GRI calls for mandatory sustainability reporting

The Global Reporting Initiative is responding to a proposal from the International Financial Reporting Standards Foundation to oversee sustainability standards alongside international accounting standards, saying Monday that sustainability reporting needs to be mandatory and on an “equal footing” with financial reporting.

The IFRS Foundation, which oversees the International Accounting Standards Board, issued a consultation paper in late September asking for comments on how it might contribute to the development of international sustainability standards and perhaps oversee them (see story). Earlier that month, five of the existing sustainability standard-setters, including GRI, pledged to work together to more closely align their various standards and frameworks, and the International Federation of Accountants proposed that the IFRS Foundation oversee an international sustainability standards board alongside the IASB. In response, the IFRS Foundation released its consultation paper. IFAC and its CEO, Kevin Dancey, enthusiastically endorsed the proposal last week (see story). GRI released its comments Monday. While the group stopped short of agreeing to have the IFRS Foundation take over the job of sustainability standard-setting, it did highlight the importance of a role for the foundation in both international financial and sustainability reporting.

“We believe it essential for the IFRS Foundation to explicitly recognize the broader concept of sustainability reporting as a practice that should co-exist next to financial reporting, and to acknowledge that evolving financial reporting to include the financial implications of sustainability issues on the reporting entity, is only a partial answer toward a comprehensive corporate reporting regime,” said a comment letter jointly signed by GRI Global Sustainability Standards Board chair Judy Kuszewski and GRI board chair Eric Hespenheide. “We believe that the transparency that leads companies to assume responsibility for the impacts of their activities is a vital aspect of a comprehensive future corporate reporting regime. This future corporate reporting regime needs to enable the evaluation of corporate business models and performance in the context of adherence to authoritative intergovernmental instruments such as the Paris Agreement as well as to societal expectations and planetary boundaries.”

GRI pointed to a survey earlier this month by KPMG that found a record 80 percent of 5,200 leading companies across 52 countries now voluntarily undertake sustainability reporting, with 67 percent using GRI's standards (see story). Nearly all (96 percent) of the world’s largest 250 companies report their sustainability performance, of which three out of four adopt the GRI standards.

They contended that for sustainability reporting to contribute to better decision-making, it needs to transition from a voluntary practice to a mandatory requirement to allow greater comparability and transparency.

They would also like to see financial reporting strengthened to reflect the implications of sustainability issues to recognize the financial consequences on a company of sustainability risks and opportunities.

They argued that a new corporate reporting regime is needed in which financial and sustainability reporting is given equal footing. “GRI will work with the IFRS Foundation and others to realize this transition, including undertaking joint standard-setting efforts,” said GRI.

“GRI sees IFRS as a crucial partner in ensuring a seamless link between financial and sustainability reporting,” Hespenheide said in a statement. “Therefore, we fully support the IFRS Trustees in their objective to improve financial reporting so it is inclusive of the financial risks and opportunities presented by a company’s sustainability impacts. The interconnection between financial and sustainability reporting deserves particular attention by the IFRS, and is an area I believe we can closely collaborate on. It is essential to limit the burden on businesses while at the same time ensuring enhanced reporting that illuminates corporate impacts.”