The Debate Of Mandatory CR Reporting

n 1989, following the Exxon Valdez oil spill, nonprofit organization CERES developed the CERES Principles (previously “Valdez Principles”), which introduced specific environmental reporting guidelines. These values became the driving force behind the Global Reporting Initiative standards, which, today, 77 percent of the global 250 use to disclose environmental, social and governance data.

Corporate Responsibility (CR) reporting – often referred to as sustainability reporting – is a voluntary tool used to exercise transparency and proactive engagement on key issues. But what if it was mandated, much like financial reporting? Would this be good for companies? Society? These questions were up for debate in a recent BSR article (membership required), which followed a conversation sparked during the annual conference hosted by the organization. Experts from all sides are debating the implications of such mandates. Highlights include:

Pros of Mandating CR Reporting:

  • Gives sustainability the same weight of importance as financial performance
  • Creates an equal playing field for companies – requiring all to disclose their practices
  • Drives corporate action for positive environmental change

Cons of Mandating CR Reporting:

  • Encourages companies to simply “check the box” – which goes against the value of Shared Responsibility
  • Presents challenge to itemize issues material to all companies across all sectors – therefore, hard to create a standard set of reporting criteria
  • Puts liability on companies to ensure accuracy

According to another report, six countries recently passed legislation or issued directives mandating companies include at least some CR data in their annual reports. But it’s unclear whether these regulations are signs of a lasting trend or simply a trial in endorsing transparency.
 
The question also remains about whether reporting can be an effective tool to meet the demands of all stakeholders. Whether you are for or against reporting mandates, Cone’s research shows consumers are looking to companies to solve societal ills. Most (91%) want companies to communicate their commitments, yet two thirds (67%) of consumers are confused by the messages companies use to talk about their commitments. The challenge for companies today is to create reports or other communications that engage and meet the demands of a range of audiences, including those looking for credible data and those seeking the story behind each CR program.

Reporting is no longer about checking the box. So perhaps it’s less important to debate whether reporting should be mandatory, but rather how CR reports should be executed to meet varied stakeholders’ needs for transparent, yet digestible and relevant information.

 

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