Carrots-And-Sticks-Promoting-Transparency-And-Sustainbability(1)

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CARROTS AND STICKS –
PROMOTING TRANSPARENCY
AND SUSTAINABILITY
An update on trends in Voluntary and Mandatory
Approaches to Sustainability Reporting
Project Partners
United Nations Environment Programme (UNEP)
UNEP represents the United Nations’ environmental con-
science. Based in Nairobi, Kenya, its mission is to provide
leadership and encourage partnership in caring for the en-
vironment by inspiring, informing, and enabling nations and
peoples to improve their quality of life without compromis-
ing that of future generations. UNEP’s
Division of Technol-
ogy, Industry and Economics (DTIE) aims to help decision-
makers in the public and private sectors to develop and
implement policies and practices focusing on sustainable
development. It works to promote sustainable consump-
tion and production, the eficient use of energy and other
resources, adequate management of chemicals, and the
integration of environmental costs in development policies.
Leading outreach activities with business and industry, sus-
tainability reporting has for many years been a core subject
of its work on corporate social responsibility.
The Global Reporting Initiative
The Global Reporting Initiative
TM
(GRI) is a multi-stakeholder
non-proit organisation that develops and publishes guide-
lines for reporting on economic, environmental and social
performance (‘sustainability performance’). As the world’s
most widely-used sustainability reporting framework, the
GRI Sustainability Reporting Guidelines are being used by
organisations of all sizes and types, across sectors and
regions. The Guidelines are developed through a unique
multi-stakeholder consultative process involving representa-
tives from reporting organisations and report information
users from around the world. First published in 2000 and
then revised in 2002, the guidelines have now entered their
third generation, referred to as the GRI G3 Guidelines which
were released in October 2006.
United Nations
Environment Programme
PO Box 30552
Nairobi 00100
Kenya
Tel: +254 20 762 1234
Fax: +254 20 762 3927
www.unep.org
UNEP DTIE
15 rue de Milan
75441 Paris Cedex 09
France
Tel: +33 1 4437 1450
Fax: +33 1 4437 1474
unep.tie@unep.fr
www.unep.fr
Global Reporting Initiative
PO Box 10039
1001 EA
Amsterdam
The Netherlands
Tel: +31 20 531 00 00
Fax: +31 20 531 00 31
info@globalreporting.org
www.globalreporting.org
KPMG
KPMG is a global network of professional irms providing
Audit, Tax and Advisory services. We operate in 144 coun-
tries and have 140,000 people working in member irms
around the world. The independent member irms of the
KPMG network are afiliated with KPMG International Coop-
erative (“KPMG International”), a Swiss entity. Each KPMG
irm is a legally distinct and separate entity and describes
itself as such.
Our irms’ clients include business corporations, govern-
ments and public sector agencies and not-for-proit organi-
sations. KPMG irms aim to provide a consistent standard
of service based on our professional capabilities, industry
insight and local knowledge. At KPMG we try to create
sustainable, long-term economic growth, not just for our
member irms and their clients but for the broader society,
too. We seek to be good corporate citizens, making a real
difference to the communities in which we operate.
KPMG’s Sustainability Services practices deliver assurance
and advisory services in the ield of corporate responsbility
(CR), including reporting and assurance on CR reporting. For
further information about our services please go to www.
kpmg.com or contact:
Unit for Corporate Governance in Africa, University of
Stellenbosch Business School
The Unit for Corporate Governance in Africa conducts multi-
disciplinary research, educational and development activities
with the aim of improving the effectiveness of corporate
governance in African organisations.
The Unit focuses on:
The development of the compliance and performance as-
pects of directors’ attitudes, knowledge and skills
The link between corporate governance, business ethics
and total organisational performance
The purpose of the Unit is to improve the effectiveness of
corporate governance within African organisations, predomi-
nantly in the private sector.
The mission of the Unit is to develop both the compli-
ance and the performance aspects of directors’ attitudes,
knowledge and skills, as well as the link between corporate
governance, business ethics and total organisational perfor-
mance.
Unit for Corporate Governance in Africa
PO Box 610, Bellville 7535, South Africa
Tel: +27 21 918 4342
Fax: +27 21 918 4468
governance@usb.ac.za
www.governance.usb.ac.za
Wim Bartels
Global Head of Sustainability Assurance
at KPMG
Partner, KPMG Sustainability, the Netherlands
Tel: +31 20 656 7783
bartels.wim@kpmg.nl
Contents
Forewords
2
1
Executive Summary
4
2
Introduction
6
3
Analysis of trends and approaches in mandatory and voluntary
sustainability reporting
10
4
Inventory of selected legislation, standards, codes and guidelines
18
4.1
Global
18
4.2
Regional
22
4.3
Country
24
5
Country profiles
75
5.1
Australia
75
5.2
Brazil
76
5.3
China
78
5.4
France
79
5.5
India
80
5.6
South Africa
82
6
Conclusion
84
7
References
88
8
Disclaimer and Acknowledgments
90
Carrots and Sticks - Promoting Transparency and Sustainability
Forewords
The five capital assets of Financial, Human, Natural, Social and Technological have become
critically interdependent. No entity can plan for the long term in the economy in which we
find ourselves without taking account of these critical, interdependent capital assets. A
sustainable economy demands business as unusual and the ability to make more with less.
Our resources are not infinite and the world can no longer absorb waste. The hundred years
of taking, making and reducing to waste cannot continue. There is no time for a business-
as-usual approach. The time is ripe to follow the example of several governments who have
introduced legislation on a report-or-explain basis regarding the impact which the operations
of any company may have economically, societally and environmentally.
Many developments since the first edition of this publication point to things moving in
the right direction. Governments around the world should follow the Danish regulation
requiring its largest companies to report or explain as described above. Mandatory and
voluntary approaches to integrated reporting are not mutually exclusive options. They
are complementary, and the challenge for governments is to determine the appropriate
mandatory requirements.
World bodies need to share knowledge and reduce duplication of effort because we all have
to move forward in the interests of Planet Earth and those who will come after us. It has
become essential that the G20 agree to legislate that all entities within their jurisdictions
report or explain how they have impacted on society, the environment and the economy.
Mervyn King
Chairman of the Board of Directors, GRI
Stakeholders need integrated reporting, and that’s why GRI is at the forefront of working with
governments, regulators, civil society and other key players around the world, to make this a
reality.
The need for regulatory frameworks for reporting has for long been debated. Should
companies be left to their own initiatives to explore further transparency, thus creating
a real commitment to reporting based on a genuine thought process, but with the risk
that progress is too slow? Or should governments take the lead in setting frameworks
for reporting, thus creating a level-playing field in reporting but providing companies
with the opportunity to complete nothing more than a tick-the-box exercise?
In this era of low trust in the corporate world it would seem to be the duty of all
parties to ensure that transparency is elevated to a level where an organisation’s
stakeholders can understand its comprehensive performance in such a way that trust
is rebuilt and decisions can be taken in an environment where dialogue is an integral
part of business.
In this context frameworks for sustainability reporting (whether voluntary or
mandatory) can assist those who want to be part of this world, as well as stimulating
or forcing those who prefer the old situation to report on the wider impact they have
on society – negatively and positively.
We are proud to be able to contribute to further progress in this area by participating
in studies such as this and by advising companies and governments on current
practices and the state of play in sustainability reporting.
Wim Bartels
Global Head of Sustainability Assurance
at KPMG, Partner KPMG Sustainability,
the Netherlands
2
Carrots and Sticks - Promoting Transparency and Sustainability
3
Core environmental issues today – climate, biodiversity and others – are clearly socio-
economic challenges as well. Looking at the stress we put on our natural resources as our
economies expand and populations grow, it is abundantly clear that business as usual will
not do. As managers in public and private organisations face changing market conditions,
information overload and growing public demand for accountable resources use, they need
new management tools and credible information to take action.
This implies a new era for public reporting, both at national and organisational level. It
implies that conventional models of running financial reporting and so-called non-financial
reporting as two separate islands are no longer acceptable. It also implies that sustainability
reporting can no longer remain the speciality of a top one hundred corporations, or an
experimental area of expertise left to advanced communications agencies. It needs to
be mainstreamed and scaled up on a grand scale. This cannot simply be the result of
regulatory pressure, but different forms of regulation – including self-regulation – can play
an important role in advancing the comparability, credibility and relevance of information
disclosed.
The Global Reporting Initiative remains the international reference for how to approach the
reporting of holistic information on sustainability performance. Public regulators can build
on this. They can help us to engage the accounting and investment community in defining
integrated reporting and use of forward-looking indicators that reflect key resource use risks
that organisations, markets and societies face today. UNEP looks forward to working with
Governments, our project partners and others in this.
Angela Cropper
Deputy Executive Director, UNEP
GRI Governmental Advisory Group
The Global Financial Crisis has focused for many of us the need to rethink how we
finance and to what end we use our human organisations – private, public and non-
profit. One can see a distinct change of mindset occurring where the previous notions
of economic rationality, the paramountcy of quantification and the automatic balancing
of free markets are beginning to have to take into account human irrationality,
behavioural economics and emotional sensitivity, and more pragmatic approaches to
the asymmetric nature of market intelligence.
One sees this in the growing interest especially in the Corporate Governance world
in two distinct ways. First, the developing differentiation between managing, and
directing. Second, the growing public awareness of the connectedness of living
systems. This both broadens and strengthens the definition of “stakeholders” of our
organisations but leads to intellectual and operational discomfort amongst current
directors and managers. Globally, one can see the continuing historical move to create
an annual reporting system for our organisations based on The Triple Bottom Line.
This is easy to recommend but as we are only too aware it is easy for humans to
agree the rhetoric and then argue “Lord, make me chaste, but not just yet”. The big
issue is how does one get humans to willingly commit to the values and subsequent
assessable behaviours that would allow a sustainable world to come into being? This
report contains valuable insights into how to move forward and I commend it.
Professor Bob Garratt
Chairperson, Unit for Corporate
Governance in Africa, University of
Stellenbosch Business School
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