An April 2017 commentary by Jean Rogers, CEO of the Sustainability Accounting Standards Board (SASB), in Investor’s Business Daily (“Sustainability Accounting Standards Represent Market—Not Regulatory—Forces at Work,” http://bit.ly/2sYwjXa) emphasized that it is mainstream investors, not the SASB, that are calling for “financially relevant environmental, social, and governance data.” Rogers pointed out that a recent analysis of SEC filings revealed that almost 70% of industry leaders were addressing the majority of their industry-related SASB standards; however, less than 24% of disclosures included metrics, the measures were not standardized across companies, and little usable explanation was provided.
With a skill set naturally inclined toward measuring performance and communicating quantified information, CPAs can be on the leading edge of sustainable capitalism. This month’s column offers a roundup of user-friendly, free resources to fill a CPA’s sustainability toolbox.
International Federation of Accountants: Global Knowledge Gateway
The IFAC Global Knowledge Gateways (http://www.ifac.org/global-knowledge-gateway) offer convenient collections of IFAC articles, reports, short videos, and links to IFAC and outside resources for several topical portals, including sustainability (http://bit.ly/2sZlbJ3) and business reporting (http://bit.ly/2sUDyhU).
The Sustainability Gateway’s overview (http://bit.ly/2rZCIMx) webpage defines sustainability, its importance, and the leadership role that accountants can play in their organizations and includes links to such resources as “The Sigma Guide to Sustainability Issues” (http://bit.ly/2rGnD3p), which is a handy glossary of over 60 sustainability issues, from accidents or incidents to energy consumption to work-life balance. “IFAC Global SMP Survey Report & Summary” (http://bit.ly/2sUDazY) is an annual survey tracking small-to-medium sized practitioners’ responses on a variety of issues; the 2013 survey revealed that 73% of respondents were already or were planning to offer sustainability services to clients.
“Principles for Effective Business Reporting Processes” (September 2013) is available for download as a six-page executive summary or a 25-page guidebook (http://bit.ly/2sFfgpP). The full report recommends several steps for accountants to follow in assisting organizations with integrated reporting, such as identifying the organization’s key stakeholders, providing expertise on GAAP and non-GAAP reporting standards, and controlling preparation of the relevant reports. The guidebook lists 11 significant reporting principles and provides practical directions for each. For example, item E.3 reminds companies not to overwhelm stakeholders with excessive detail. The report also recommends restricting the number of disclosures and level of detail to “essentials” and providing links to additional information.
“Developing and Reporting Supplementary Financial Measures – Definitions, Principles, and Disclosures” (September 2014) is a short booklet, running 14 pages for the full report and four pages for the executive summary (http://bit.ly/2rZx50T). The guidelines include seven principles for developing and reporting supplementary financial measures and, most importantly, providing explanations. For example, the principle of comparability requires that organizations have standard definitions for supplementary measures; when new measures are introduced, information should be presented for comparative periods.
The Business Reporting Gateway highlights a recent Association of Chartered Certified Accountants (ACCA) publication, “Insights into Integrated Reporting” (Yen-Pei Chen, May 11, 2017, http://bit.ly/2sZxDc1), which reviews 41 public company corporate reports for integrated reporting challenges and best practices. Materiality is a good example of the priority areas identified by the report; fewer than half of the reports reviewed explained the materiality definition used.
The Integrated Reporting PAO Network webpage (http://bit.ly/2sYo7Gf) is a one-stop collection of resources from professional accounting associations (PAO) such as IFAC and the International Integrated Reporting Council (IIRC), as well as other professional bodies. As an illustration, the IFAC’s “Accounting for Sustainability: From Sustainability to Business Resilience” (July 2015) is a 28-page report that addresses, among other topics, what accountants view as their professional responsibility to provide sustainability information versus what they believe is actually being reported by their organizations (http://bit.ly/2sYf8VB). The jewel is a 10-page table that presents focus areas, action steps, and relevant tools and resources.
Another PAO link is the IIRC’s Integrated Reporting Examples Database, which contains examples of current practices in published annual reports (http://bit.ly/2sFm6vw).
Business for Social Responsibility
Business for Social Responsibility (BSR, http://www.bsr.org) is a nonprofit membership organization of corporations and professional and other bodies that develops sustainable business practices. BSR has launched a practitioner-led Future of Sustainability Reporting initiative, described in its Feb. 15, 2017 blog post “Calling All Sustainability Reporting Practitioners” (http://bit.ly/2sZIzGr). BSR’s Reporting and Communications blog also has several excellent articles; one in particular, “The Future of Reporting is Triangular” (July 18, 2016, http://bit.ly/2tStEur) describes BSR’s proposed “triangular” reporting model, which is built on a base of issue- or country-specific reports, followed by a middle layer of Form 10-K and sustainability report requirements, and topped off by integrated reporting guidelines.
BSR publishes reports on a variety of sustainability topics, such as the circular (regenerative) economy, ethics and governance, and transport and logistics; integrated and sustainability reporting materials can be found in the reporting and communications section (http://bit.ly/2sZIUZR). “Triangles, Numbers, and Narratives: A Proposal for the Future of Sustainability Reporting” (Nov. 2, 2016, http://bit.ly/2suMeuA) is a downloadable 18-page working paper that focuses on presenting the main features of sustainability reporting to help companies to make informed decisions and improve performance. The two important messages are 1) different users have different information needs, and 2) information requires both numbers and discussion to provide a true picture of the facts. The report then proposes the “triangular” reporting model described above. The study also recommends the use of key performance indicators, with explanatory narratives presented in table format. Finally, the document includes a useful appendix of reporting frameworks and standards with hyperlinks to the issuing organization.
Center for Sustainable Business
The New York University Stern School of Business launched the Center for Sustainable Business (http://bit.ly/2tStL9o) in early 2016 with a mission of helping business leaders develop the skills necessary to address environmental and social challenges, create competitive advantages, and develop innovations. The center’s webpages include access to CSB research, external research, and videos of center events.
CSB research resources (http://bit.ly/2suNG00) include the 14-page “Sustainability Assessment Tools” (January 2017, http://bit.ly/2rVEWl7), a primer on the three most widely used reporting standards, current reporting requirements, and available guidance. It also summarizes risk assessment tools for environmental risks and human rights and labor standards. The final section is a discussion of natural capital accounting.
Examples of Sustainability Reporting
Ceres SEC Sustainability Disclosure Search Tool
Search annual filings on climate and energy issues
ICAS Sustainability Reporting Examples
Links to public company sustainability report webpages
IIRC Integrated Reporting Examples Database
Examples of current practices in published annual reports
Blogger Elaine Cohen’s top sustainability report picks, with links to the reports
External Research (http://bit.ly/2sFeRE3) is a useful library of reports and other materials grouped under several categories, such as c-suite perspective, financial performance, risk management, and sustainability reporting.