused in context of resource intensive industries, and the Software and IT Services sector is often left out.

With sustainability being a major factor in competitive advantage and investor decision-making, Software and IT Services companies need to re-think their sustainability reporting strategies, if they are not already at that point.

SASB identifies a limited number of material issues for the industry for corporate reporting, such as:
• environmental footprint of hardware infrastructure,
• data privacy and freedom of expression,
• data security,
• recruiting and managing a diverse skilled workforce, and
• managing systematic risks from technology disruptions.

Environmental Disclosures

The disclosure suggestions set forth by both the SASB and GRI Standards are in fact quite comparable, and in alignment with each other for some topics.

For example, both standards suggest companies to report on the energy consumed (both renewable and non-renewable) — but with different reporting boundaries.

SASB suggests reporting consumption within the organization — and the GRI Standards ask to additionally include consumption outside of the company.

However, GRI Standards also include disclosures in terms of energy reduction due to conservation and efficiency initiatives — which SASB disclosures do not include.

Similarly, though both the disclosure frameworks require information about water withdrawal and consumption, GRI also expects detailed reporting on water discharge into different water bodies, with information such as whether water was treated before discharge and whether they follow international standards on discharge limits.

The GRI Standards also include disclosure on recycling — which although not very comprehensive, is completely non-existent in the SASB sector disclosure.

Given the increasing e-waste generated by the IT industry, both GRI and SASB could consider including more detailed disclosures in this area for addressing material risks companies face.

Addressing Data Security/Privacy

In terms of data security, both standards include suggestions of disclosures related to data breaches and the number of users affected. But since SASB disclosures are designed to be industry-specific standards, more detailed reporting requirements in terms of data privacy and freedom of speech are found in SASB — including information on secondary usage of user data and monetary losses as a result of legal proceedings associated with user privacy.

Other such additional detailed areas of sector-/industry-specific disclosures by SASB which are not specified in the GRI standards are topics under managing systematic risks — such as performance issues, downtime and service disruptions due to technological impediments; and, activity metrics related to data storage, processing capacity and cloud-computing.

Disclosures with respect to monetary losses due to legal proceedings around intellectual property protection and competitive behaviour can also be found in the SASB Standards.  These disclosures can be loosely be aligned with the GRI disclosures under non-compliance with laws in the socio-economic arena.

S/Social Reporting

With respect to the “S” (social domain) of corporate ESG reporting, both of the standards suggest reporting on employee diversity, with GRI focusing on categories such as age, gender and minority representation and SASB additionally suggesting reporting on data related to the percentage of employees who are (1) foreign nationals and (2) located offshore.

Interestingly, although SASB disclosures are industry specific standards and the IT industry is mainly dependent on human and intellectual capital, there is no specific suggestion of reporting on training and education of employees.

GRI Standards appear to be filling this gap with suggestions of detailed disclosures on average training hours, upskilling and transition assistance programs and information related to employee performance reviews.

Sustainability Reporting Criteria

The GRI Standards have extensive sustainability reporting criteria, of which a major portion of the disclosures fall under the “General Disclosures” — which include materiality, measurement approaches, consistency and comparability of reporting, external assurance, supply chain information, sustainability strategies, and ethics and integrity. This to me is seemingly more transparent as compared to the SASB Standards.

Another such area is stakeholder engagement, which exists in the SASB Standards only in the form of percentage of employee engagement.

The category of Discussion and Analysis under SASB Standards does require reporting on strategic planning about each of the material topics identified, which can be mapped to the Management Approach (DMA) disclosures recommended under each material Topic-specific disclosure area of the GRI Standards.

Alignment – and Gaps

With the above overview, the SASB disclosures and GRI Standards can be seen in alignment with respect to some material topics while having some gaps in others.

However, since both the standards are developed to address the needs different stakeholders – with GRI aiming a broader set of stakeholders and the SASB majorly targeting mainstream U.S. investors — they should not be seen by report preparers as being in competition with each other.

I believe that the efforts of the CDP and important sustainability reporting standards-setters such as GRI and SASB will certainly be welcomed by companies and other stakeholders now struggling to keep up, but the question remains if such collaborations can ultimately lead to the desired standardised sustainability reporting framework that many investors actively seek.

#  #  #

Note:  This commentary is part of a series sharing the perspectives of G&A Institute’s Analyst-Interns as they examine literally thousands of corporate sustainability / responsibility reports.  Click the links below to read the other posts in the series:

Tune In to the Corporate Reporting Dialogue — An Initiative That Will Impact Investors, Corporate Reporters and Stakeholders

Posted on by
Reply

by Hank Boerner, Chairman – G&A Institute

Tune in to the [just launched] Corporate Reporting Dialogue – whether you are an investor, or company manager, or stakeholder with interest in corporate disclosure and structured sustainability / responsibility reporting.

This important dialogue was formally begun in June at the annual International Corporate Governance Network (ICGN) conference – the effort is spreadheaded by the International Integrated Reporting Council (ICCR).

The “dialogue” is organized to include the group of prominent independent organizations that exert varying degrees of influence on (among other things) the valuation and reputation of the world’s public and private companies … by inviting, mandating, suggesting and in various ways requesting that corporate managers look to their framework or standard or approach for their ESG disclosure and reporting.

Compliance with some of the standards of the organizations that gathered are in some cases mandatory (FASB, IASB for periodic or immediate public company financial disclosure & reporting); others are voluntary for the most part (the GRI, now the most widely used for global corporate and institutional sustainability reporting); some are voluntary logically leaning toward becoming the industry norm and perhaps at some point, mandatory (SASB for corporate sustainability reporting in the USA); some have created a global norm that public companies ignore at their risk (CDP for water, carbon and supply chain disclosure).

Gathering in Amsterdam, the Netherlands, the alphabet soup of leading ESG framework purveyors and standards setters came together to talk about important topics: (1) the coming of integrated reporting (for disclosure related to financial and ESG performance and more), (2) improving the quality and consistency or comparability of the various standards and reporting frameworks that corporations are using or adopting for their reporting, and (3) these (as described) and other approaches that asset owners and manager are using to make portfolio decisions.

“More certainty” for corporates and investors is one of the worthy objectives being debated.  More certainty in sustainability reporting…greater coherence among frameworks and standards…and the subsequent investor analysis and use of same?  All users of the standards, frameworks, related requirements, and analytical approaches will cheer that worthy goal on.

The organizations now collaborating under the umbrella of the Corporate Reporting Dialogue include:

  • The Global Reporting Initiative (GRI, the most widely used framework for sustainability reporting);
  • CDP (formerly known as the Carbon Disclosure Project);
  • the USA’s financial accounting standards FASB, authorized by the Congress to set accounting and financial reporting standards;
  • the counterpart international body, IASB for global (non-USA) accounting standards;
  • the very influential International Organization for Standardization (ISO – you know them for ISO 9001 etc.);
  • Climate Disclosure Standards Board (CDSB);
  • International Integrated Reporting Council (IIRC, the initiator of the dialogue);
  • International Public Sector Accounting Standards Board (IPSASB);
  • the relative newcomer and increasingly influential player, based in the USA, the Sustainable Accounting Standards Board (SASB, which is now in the process of generating sustainability reporting standards for various sectors and industries).

Connectivity is Key:  The collaborating organizations are aiming to develop practical ways to align the direction, content and development of the various reporting frameworks, standards, etc. The initial deliverable is going to be a document highlighting the “connectivity” of the various frameworks and standards….and the relevance to the coming of integrated reporting.

In the announcement, the IIRC organizers said that “…in an interconnected world, isolated change is insufficient to reflect the complexities of modern business and investment decisions…the CRD is a collaboration to promote greater cohesion and efficiency, rebalancing reporting in favor of the reader, helping to reestablish the connection between a business and its principal stakeholders…”

Note:  Chair of the CRD is Mrs. Hugette Labelle, Chair of Transparency International and board member of IIRC.

In announcing the initiative, Paul Druckman, IIRC CEO stated: “The purpose of the CRD is to strengthen cooperation, coordination and alignment between key organizations with Integrated Reporting as the umbrella. The need for this is continuously articulated in my discussions with companies, investors, regulators and other stakeholders across the world.

“At the creation of the IIRC we set out to be a catalyst for an evolution in corporate reporting – the formation of the CRD is at the heart of this, and is a significant step towards achieving our goal.”

Tune in and follow the new CRD — whether you are an investor, or corporate manager, or other stakeholder — this conversation will affect the future of corporate sustainability disclosure and reporting.

Information at:  http://www.theiirc.org/2014/06/17/corporate-reporting-dialogue-launched-responding-to-calls-for-alignment-in-corporate-reporting/