Standardization still eludes sustainability reporting, but the foundation of every report should be transparency and accountability.
By Robin Byrd

Transparency and accountability are two critical tenets of sustainability reporting that are still evolving, just like the sustainability report itself. A lack of report standardization in the past has led to non-standard report forms and content, but there are underlying principles that every reporting process should incorporate. Transparency includes everything from required to voluntary disclosures in environmental, social, and governance (ESG) outcomes. Accountability refers to the organized and consistent reporting of ESG metrics and information of importance to stakeholders. The transparency and accountability built into sustainability reporting are critical to producing meaningful disclosures of interest to stakeholders.

Early sustainability reporting offered insights in environmental sustainability activities, but over the last five years, the reporting has become more sophisticated in terms of offering insightful metrics to stakeholders. It is stakeholders who have largely driven the transformation as they demand more corporate transparency and accountability around environmental, social, and governance outcomes.

The tech industry is a good example of a set of companies that attempted to avoid transparent reporting of information like workforce diversity. When Jesse Jackson, president and founder of Rainbow PUSH Coalition, pushed for public disclosure of employee demographic information, some companies tried to hold out. They knew the public would not like what their information contained – proof there is a lack of workforce diversity in Silicon Valley.

Most of the largest tech companies now publish employee demographics, but surprisingly some continue to resist. Lack of transparency today indicates there is something to hide, and that harms the company reputation. A better strategy is to publish the metrics, whether favorable and unfavorable, and include information on strategies implemented to improve and progress made to date.

The principle of transparency means the information of importance to stakeholders is published. Accountability is the application of consistent reporting methodologies to produce information linked to the company's core mission and strategies. The companies issuing sustainability reports are the first to say the initial report is the most difficult because the material sustainability and related data must be collected and analyzed, the relevant metrics identified, and the linkages established to the satisfaction of stakeholders. Adding to the challenge is the fact new risks regularly appear, legal requirements change, and issues of importance to stakeholders will change.

Transparency
Transparency in sustainability reporting refers to openness and communication, and easily available information concerning ESG impacts. Stakeholders use the information to assess how well a company is fulfilling its responsibilities to society. It includes reporting on areas where the company has successfully met its responsibilities and on areas where economic activities resulted in a lower quality of life in some manner. This is difficult for corporations to do because they spend millions on marketing a positive brand, so admitting weakness or failure in any ESG area is challenging.

This is where corporate core values and mission are linked to transparent reporting. Consumers, investors, stockholders, and employees expect a company to be social engineers and stewards in areas like mitigating climate change, increasing the economic status of employees and communities, and hiring diverse people. Publishing failures as well as successes in meeting sustainability goals offers guidance to other companies also pursuing sustainability initiatives. The company needs transparency in sustainability reporting to satisfy stakeholder needs and to identify and manage risks.

A good example of transparency is United Rentals willingness to publish safety data on a year-over-year basis, making it easy to see if progress is being made. From 2014 to 2015, near-miss reports increased from 12,098 to 17,597. However, the footnote explains that the increase is due to the company's stronger emphasis on increasing employee awareness of unsafe situations or conditions, encouraging the filing of reports. United Rentals did not have to include this metric, but in the interest of transparency includes these figures and is applauded for doing so. The report is filled with successes concerning ESG impacts, such as a 5.8 percent reduction in greenhouse gas emissions despite footprint growth of 2 percent.

Accountability
Sustainability reporting accountability is a concept in which a company acknowledges responsibility, within the ESG context, for strategies, decisions, products, policies, and actions. Accountability is an element of transparency.

For example, consumers are interested in knowing products have a green lifecycle, and investors expect the company to not be wasteful when using resources for the manufacturing process. Communities of operation expect the company to make positive contributions to local well-being. The metrics are different for these areas of accountability. Accountability requires developing robust procedures to produce accurate and meaningful data for ESG concerns and results. Implementing the appropriate processes and controls to ensure access to meaningful data is critical.

Companies have traditionally focused on financial performance, but there is a clear shift to adding metrics that measure ESG impacts in a meaningful way. However, unlike financial accounting, sustainability reporting includes quantitative and qualitative information.

Coca-Cola's 2014-2015 sustainability report offers good examples. Under water stewardship, the company reports it replenished approximately 153.6 billion liters of water to 209 communities in 61 countries. In the same impact area, Coca-Cola also reports it launched the "New World: Inclusive Sustainable Human Development Initiatives" in cooperation with the United Nations Development Program "Every Drop Matters."

The information and metrics reported need to be appropriately focused for the company. Once the areas of focus are identified, the Sustainable Performance Indicators (SPIs) are developed for each of the ESG areas. One suggestion for zeroing in on relevant KPIs is to use the SMART criteria, but the metrics need to be reasonably attainable. Only very large companies can afford to purchase and install new data collection and analyzation systems dedicated to sustainability reporting.

Transparency and accountability are the foundation of impactful sustainability reporting. Companies needing guidance in getting started with the sustainability report can utilize the frameworks and reporting guidelines already developed by organizations like the Global Reporting Initiative, the Sustainability Accounting Standards Board, and even competitor reports.

One of the common features of sustainability reports is that they get better each year. The first one does not need to be perfect. It just needs to have honest transparency and accountability.