by Robyn Leeson
According to the film The Pirates of the Caribbean: Curse of the Black Pearl the Pirate Code, in practice, “is more what you'd call guidelines than actual rules”. Captain Barbossa’s interpretation of the Pirate Code is consistently used throughout the story to renege on promises, dampen expectations and betray colleagues. As efforts to mainstream non-financial reporting ramp up, we expect the frameworks used to be less subject to Captain Barbossa’s style of interpretation. He is a pirate after all.
The Australian Stock Exchange (ASX) and the European Parliament have both announced new requirements for the disclosure of non-financial information in the past weeks. Both initiatives have been met with great enthusiasm and both represent further uptake of the global “report or explain” agenda. Various blogs have already described the ASX announcement as “forcing” sustainability reporting and the European Commission Directive as a “game-changer” and heralding a sustainability reporting “revolution”. High expectations indeed.
For its part earlier this month, the European Parliament passed an amendment to a Directive which now requires mandatory disclosure of non-financial and diversity information by certain large companies and groups on a “report or explain” basis. According to the European Commission press release, the 6,000 entities concerned will need to disclose information on policies, risks and results regarding environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on boards of directors.
Last month, the Australian Stock Exchange announced the third edition of its Corporate Governance Principles and Recommendations that includes recommendation 7.4 that “a listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risks and, if it does, how it manages those risks.” The European Commission will now prepare guidelines and, in the meantime, member states are expected to enact legislation to support the Directive. The Directive goes further than the ASX recommendation by requiring the reporting of results, as well as risks and policies, and encourages the disclosure of concise and useful information. Closer to home, the new Corporate Governance Principles and Recommendations come into effect from 1 July this year but we’ll have to wait another year before we see what compliance and non-compliance really looks like.
Regulators and legislators do enjoy having a standard to reference. Both announcements refer to a list of frameworks which might be used to inform disclosure, including the Global Reporting Initiative (GRI), the UN Global Compact, the International Integrated Reporting Council and the OECD Guidelines for Multinational Enterprises. This indicates an expectation that externally derived frameworks and principles should be used to guide disclosure. With its focus on materiality, the GRI’s G4 Guidelines lend themselves to meeting the requirements of both and this is not a coincidence. Due to market position and uptake, the GRI Guidelines are often referred to as a de facto standard. There was a clear intention when it was under development that the G4 platform should support the mainstreaming of sustainability reporting by being more “standard ready” than its predecessors. The separation of the guidelines into two documents – “Reporting Principles & Standard Disclosures” and “Implementation Manual” also makes G4 look more like a standard.
Next month, an ad hoc group of the environmental auditing sub-committee of the International Organization for Standardization (ISO) will meet. The agenda is expected to include the results of a recent survey testing the market need for a standard on the verification of environmental sustainability reports. The meeting is in Panama, possibly on Panama’s Caribbean coast. Stay tuned for Pirates of the Caribbean 6: The Thrill of Verification.
Robyn Leeson is a Director of Net Balance (email@example.com), one of the world’s leading sustainability advisory firms.
Robyn is a member of GRI’s Stakeholder Council and Technical Advisory Committee and is based in Melbourne.
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