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

“The vision of the Danish
Government’s Action Plan on
Corporate Social Responsibility
is to make the Danish corporate
sector internationally renowned
for responsible growth. A large
number of Danish businesses
work determinedly on corporate
social responsibility, but far too
few businesses release systematic
information about their initiatives.
And then it is difficult for them to
gain recognition for their work. So
some businesses need to be better
at communicating about their
initiatives. Reliable communication
and transparency play a key role
for the businesses to reap the full
benefits of their initiatives because
customers, consumers, employees,
investors, etc. request such
communication and transparency.
The government’s message is
clear: the new government rules on
how large businesses must report
on corporate social responsibility
can play an important role. We in
Denmark welcome the rest of the
world to a dialogue on our new
law.”
Carsten Ingerslev, Head of the Danish Centre
for CSR, Danish Commerce and Companies
Agency, Member of the GRI Governmental
Advisory Group
The analysis of legislation and
mandatory and voluntary standards,
codes and guidelines revealed the
following key findings:
Governments take the lead
Compared to four years ago, more
governments have started to make
sustainability reporting mandatory.
Of the more than 140 national
standards identified, approximately
two thirds are mandatory. Examples
are Sweden’s Guidelines for external
reporting by state-owned companies
complementing accounting legislation
and generally accepted accounting
principles and Denmark’s revised
Financial Statements Act, requiring
CSR disclosure for large companies.
This development may form part of
growing interest in ‘new regulation’,
variants of ‘smart regulation’ that takes
a more collaborative approach and
requires improved sharing of relevant
information so that regulations can
reflect change and promote continual
improvement, amongst others based
on ongoing stakeholder feedback and
disclosure of performance information.
In 2007 Sweden’s Ministry
of Enterprise, Energy and
Communications issued Guidelines
for external reporting by state-owned
companies. According to these
guidelines, which took effect in
2008, the state-owned companies
are to present a sustainability report
in accordance with the Global
Reporting Initiative’s (GRI) guidelines.
Sustainability reports are to be quality
assured by being independently
checked and are to be published in
time for the Annual General Meeting
at the same time as the annual report.
This action has resulted in a significant
increase in sustainability reporting from
Sweden’s state-owned companies.
The requirement was for companies
to report or explain why they could
not, resulting in more than 89% of
Swedish state-owned companies
having issued GRI reports.
In 2009 the Danish Government
expanded the requirements in the
Danish Financial Statements Act
requiring reporting on environment
and intellectual capital in the
management’s review to also include
CSR reporting in general. About 1,100
of the largest businesses, listed
companies and state-owned public
limited companies are required to
report on corporate social responsibility
in their annual reports, or explain why
they refrain from such reporting. 9
The revised Act entered into force on
1 January 2009 and applies to financial
years beginning on 1 January 2009 or
later.
But governments have also become
more active in issuing voluntary
guidelines for sustainability or
environmental reporting. They are
designed to assist companies and/or
public agencies themselves. Examples
are the Voluntary CSR Guidelines,
2009 issued by the Indian Ministry
of Corporate Affairs. In December
2009 India’s Ministry of Corporate
9 Danish companies that are members of the UN Global Compact
and issue COPs are exempt from reporting.
Carrots and Sticks - Promoting Transparency and Sustainability
Affairs launched voluntary guidelines
for responsible business which aim
to add value to the operations and
contribute towards the long term
sustainability of the business. These
guidelines also aim to enable business
to focus as well as contribute towards
the interests of the stakeholders and
the society. Pursuant to the guidelines
the companies should disseminate
information on CSR policy, activities
and progress in a structured manner to
all their stakeholders and the public at
large through their annual reports, their
website and other communication
media. Another example is the
Environmental Reporting Guidelines,
2007 issued by the Japanese Ministry
of the Environment.
Interestingly, many of the voluntary
standards identified at the national
level were issued by governments
(Government Ministries). Often
governments prefer to use “soft
power” (Hohnen, 2007) first before
they legislate. Moreover, they aim
to provide guidance to companies
without having to pass through a
cumbersome parliamentary procedure.
Soft “measures” often pave the way
for harder measures, e.g. legislation.
In this sense, voluntary standards are
not only complementary, but they
can also have a pre-law function.
The review of standards, codes and
guidelines in chapter five revealed
almost 50 voluntary standards, codes
and guidelines of different types. Not
only governments issue voluntary
guidelines: a substantive part of
these instruments are issued by nongovernmental
entities, for example
industry associations or other private
institutions. Examples include the
RSE.COOP Reporting Guidelines
Programme, 2006 issued by CEPES,
a Spanish Enterprise Confederation,
the guidelines for social reporting in
the financial sector published by the
Italian Banking Association and the
European Institute for Social Reporting,
or the King Code of Governance for
South Africa (King III), 2009, issued by
the Institute of Directors in Southern
Africa.
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