LESSON 15

CORPORATE SUSTAINABILITY REPORTING FRAMEWORS

INTRODUCTION
The concept of sustainability reporting is of recent origin. Conventionally financial accounting
making. The new approach is an integrated one seeking to link strategic management.
reporting is a part of the new approach.
The term sustainability accounting is used to describe the new information management and
accounting methods that aim to create and provide high quality information to support a
corporation in its movement towards sustainability. Sustainability reporting describes new
formalized means of communication which provides information about corporate sustainability.
Some of the quantitative methods used to assess sustainability include measures of resource
use like life cycle assessment, measures of consumption like the ecological footprint and
measurements of quality of environmental governance like the Environmental Performance Index.
LIFE CYCLE ASSESSMENT
[June, 2010 Q8(i)]
Life Cycle Assessment tracks the environmental impacts of a product from its raw materials
through disposal at the end of its useful life. LCA is an important tool for developing an
environmental self-portrait and for finding ways to minimize harm. A good LCA can shed light on
ways to reduce the resources consumed and lower costs all along the value chain.
A Life Cycle Assessment looks at this complete circle and measures environmental impact at
every phase. It provides the
foundation for understanding the issues a company must address and clues to help find Eco-
Advantage.
ECOLOGICAL FOOTPRINT
The ecological footprint is a measure of human demand on the Earth's ecosystems. It represents
the amount of biologically productive land and sea area needed to regenerate the resources a
human population consumes and to absorb and render harmless the corresponding waste, given
prevailing technology and resource management practice.
ENVIRONMENTAL PERFORMANCE INDEX
Environmental Performance Index EPD is a method of quantifying and numerically benchmarking
the environmental performance of a country's policies. This index was developed from the Pilot
Environmental Performance Index, first published in 2002, and designed to supplement the
environmental targets set forth in the U.N. Millennium Development Goals.
GLOBAL REPORTING INITIATIVE
(June, 2010 Q8Giii))
The Sustainability Reporting Guidelines developed by the Global Reporting Initiative (GRI), the
Netherlands, is a significant system that integrates sustainability issues in to a frame of
reporting.
Organization's purpose is no more merely to engage in a creative operation or activity. Be it a
business organization or a non-profit or non-government organization its operation must also
address the concerns of sustainable development. The "Governance Eye" will take into account
the concerns of the present and those of the future. Creativity should also have the angle of the
eternity and not only of the contemporaneity.
What is GRI Network?
The Global Reporting Initiative (GRI) is a large multi-stakeholder network of thousands of
experts, in dozens of countries worldwide,
who participate in GRI's working groups and
governance bodies, use the GRI Guidelines to report, access information in GRI-based reports, or
contribute to develop the Reporting Framework in other ways - both formally and informally.
What is the purpose of sustainability reporting?
Sustainability reporting is the practice of measuring, disclosing, and being accountable to
internal and external stakeholders for organizational performance towards the goal of
sustainable development.
A sustainability report should provide a balanced and reasonable representation of the
sustainability performance of a reporting organization - including both positive and negative
contributions.
Whatever activities a company pursues in order benefit all the stakeholders (community,
suppliers, employees, and all having reasonable interest in the activities of the company).
What are the G3 Guidelines?
The Sustainability Reporting Guidelines or G3 Guidelines are the cornerstone of the GRI
Sustainability Reporting Framework. GRI recommends that every organization uses the
Guidelines as the basis for their sustainability report. The G3 Guidelines outline a disclosure
framework that organizations can voluntarily, flexibly, and incrementally adopt. The flexibility of
the G3 format allows organizations to plot a path for continual improvement of their sustainability
reporting practices.
The G3 Guidelines are divided into two parts:
→ Reporting Principles and Reporting Guidance and
→ Standard Disclosures (including performance indicators).
Part 1
Reporting principles and guidance
– Principles to define Report Content: materiality, stakeholder inclusiveness, sustainability
context and completeness.
– Principles to define Report Quality: balance, comparability, accuracy, timeliness,
reliability and clarity.
– Guidance on how to set Report Boundry: "Reporting Boundary" enables reporting
organizations to define the range entities represented by the report. The Reporting
Principles provide guidance to the reporting organizations to help them contour the Report
Boundaries.
Report Content
In defining the content of the report, the purpose is to achieve a balanced reasonable
presentation of the organization's performance. This determination should be made by
considering both the organisation's purpose and experience, the reasonable expectations and
interests of the organisation's stakeholders.
What is Materiality?
The information in a report should cover topics and indicators that reflect organisation's
significant economic, environmental and social impacts or that we substantially influence the
assessments and decision of stakeholders.
Materiality, the explanation offered by GRI says, is the threshold at which an issue or indicator
becomes sufficiently important that it should be reported. The report must emphasize
information on performance regarding the most material factors.
What is Stakeholder Inclusiveness?
[December, 2009 Q8(ii)]
"The reporting organization should identify its stakeholders and explain in its report how it has
responded to their reasonable expectations and interests".
What is Sustainability Context?
The report should present the organization's performance in the wider context of sustainability.
The underlying purpose of sustainability reporting is different as compared to financial
performance reporting. The purpose is to show how an organization contributes or aims to
contribute in the future, to the improvement or deterioration of economic, environmental and
social conditions and trends, and developments at the local, regional or global level.
What is Completeness?
Coverage of the material topics and indicators and definition of the report boundary should be
sufficient to reflect sufficient economic, environmental, and social impacts. It should enable the
stakeholders to assess the reporting organization's performance in the reporting period.
Reporting Principles for Defining Ouality
This contains Principles that guide choices on ensuring the quality of reported information,
including its proper presentation.
Balance
The report should reflect positive and negative aspects of the organization's performance to
enable a reasoned assessment of overall performance.
Comparability
and information should be selected, compiled, and reported consistently. Reported information
should be presented in a manner that enables stakeholders to analyze changes in the
organization's performance over time, and could support analysis relative to other organizations.
Accuracy
The reported information should be sufficiently accurate and detailed for stakeholders to assess
the reporting organization's performance.
Timeliness
Reporting occurs on a regular schedule and information is available in time for stakeholders to
make informed decisions.
Clarity
Information should be made available in a manner that is understandable and accessible to
stakeholders using the report.
Reliability
Information and processes used in the preparation of a report should be gathered, recorded,
compiled, analyzed, and disclosed in a way that could be subject to examination and that
establishes the quality and materiality of the information.
Reporting Boundary
A sustainability report should include in its boundary all entities that generate significant
sustainability impacts (actual and potential) and/or all entities over which the reporting
organization exercises control or significant influence with regard to financial and operating
policies and practices.
Part 2
Standard Disclosures
There are three different types of disclosures contained in this section.
● Strategy and Profile: Disclosures that set the overall context for understanding
organizational performance such as its strategy, profile, and governance.
● Management Approach: Disclosures that cover how an organization addresses a given
set of topics
in order to provide context for understanding
performance in a specific area.
• Performance Indicators:
Indicators that elicit comparable information on the
economic, environmental, and social performance of the organization.
Un global compact

Communications on Progress (COP) is a report to inform the company's stakeholders about the
company's progress in implementing the Global Compact's ten principles.
The UN Global Compact presents a unique and powerful platform for participants to advance
their commitments to sustainability and corporate citizenship. A company that signs-on lo the
Global Compact specifically commits itself to:
● set in motion changes to business operations so that the Global Compact and its
principles become part of management, strategy, culture, and day to-day operations;
● publish in its annual report or similar public corporate report (e.g. sustainability report)
(Communication on Progress),
a description of the ways in which it is supporting the Global Compact and its principles
● publicly advocate the Global Compact and its principles via communications vehicles
such as press releases, speeches, etc.
Benefits of participation include:
Direct:

Global and local opportunities to dialogue and collaborate with other businesses, NGOs, labour,
and governments on critical issues Exchange of experiences and good practices inspiring
practical solutions and strategies to challenging problems
Finding
an entry-point through which companies can access the UN's broad knowledge of development
issues
Leveraging the UN's global reach and convening
power with governments,
business, civil society and other stakeholders
Indirect

Increased legitimacy and license to operate, particularly in the developing world, because
business practices are based on universal values Improved reputation and increasing brand value
to consumers and investors - specifically in the context of changing societal expectations
Increased employee morale and productivity, and attracting and retaining the highest qualified
employees
Improved operational efficiency, for instance through better use of raw materials and waste
management
Ensuring a company's accountability and transparency through a public communication on
progress

Ideally, COPs should be integrated into a participant's existing communication with stakeholders,
such as an annual or sustainability report. However, in case a participant does not publish such
reports, a COP can be a stand-alone report that is made available for stakeholders through other
public communication channels (e.g. websites, newsletters, intranets, company notice boards,
included with payroll, etc.). COPs should be issued in the company's working language and, if
the company determines a need, in additional languages.
DOW - JONES SUSTAINABILITY INDEX
The Dow Jones Sustainability Indices are the first global indices tracking the financial
performance of the leading sustainability-driven companies worldwide, it was launched in 1999.

It is equivalent to a sustainability Oscar. It is the most prestigious, most recognized, most

respected benchmark of sustainability performance.
The Dow Jones Sustainability World Index (DJSI World) comprises more than 300 companies con
price i th top on on Index.
that represent the top 10% of the leading sustainability companies out of the biggest 3000 In
addition to the composite DJST World, there are six specialized subset indexes excluding
alcohol, tobacco, gambling armaments & firearms and adult entertainment.
Corporate Sustainability Assessment Criteria under the Dow-Jones Indices is as under:
ENVIRONMENT, SOCIAL, GOVERNANCE (ESG) INDEX
ESG describes the environmental, social and corporate governance issues that investors are
considering in the context of corporate behaviour.
The ESG index employs a unique and innovative methodology that quantifies a company's ESG
practices and translates them into a scoring system which is then used to rank each company
against its peers in the market. Its quantitative scoring system offers investors complete
transparency on Environmental, Social & governance issues of a company.
Key Performance Indicators:
● Environment: Energy use and efficiency, Greenhouse gas emissions, Water use, Use of
ecosystem services - impact & dependence and Innovation in environment friendly
products and services.
● Social: Employees, Poverty and community impact and Supply chain management
Governance: Codes of conduct and business principles, accountability, Transparency and
disclosure and Implementation - quality and consistency.

Standard & Poor's ESG India Index

Standard & Poor's ESG India index provides investors with exposure to a liquid and tradable
index of 50 of the best performing stocks in the Indian market
as measured by
environmental, social, and governance parameters. The index employs a unique and innovative
methodology that quantifies a company's ESG practices and translates them into a scoring
astem which is then used to rank each company against their peers in the Indian marker. Its
quantitative scoring system offers investors complete transparency.
The creation of the index involves a two step process, the first of which uses a multi-layered
approach to determine an 'ESG' score for each company. The second step determines the
weighting of the index by score. Index constituents are derived from the top 500 Indian
companies by total market capitalizations that are listed on National Stock Exchange of India Lid.
(NSE). These stocks are then subjected to a screening process which yields a score based on a
company's ESG disclosure practices in the public domain.
BENEFITS OF SUSTAINABILITY REPORTING
[June, 2009 Q8(c)]
Benefits of sustainability reporting are:
● Legitimation of corporate activities, products and services which create environmental
and social impacts.
● Increase in corporate reputation and brand value.
Gaining a competitive advantage.
● Comparison and benchmarking against competitors.
Increasing transparency and accountability within the company.
Establishing and supporting employee motivation as well as internal information and control
processes.
DEVELOPMENT OF SUCCESSFUL SUSTAINABILITY REPORT
Reporting activity should be embedded in the general communication concept. Developing
successful sustainability will in any case require a well managed team based process involving
different departments or external communication agencies. Efforts should be focused on the
systematization and consolidation of experiences which improve the knowledge.
SUSTAINABILITY REPORTING IN EMERGING ECONOMIES
[June, 2009 Q8(c)] & [December, 2010 Q8(i)]
Investors increasingly recognize the value of robust sustainability reporting and expectations for
such reporting have spread to companies in emerging markets.
Increasingly global companies understand that a commitment to sustainability reporting can
contribute to financial success. Such transparency allows companies to reach a broader range of
investors and customers, enhance operational efficiency, improve brand positioning, and develop
leadership in the marketplace.
Reemy, in India corporate Environmental Reporting as a useful adjunct to the concept sitanable
development has been recognized in various policy documents like the Approach Piper to the
Eleventh plan and the National Environmental Policy 2006.

CONCLUSION
In the light of the increasing and currently underestimated relevance of sustainability reporting
for the reputation and social acceptance of a company, it can be expected that an increasing
number of companies will be addressing this topic.
Sustainability reporting is more han the publication of a report. Companies venturing out to
produce a corporate sustainability report must show how business objectives such as profits and
competitiveness are consistent with sound environmental management and sustainability
principles. Unless the connection is established the report would be superficial. Sustainability
reporting should be embedded in a comprehensive sustainability communication approach and in
the company's general communication concept.