Standards for Disclosure
Companies crafting financial filings have long relied upon a common standard, whether it be the Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS).
Shared standards and definitions facilitate performance comparisons and remove much of the confusion that comes with a large assortment of data. The same holds true for sustainability disclosure with the Global Reporting Initiative (GRI) Guidelines considered to be the internationally accepted standard for sustainability reporting.
The GRI Sector Supplements provide additional guidance for the disclosure of specific issues relevant to a particular sector. According to the GRI, U.S. companies are lagging behind their European counterparts in GRI reporting; however, there is an upward trend. According to recent estimates, there was an increase of approximately 35 percent in GRI reporters in the U.S. from 2010 to 2011 alone.5
In the video below, Dr. Nelmara Arbex, Deputy Chief Officer at GRI talks about the changing landscape of sustainability disclosure and the G4 reporting guidelines.
Case Study: Deciding what is Material
A substantial part of the International Integrated Reporting Committee’s (IIRC) deliberations revolves around the concept of materiality, or identifying the most relevant/significant issues "that influence the decisions, actions and performance of an organization or its stakeholders." To date, most companies follow separate processes to identify materiality from a business perspective, versus materiality from a sustainability perspective. The trend toward integrated reporting, which brings sustainability and financial reporting under a single umbrella, requires a reconciliation of these varying approaches to materiality. The Sustainability Accounting Standards Board (SASB) has taken on this challenge in the U.S. context, and is working to develop industry based sustainability standards to guide corporations and investors on material issues for disclosure in financial filing such as the 10-K. A key task for the SASB will involve identifying an approach to materiality that is not purely linked to financial thresholds, given that many environmental and social issues cannot be easily reduced to dollars and cents. SASB will also take on the task of obtaining industry buy-in, so that corporate disclosure of material issues is consistent and comparable.
Wallace, Mike. “What GRI Learned in Its First Year in America.” GreenBiz.com. February 28, 2012.