A couple of weeks before the 35th celebration of Earth Day in April 2006, the New York Times declared “Green Is The New Black.” The article reported on how environmental friendliness had reached into consumer trends, business and fashion, and stated, “Eco-awareness is becoming a hot topic and a growing business.”
Five years later, an Obama has replaced a Bush in the White House (and finally done something for the planet); the economy is showing tentative signs of life after suffering a meltdown; and green has gone from trendy to what the MIT Management Review calls “table stakes” for doing business. As companies and industries move from compliance to strategic investment in sustainability throughout their value chain, the new watchwords are disclosure and reporting.
We’re now in the age of transparency: Clear is the New Black. Hiding sustainability exposures behind the veil of corporate secrecy is shifting from common practice to a sign of weakness. Today, leading companies – in sectors ranging from consumer goods to major extractive industries – are producing public reports with greater detail and transparency than ever thought possible.
Public Reporting Requirements Grow
In the U.S., two recent developments have hastened the shift toward greater public reporting of sustainability risk, opportunity and progress:
- Under a federal rule (referred to as “Part 98”) published in October 2009, all “large source” greenhouse gas (GHG) emitters in the U.S. are required to track and report their emissions. The rule, under what is also called the Greenhouse Gas Reporting Program (GHGRP), covers more than 10,000 facilities in the U.S. and accounts for more than 85 percent of all U.S. greenhouse gas emissions.
- In January 2010, the Securities Exchange Commission – the federal agency charged with determining what business risks publicly traded companies must document in their quarterly or annual reports – for the first time included climate change on the list of required disclosures.
Sustainability reporting, however, is not only a U.S. phenomena – it’s global. A 2010 survey of sustainability reporting requirements of 30 countries showed a total of 142 country standards and/or laws have some form of sustainability-related reporting requirement or guidance. Approximately two thirds (65 percent) of these standards can be classified as mandatory and one third (35 percent) as voluntary.
A large array of reporting options exists for public agencies, educational institutions and private enterprise, ranging from custom corporate social responsibility (CSR) reports to widely adopted, industry-standard reporting schemes. The Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP) are two of the most commonly used and well-known reporting models.
The Carbon Disclosure Project (CDP)
More than 3,000 organizations in some 60 countries around the world measure and disclose greenhouse gas emissions, water management and climate change strategies through CDP. Their goals are to set reduction targets and create performance improvements. Responses from most CDP reporting companies are available in a searchable database from the CDP web site: www.cdproject.net.
The CDP Leadership Index
Company responses are scored based on the quality of their reporting to CDP. Companies with the top scores for disclosure qualify to be listed in the Carbon Disclosure Leadership Index (CDLI).
In addition, the carbon performance score recognizes companies that are taking positive measures on climate change mitigation. Top-scoring companies for performance qualify to be listed in the Carbon Performance Leadership Index (CPLI, shown at right). Companies reporting under the CDP are scored for both the quality of their reporting and the quality of their action plans to reduce their climate impacts. To qualify for leadership recognition under the “action plan” rankings – the CPLI – a firm has to first achieve a score on the Disclosure ranking of 50 percent or greater. (Both rankings can be found on the CDP web site.)
To achieve top ranking in the Performance index, a firm must accomplish the following outcomes:
- Attain a disclosure score of 50 or above in order to be scored for performance
- Attain a performance score greater than 70
- Score maximum performance points on question 13.1a (absolute emissions performance) for GHG reductions due to emission reduction actions over the past year
- Disclose gross global Scope 1 and Scope 2 figures
- Score maximum performance points for verification of Scope 1 and Scope 2
- Make their responses public and submit via CDP’s Online Response System
The Global Reporting Initiative
Like the Carbon Disclosure Project, the Global Reporting Initiative (GRI) represents a broad-scale, industry-standard reporting scheme. According to its web site, GRI “is a network-based organization that produces a comprehensive sustainability reporting framework that is widely used around the world… GRI’s core goals include the mainstreaming of disclosure on environmental, social and governance performance.”
Where CDP reporting goes deep on carbon and water, GRI looks more broadly to include social sustainability considerations and corporate governance. Since its inception in 1999, GRI has forged alliances with the Organization for Economic Cooperation and Development (OECD), the United Nations Environmental Programme (UNEP) and the UN Global Compact. This effort aligns reporting standards with national laws and regulations to support consistency in tracking and reporting sustainability performance information.
GRI has also received widespread global adoption. Research by KPMG in 2008 indicated 79 percent of Global 250 companies disclose environmental, sustainability and governance (ESG) data and 77 percent of those use GRI to do so. In addition, 10 governments have a formal reference to GRI in their governmental corporate responsibility guidance documents and/or policies.
Reporting in Higher Education
Sustainability reporting is not limited to the public and for-profit sectors alone. In higher education, the American College & University Presidents’ Climate Commitment, which requires both reporting of climate footprint and publication of action plan strategy for climate mitigation, now has 674 signatory colleges and universities. This includes most major state university systems and nearly every notable major college or university in the U.S.
Public Scrutiny Grows
In the U.S. and globally – and across public agencies, private enterprise and the world of education – sustainability is not only considered an internal best practice or policy matter. How organizations track, document and report sustainability efforts are subject to higher levels of public scrutiny than ever. Increasingly, customers, investors, employees and regulators are expecting to see sustainability reporting and actions from the organizations they interact with.
Five years past Earth Day 2006, we’re now well into the era of full sustainability disclosure. Yes, reporting on your social, environmental and community impacts is a tall order. And it requires nothing less than a full commitment. But to postpone the commitment is to simply delay the inevitable. Organizations that fail to track and report their sustainability impacts and action plans do so only at their own peril. That much is Clear.