CARROTS AND STICKS – PROMOTING ... - Global Reporting Initiative

There is a large variety of regulatory
choices. This variety depends on a
lot of factors, including geopolitical
factors. However, there are a few
general trends to be discerned.
With the publication of Carrots
and Sticks for Starters in 2006,
the debate was perhaps more
about voluntary or mandatory
reporting, although it had already
been indicated that this was not
an either/or debate. Explaining our
title at the time, we noted that
“the comprehensive sustainability
reporting regulation debate is still
young, the main course still has to
be prepared”. Today the preparation
of the main course is underway.
In this new context today we can
discern three emerging trends or
developments.
The first is a stronger role for
the state and its regulatory role,
to ensure a minimum level of
disclosure and risk prevention. This
was highlighted by Mervyn King,
chairperson of the Global Reporting
Initiative, when he addressed the
ESG disclosure workshop hosted
by the European Commission in
early 2010: “there is no time for
a regulatory Business as Usual
approach. After decades of voluntary
laissez-faire reporting the time is
ripe for stronger regulatory action
and to follow the good examples
of several EU governments who
have introduced binding measures
or legislation on ESG disclosure
for some portion of their corporate
sectors.”
The second trend is an emerging
emphasis on a combination of
(complementary) voluntary and
mandatory approaches.
And the third emerging trend –
although in its infancy – is one
of gradual integration, resulting
in a combination of corporate
governance, financial and
sustainability reporting into one
reporting framework. This third
trend may be a reaction to avoid
new financial scandals and crises.
It is also a sign of the maturing
field of sustainability reporting, and
can contribute to achieving the
transition to sustainable markets
and economies. An important new
initiative, which will help realise this
emerging trend, is the establishment
of the International Committee
on Integrated Reporting (ICIR). Its
purpose is to bring together the key
standard setters of financial and
ESG reporting and their principal
stakeholders to plan and promote the
transition to Integrated Reporting.
Today and tomorrow’s debate on
the future of sustainability reporting
standards is focused on the following
questions: (1) Whether and how
to reach agreements on global or
national reporting standards; (2) How
regulation can speed up the pace
of making relevant, accurate and
comparable information available;
(3) Whether sustainability reporting
should become an integral part
of financial reporting (integrated
reporting); (4) Whether and how
the current global sustainability
and CSR frameworks be further
aligned and consolidated, avoiding
unnecessary overlap and confusion;
(5) The meaning of “materiality”
and linking backward-looking with
forward-looking reporting; (6)
How to take into consideration
the different information needs of
different groups (target audiences);
(7) Whether a report is conceived
as the only vehicle of disclosure;
(8) Whether and what steps should
be undertaken towards a generally
accepted approach to assurance
of sustainability reports; (9) The
boundary of sustainability reporting
(in particular supply and value chain).
As mentioned above, a sense
of “crisis” and “credibility” puts
growing pressure on regulators
world-wide to explore these
questions more closely. One
consideration is how regulation
can speed up the pace of making
relevant, accurate and comparable
information available to address
pressing societal challenges such
as climate change and accountable
business practice.
Carrots and Sticks - Promoting Transparency and Sustainability
Methodology
Following the publication of
Carrots and Sticks for Starters in
2006, a core project team was
formed in 2009 to oversee the
revision process. In addition to the
original partners, UNEP and KPMG
Sustainability, the Global Reporting
Initiative and the Unit for Corporate
Governance in Africa at the
University of Stellenbosch Business
School joined as partners.
Core funding was provided by UNEP,
but most project partners provided
their services on a pro bono basis.
Country practices from KPMG
and GRI focal points performed
the primary research and provided
country information, while the core
project team worked together on the
analysis of data and development of
content.
A special advisory committee was
convened by the GRI – this group
of eminent persons provided input
throughout the entire process. The
names of the members of the
advisory committee appear later
in the document, but it should be
emphasised that they have no
responsibility for the content of the
publication.
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