BSR 2009: The Quandary of Mandatory Sustainability Reporting

BSR 2009: The Quandary of Mandatory Sustainability Reporting

Images by Fonis

[Editor's Note: This article is part of's coverage of the 2009 Business for Social Responsibility conference. To read all our coverage, visit]

Increasingly, voluntary sustainability reporting is becoming a mainstream practice. Yet with the global economy still roiling, trust in business remains low and the question of mandatory reporting is being raised with greater persistence.

The question and issues surrounding it -- what to report, how much, to whom, who finds them important and who reads them -- were the focus of a panel discussion at the 2009 Business for Social Responsibility conference in San Francisco.

"We are still in a situation in which trust in business is still really low," said Doug Bannerman, BSR's senior manager for advisory services and moderator of the panel "From Voluntary to Legal Disclosure: Should Sustainability Reporting Be Required?"

"In the course of the last 10 or 12 years, reporting has become mainstream, yet we keep coming back to these issues of trust," Bannerman said, noting that news reports of the failure of more than 100 U.S. bank so far this year is not likely to help foster a resurgence of trust in business.

There are, he said, "constituencies who say maybe voluntary (reporting) isn't enough, maybe reporting should be mandatory."

Bannerman's intro launched a lively and often humorous hour-long dialogue with Gary Niekirk, director of global citizenship at Intel, and Jerome Tagger, chief operating officer at Principles for Responsible Investment.

Intel's compiled its first report on environmental, health and safety issues in 1994, said Niekirk. For the past decade, the company has followed Global Reporting Initiative guidelines in drawing up its Corporate Social Responsibility reports -- the most recent of which followed G3, the latest version of the reporting framework.

Nevertheless, Niekirk said, he would not recommend making a case for mandatory reporting based on return on investment, given studies on whether a correlation exists between environmental, social and corporate governance reporting and ROI. About half have found a positive correlation, 35 percent were neutral and about 15 percent didn't support the hypothesis.

Niekirk likened the situation to a doctor telling a patient to take vitamins based on findings from 20 studies, 10 of which found a correlation between taking vitamins and good health, seven of which were neutral and three were negative. "And then, what if you were told the vitamins would cost you 50 bucks month ... " he said.

Drawing a parallel to the issue of reporting, Niekirk said, "maybe citing ROI is the wrong focus, maybe the issue is accountability."

PRI, Tagger said, does not take a position on mandatory reporting. The organization's six principles are a framework for responsible investment practices but they're not a compliance framework, he emphasized. However, many of the firms that are signatories to the principles, do take a position on the issue, he added.

"Disclosure is a big word and a scary word, and because disclosure means reporting it means work," Tagger said as the discussion moved to the question of costs, including investments in time for compiling the reports, potential expenses for putting together more comprehensive reports if they become mandatory, and, possibly, fees for third-party auditing.

Tagger suggested that before delving into costs, more basic matters need to be sorted out.

"I think the primary point is -- even before we get to the question of mandatory or not -- is what do we report, to whom and why," Tagger said.

The panel batted around the issue of whether a requirement for all firms to cover all the indicators in the GRI would be effective, or as Bannerman asked, whether that would "potentially undermine the point of reporting" because the amount of reporting would be voluminous.

Rather than making comprehensive GRI reporting mandatory, reporting on climate change-related factors and carbon disclosure might be more on point, Niekirk said.

Diana Lyon, program director of Corporate Environmental Affairs at IBM, took up that issue during the Q&A portion of the session with a comment about materiality and how it varies from among businesses.

For example, IBM reports extensively about its use of water in semiconductor manufacturing, said Lyon. "We report on water for the part of the company in which its material," she said.

The resource does not figure as greatly in the manufacturing process for other industries, nor even in other lines of IBM's business, Lyon noted, adding that mandatory reporting could "create an expectation for comparability that does not exist in reality."

Tagger noted that when the subject of mandatory reporting is raised, it's often discussed in as "one-size-fits-all" concept, but that might not be the right solution.

He elaborated when further questions from the audience led to talk about who actually reads the reports, what people want to see in them and whether there were ways to engage financial and industry analysts on sustainability issues.

On the issue of audience, Tagger estimated that 50 percent of investors read GRI reports, but generally they look to the reports for cues about what companies views as their key ESG issues. "They (investors) want to know what's material, what's important," Tagger said.

As to getting analysts to consider matters of sustainability, Niekirk said that in years of sitting in on quarterly earnings calls, he has yet to hear an analyst ask about ESG issues.

"If one question came from an analyst on ESG issues, that would be huge," said Niekirk. But if the company introduced the subject, it would likely be seen as suspect and that the firm was attempting to divert attention from its numbers, he said.

Christian Florensa of HP Environmental Sustainability pointed out that "analysts ask questions where there are perceived risks."  Intel may not be getting questions on ESG issues, but other companies may well be, Florensa said.

On the big question of voluntary vs. required reporting, Niekirk said: "We do the reporting, but I still struggle with making it mandatory."

"Because if its good, then we -- and other good companies -- should get ahead, and other people should follow and you should be rewarded in the marketplace," Niekirk said. "You shouldn't need to make it mandatory."

To Tagger, "it's important to separate regulation from responsibility."

"Whatever the regulations are or are not," Tagger said, "it's not the rules that make the world a better place, or a safer place, or a better place to do business -- it's individual responsibility."

Summing up, Bannerman said, like it or not some aspect of sustainability reporting probably will become mandatory. And regardless, it needs to be acknowledged that there is a market demand for such reporting.

"The bottom line is: With reporting, companies are trying to achieve transparency and connect with stakeholders around the issues that are important to them," Bannerman said. "Whether reporting is voluntary, mandatory, or mixed or hybrid, at the end of the day, reporting is about the quality of dialogue with stakeholders and improving your company's performance."

You can read all the GreenBiz coverage of the BSR conference at

In addition, BSR has made session summaries and video highlights of the conference available at

Images by Fonis