Rio+20 could be a springboard for integrated reporting

by Terence Jeyaretnam, Director, Net Balance

Rio+20’s focus on the ‘green economy’ provides a strong platform for business to be engaged in the dialogue on planetary sustainability and make them part of the solution.

Australian business has generally followed European leadership in business sustainability, including in reporting on non-financial performance. Over the past five years, Net Balance Foundation, in partnership with ACCA, has undertaken twelve studies examining the extent to which various aspects of material non-financial issues are voluntarily integrated within corporate reports in publicly listed firms. The resulting research notes have shown that corporate attention to non-financial issues is increasing and becoming the norm[1].

As non-financial reporting reaches a tipping point, leading businesses would prefer to see their counterparts equally engaging in the open communication of performance beyond financial outcomes. Paragraph 24 presents a monumental opportunity to elevate this movement in corporate reporting to the next level. Obligating companies to integrate material sustainability issues within their reports and accounts on a ‘comply or explain’ basis would not only further engage business in integrating sustainability issues into corporate reporting, but also allow governments and investors alike to align to a global and unified approach on business performance reporting in sustainability. The business pillar of the green economy platform would therefore be strengthened.

Australian businesses are engaged in dialogues around issues such as integrated reporting and ‘report or explain’ requirements and are looking for global consensus and leadership. Rio+20 offers an opportunity for global leadership. With an announcement around carbon reporting stemming from the implementation of a price on carbon in Australia from 1 July 2012, a global declaration on sustainability reporting will see significantly more take-up in Australia.

The corporate sector has demonstrated over time that it is very good at receiving policy signals and innovating to turn these into its own advantage. Over the past twenty years, companies have demonstrated that improved non-financial disclosure brings competitive advantage in terms of: increased interest from socially responsible investments; risk management; external recognition; and performance management.

Experimentation and innovation has led to significant improvement in non-financial disclosures over time. Integrated reporting is no different, with over 50 pilots globally helping shape the concept into reality already. Three of the pilots are Australian firms.  Beyond the pilots, there are a large number of other companies already embarking on ‘integrated reports’. This enthusiasm could be better harnessed and channelled by a ‘report or explain’ approach initiated by Rio+20.

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1. Net Balance is a signatory to the Corporate Sustainability Reporting Coalition. Net Balance is also represented on a number of GRI steering and working groups, helping shape the next version of the reporting guidelines.  With ACCA, Net Balance partners in Australia on research and engagement around non-financial reporting. For more information on our research please visit www.netbalance.com/insights/reports/our-reports.

 

Terence Jeyaretnam is a Director of Net Balance (terence@netbalance.com), 
one of the world’s leading sustainability advisory firms.
Terence is based in Melbourne.