New sustainability reporting guidelines gain credence: Ernst & Young

Thursday, 17 April 2014 00:00 - - {{hitsCtrl.values.hits}}

In the last decade, confidence in the corporate sector globally has taken a beating as a result of a slew of high profile financial scandals and bankruptcies. In such an uncertain climate, companies discover that they need to work doubly hard to engage with stakeholders to convince them of their financial and non-financial health, whilst also demonstrating their corporate stewardship in a tangible manner. But how exactly do companies succeed in convincing diverse stakeholders that their trust is well founded? More and more forward thinking companies are embarking on sustainability reporting as a tool for both introspection and communication with stakeholders, reports Ernst & Young. Smart companies adopt sustainability reporting Asite Talwatte, Country Managing Partner, Ernst & Young, said: “Sustainability reports are not mandatory, but savvy companies are opting to go in for sustainability reports as they rightly foresee far-reaching benefits of this decision. More and more companies are embracing the Global Reporting Framework or GRI guidelines to develop a comprehensive Sustainability Reporting Framework not because it is a mandatory requirement, but because it serves as a 360-degree performance based measurement of the company’s contribution to stakeholders. In the aftermath of the exercise, many companies report the unique value creation opportunities that emerged during the process of disclosure.” New G4 standards introduced by GRI Continually improving its guidelines to enhance the quality of reporting, GRI launched the fourth generation of its sustainability reporting guidelines in May 2013: the GRI G4 Sustainability Guidelines. The new GRI G4 Guidelines are effective for reports published after 31 December 2015, which gives reporters two reporting cycles to complete their transition to G4. Offering flexibility, early adoption is permitted as even first-time reporters are encouraged to use the G4 guidelines, although they may be unable to claim compliance with them in their first reporting cycles. G4 offers enhanced reporting and better understanding Over the years, GRI has altered its guidelines to facilitate reporting for companies whilst making it simpler for stakeholders to understand the report. The guidelines are now presented in two parts to facilitate the identification of the reporting requirements and related guidance: Part 1, Reporting Principles and Standard Disclosures – In addition to containing the reporting principles and standard disclosures, also sets out the criteria to be applied by an organisation to prepare its sustainability report in accordance with the guidelines; Part 2, Implementation Manual – Contains reporting and interpretative guidance that an organisation should consult when preparing its sustainability report. Put your company’s reporting needs first G4 is significant mainly because it offers two standalone options to produce a sustainability report in compliance with the requirements of the company, namely, the Core and the Comprehensive options. The Core option contains the essential elements of a sustainability report and provides the background against which an organisation communicates the impacts of its economic, environmental, social and governance performance. On the other hand, the Comprehensive option builds on the Core option, by requiring a number of additional disclosures about the organization’s strategy and analysis, governance, ethics and integrity. Companies will welcome the fact that regardless of its size, sector or location, an organisation has the freedom to choose the option that best meets its reporting needs. Bring management approach to the fore Buwanesh Wijesuriya, Partner, Ernst & Young, commented: “The guidelines introduce new and revised general standard disclosures in a number of areas. They reflect the closer attention that stakeholders and regulators now pay to these aspects: governance, supply chain, ethics and integrity, specific standard disclosures and sector disclosures. These factors are proving to be crucial operating aspects of any company and the new G4 guidelines offer reporting companies the opportunity to showcase their achievements in each of these areas.” Companies lack expertise in sustainability reporting Many companies are challenged by the prospect of embarking on their first sustainability report. Moreover, GRI recommends organisations seek external assurance on sustainability reports. However, external assurance is not required in order for an organisation to claim that its sustainability report is in accordance with the guidelines. An organisation can now indicate in the GRI content index which disclosures have been externally assured and insert a cross-reference to the external assurance statement included in the sustainability report. Despite this, most companies opt for external assurance as it sends out a clear signal to stakeholders that the report is independently audited and verified. Ernst & Young is spearheading the external assurance function for sustainability reports of leading companies in Sri Lanka. Having played an active role in the development of the GRI Guidelines in the past, the firm is an experienced and seasoned assurance provider globally. Talwatte added: “Companies are looking for expertise that will help them create their sustainability strategy and governance, conduct a materiality assessment, use leading practices to design and implement systems, processes and controls to measure performance and even draft the sustainability report. Sustainability reporting is becoming de rigueur for companies who wish to engage with their stakeholders into the long term and Ernst & Young is proud to be partnering some of the leading companies in Sri Lanka to achieve their sustainability reporting goals by leveraging on our global expertise in this field.”