Shifts in Reporting, Who, What and How It Gets Done
When it comes to sustainability disclosure reporting in the US, there has been a shift in the process that started slowly and has been accelerating noticeably in the last year or two. That shift is the general counsel’s office or the CFO having greater involvement in the reporting process, according to Hackett.
“There are changes in both what’s being reported and how it’s being reported and in some ways, there’s a narrowing of what’s being reported – including for a number of companies, a move from specificity to directional comments,” Hackett said. “But there certainly is a structural transition in which more than the usual sustainability managers are involved, and that is going to change both what’s reported and how it’s reported.”
According to Lou Coppola, Executive Vice President at the Governance & Accountability Institute, wherever the report is completed within the company and whatever sign-off is required (or voluntary) indicates the level of where the sustainability reporting sits within the organization.
“When [the report] sits in the marketing department,” he said, “And you have a couple of communication folks putting together the sustainability report rather than having a chief sustainability officer (CSO) reporting directly to the CEO or executive team, with the legal department sitting on the internal sustainability committee and being included in the reporting, we are going to see more of these problems occurring.”
Coppola added that a company’s legal team should be included in the production of disclosure reports, though Hackett said he sees companies increasingly grapple with the legal teams’ role in this process.
Hackett said he’s had a number of experiences where major companies reach out to him, each struggling with how to handle increased legal department responsibility in the production of these reports. They are concerned that areas of the Company’s focus may be misaligned and are wrestling with what it is the company should be tracking or reporting.
“They ask, ‘Are we going to report on water use, raw material use, renewable energy use, climate issues, human rights issues, labor issues?’” Hackett asked. “There’s just an explosion of issues, which vary to some extent from industry to industry, although for all of them the potential issues seem to be expanding rapidly. As a result, there is a shift in the major public companies as to who’s sitting at the table and answering the fundamental question as to what CSR covers, and what its relationship is to overall business strategy.”
Goelzer agreed, and said there are a number of questions companies should be asking themselves when deciding what to disclose and how to disclose it – while keeping the long term in mind.
“What should we be disclosing? What are our customers interested in? What are our investors interested in?” he said. “What are the risks or challenges that we are going to have to respond to over the next ten years? How should we lay out the disclosure framework in those areas?”