Kristen Sullivan is a partner at Deloitte & Touche LLP and leads the Sustainability Reporting, Assurance and Compliance services for Deloitte U.S., working with clients to help address their sustainability disclosure needs. Kristen brings extensive experience in sustainability reporting and assurance, focused on social impact. Sullivan leads Deloitte’s efforts around Social Impact Investing, specifically focused on Deloitte’s services in support of the Global Impact Investing Rating System.

Sullivan also leads Deloitte’s Conflict Minerals Advisory and Assurance Services. She brings specialized insights to this regulatory reporting requirement from her previous area of focus on Regulatory & Public Policy Matters for Deloitte, recognizing the broader policy as well as the compliance implications of this issue from a corporate brand and reputation standpoint.

Sullivan serves as a member of the Global Reporting Initiative North America Advisory Council, the Sustainability Accounting Standards Board Assurance Task Force, the International Integrated Reporting Council Working Group and the Global Initiative for Sustainability Ratings Technical Review Committee, and serves as a member of the AICPA Conflict Minerals and Sustainability Task Forces. Sullivan also serves on the Capital Markets Partnership Committee on Green Bond Underwriting Standards.

This Q&A is an edited excerpt from a Sustainable Business Fridays conversation March 6 by the Bard MBA in Sustainability program, based in New York City. This twice-monthly dial-in conversation features sustainability leaders from across the globe.

Bard MBA: The world of sustainability reporting and auditing adds many new dimensions to the practice of accounting. Why don't we start off with a bit more about your background, how you got into this field?

Kristen Sullivan: I am a CPA by background and I started with Deloitte almost 19 years ago as a financial statement auditor. I worked through various areas of our organization and have been working in this space for the past four years or so. Within the sustainability space, I have seen an increased focus and clarity around the importance of information beyond historical financial reporting.

Bard MBA: Let’s begin with the business perspective: Would you share an overview of the sustainability reporting space, as well as a sense of who is reporting?

Sullivan: We have certainly seen, by any measure, a pretty recognizable increase in reporting. Now, you can break that down to reporting in accordance with a certain framework or in response to a certain survey or rating body. From a context-setting perspective: Based on the latest research, about 95 percent of the world's largest 250 companies prepare a sustainability report. Alternatively, about 86 percent of the largest U.S. companies issue sustainability reports.

Clearly the U.S. marketplace, from a voluntary sustainability-reporting standpoint, has lagged. We have seen that focus in North America, particularly the U.S. market, has accelerated pretty rapidly over the past couple of years. Of the S&P 500, 72 percent issued a sustainability report in 2013, as compared to 20 percent in 2011. I think there is much greater appreciation in the market around the value of reporting.

In the U.S. in particular, absent broad regulatory mandates, there are number of market forces that are really compelling organizations to acknowledge and recognize the importance and the value of sustainability reporting. In a sense, sustainability reporting is becoming standard practice.

Bard MBA: We would love to hear a bit more about how sustainability reporting adds value to a publicly traded company.

Sullivan: We are really seeing the acceleration in terms of the pace, focus and quality of reporting. There's been a shift away from the mindset that “I have to do this” to respond to some competitive measure, or expectations from business partners or investors.

We see the expectation that internal value can be realized through reporting. What you don't measure, you can't manage; we all know that.

We are seeing increased evidence based around cost savings related to environmental efficiency efforts and risk reduction related to mitigating and minimizing GHG emissions. Increasingly, companies are applying the lens of sustainability to business activities to generate revenue, for example, products and services that reduce GHG emissions.

Bard MBA: As Bard MBA students, we tend to discuss companies and their sustainability journey, moving from compliance to efficiency to innovation. Because the United States is “catching up” to the 95 percent of global companies who are reporting, where do you observe the majority of companies on that journey?

Sullivan: The real leaders in this space are defining sustainability simply as how they do business. They see that there are tangible benefits. This is not just a compliance exercise to meet some external stakeholder demands. I think that is helping to accelerate appreciation of how these sustainability concepts really can drive long-term value.

Bard MBA: If we can agree that it is valuable for businesses to report, what you do see most often as the key risks to sustainability reporting from the business perspective?

Sullivan: In the U.S. market, there is still a hesitance around voluntary disclosure. There are persistent views that anything you voluntarily disclose to the marketplace might potentially expose you to some sort of liability or risk. This is still a common theme among U.S. companies when weighing the options and prioritization of how they go about enhancing that level of disclosure.

That said, I do think I think we are seeing a shift. Increasingly, the perceived risks of disclosure are outweighed by the benefits of voluntarily and proactively reporting. The risks of not disclosing are becoming greater than the risks of disclosing.

Bard MBA: So, as a company, I publish my annual sustainability report and want to have a firm like Deloitte perform assurance in a similar way you might audit a 10-K. What drives companies to request this third-party assurance for sustainability reporting?

Sullivan: It is important to clarify that the preparer [the company] needs to prepare a report in conformance with a recognized framework or standard before seeking external assurance. As it relates to the value of assurance, much more sophisticated users of this information are recognizing, and increasingly demanding, the need for some confidence that the reported information is accurate, reliable, appropriately balanced and all of those other considerations you might look for.

Companies are dedicating resources, energy and investment in these reporting programs. If they truly believe that this information has value to inform internal decisions, as well providing valuable information to external stakeholders to influence their decisions, assurance is the natural next step. Many are looking at it as a real risk mitigation measure in the event that external parties use that information to make an investment.

Many companies start with what’s called internal assurance or assurance readiness, which would identify areas for improvement in reporting, including the processes and controls around reporting. It would identify gaps in the reporting process, from data collection to analysis, which might impact the accuracy and reliability of the information.

Internal assurance can be compared to external assurance, where the objective is to provide assurance on nonfinancial information to determine whether the information is presented in accordance with the recognized framework. An external assurance report is made publicly available, accessible by external stakeholders. That’s where the companies can really find the most value — it demonstrates leadership, accountability and commitment to sustainability.

At the end of the day, the real value of assurance — internal or external — is the insights, recommendations and ideas from external assurance providers that will help the organization drive improvements and enhance their ability to meet their stated objectives.

Bard MBA: What advice do you have for MBA students interested in careers in sustainability reporting, assurance and consulting?

Sullivan:  This answer will vary based on every person you ask. I am a CPA by background am not necessarily academically trained in sustainability.

I would encourage any MBA student focusing on sustainability to complement that subject matter expertise with business expertise. Consider how sustainability can really enhance your value proposition as an MBA grad committed to driving business value.

Focus on how the subject matter of sustainability is going to differentiate you as a businessperson. That's really what companies are looking for.

Bard MBA: What do you see as the future of sustainability reporting?

Sullivan: I believe that sustainability reporting will accelerate very rapidly, far faster than we have seen in the past. I believe it will be driven largely by marketplace factors, including investor and business-to-business expectations. We are seeing “license to operate” requirements — if you want to be a supplier to a big retailer, you have to be focusing on these sustainability and supply chain issues.

I do think we will see an increase in not only the volume, but also the quality, of reporting as the market continues to demand external assurance and reliability. I hope that in five years we are in a better position across the marketplace where there is a true appreciation of sustainability as a fundamental business issue.

The full recording of this conversation is available.