The 6 Biggest Trends in Sustainability Reporting

At the GreenBiz Forum in New York City last week, Ernst & Young offered a preview of fall 2011 survey results of sustainability program and reporting trends at leading companies in 24 sectors. Of the more than 270 respondents, 85 percent are based in the U.S.

The session, led by E&Y assurance and sustainability and climate change practice experts, highlighted six trends:

1. A rise in sustainability reporting;
2. An increase in the CFO's sustainability role;
3. The emergence of employees as a key sustainability stakeholder force;
4. Strong reporting on greenhouse gas emissions and mounting reporting on water use -- despite regulatory uncertainty;
5. Growing concern about access to raw materials (including so-called conflict minerals) as a business supply chain issue;
6. Special attention to outside rankings and ratings on the part of corporate executives.

What the Trends Mean

For those who follow business sustainability, what's striking about the survey results may be less the trends identified than the reasons for them -- and what they spell for companies in the years ahead.

Interviews after the session with Christopher Walker, Americas Market Leader, and Adam Carrel, Senior Manager, both of E&Y's Climate Change and Sustainability Services group, offered the following insights:

1. More Reporting

Sustainability reporting is on the rise, with 76 percent of survey respondents already issuing such reports, and 93 percent expected to do so in the next five years.

Yet, despite a welcome increase in reporting, the tools used to gather the information are "suboptimal," with spreadsheets such as Excel widely used in the U.S. as the primary data collection source, supplemented by email and even telephone calls (which prevent third-party verification and/or assurance).

That weakness among U.S.-based companies contrasts with more mature reporting markets, such as Australia, where data collection architecture is often more robust, largely because of regulations or those pending. Explains Walker: "In order to verify information, companies need to show a reliable, accurate information trail."

Another problem: Sustainability reporting, which aims to capture environmental and social trends, is intrinsically more qualitative than traditional financial reporting, based on numbers and longstanding accounting rules.

While some environmental information is relatively easy to capture in numbers (for instance, amount of energy used, or related calculations on GHG emissions), social impact of company programs is harder to capture quantitatively. And, while "the school of social impact assessment has advanced, with a proliferation of benchmarks across industries, it's not used as much," says Carrel.

"There's no standout model for ethical behavior," he continues, so auditors and consumers will likely have to "tolerate a higher level of subjectivity," partly because sustainability is a broad and evolving field.

2. Growing CFO Involvement

One in six CFOs are now actively engaged in sustainability, with over half "somewhat" involved.

The rise likely reflects "an increase in uptake of sustainability data from capital markets," including major investors and banks, along with greater pressures from internal employees," explains Carrel.

However, while the CFO's role is growing, "it still isn't as aligned with sustainability as it should be," says Walker. He notes that the major focus is on efficiencies in areas like energy costs and savings, which are more easily quantifiable. Still, he believes greater CFO alignment will come, as quantitative sustainability data becomes more reliable.

3. Employee as Stakeholder

Among the most noteworthy trends is the rise in employee engagement as a key reason for company sustainability reporting -- as well as employee involvement in sustainability programs, and even initiation of such programs, including increasingly popular green teams.

Indeed, the survey found employees were ranked as the second most important stakeholder group (after customers) for a company's sustainability programs and reporting efforts. Shareholders trailed employees by seven percentage points and policy makers by nine percentage points.

Use of social media like company intranets makes employee-management and employee-to-employee communication easier and can help build and sustain employee momentum in sustainability programs.