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Five things to watch out for when reading a sustainability report

Most people feel a little lost when they pick up their first sustainability report. Where to start? What to look out for? What constitute a good report? Here are five things that you should watch out for when reading a sustainability report:

  1. CSR policies and practices. A report should provide an overview of a company’s CSR policies and practices. This could be in the form of a letter from a senior management which would convey the company’s CSR commitment at the highest level. It should also share the goals that company had announced previously, tracked against actual progress, as well as the company’s future goals.
  2. Systematic data, not just anecdotes. While anecdotes may be useful in providing insights into initiatives, a good sustainability report should show data of the issues that is being tracked, company-wide. This could be also in the form of regional level reporting, facility-level reporting (eg. for a company in a capital intensive industry) or specific environmental or safety records. The data should also be presented in a comparable format, adjusted to reflect changes in size of operations or corporate structure for instance, or allow for year-on-year comparisons. The company producing sustainability reports should report data in the same format each year.
  3. Includes good and bad news. Many companies are afraid of sharing ‘bad news’, preferring to present their best face to the readers. But the reality is every company has its share of problems, issues and controversies, and often, some of these would already have made news. In fact, readers may conclude that a company is not serious about looking into issues that it is facing or not thorough in its response when it choose to downplay ‘bad’ news in its sustainability report. A credible sustainability report thus would contain a balance of ‘good’ and ‘bad’ news. This could provide the company with an opportunity to share how it handled the difficult challenges it faces and demonstrate its progressiveness on CSR issues.
  4. Go beyond community affairs. Community engagement programmes and initiatives may be the first steps that many companies make in their CSR journeys and it important for companies to report on their commitments to communities in which they operate in. But a sustainability report is more than a report of the company’s community affairs activities, and a comprehensive report should address a wider range of activities that affect their stakeholders and society. A company progressive in its CSR journey should be transparent in addressing the biggest challenges faced by the company and the industry that it is in.
  5. Integrate sustainability data with business strategy and financial reporting. So that readers can understand the financial implication and benefits of its CSR initiatives, a company should strive to integrate data of its sustainability efforts with its business strategy and financial reporting. It also signals that the company takes sustainability issues seriously.

Information adapted from "How to Read a Corporate Social Responsibility Report", a 2010 study from the Boston College Center for Corporate Citizenship.

G3.1 and G.4 – what are the differences?

These are the main differences between the two sets of guidelines:

  • Materiality and boundaries: Whereas the previous G3.1 guidelines are comprehensive in its coverage of the economic, environmental, social and governance aspects of a business, the G4 guidelines emphasizes on reporters establishing the areas where sustainability impact matters to an organization. This is known as ‘materiality’, and it compels companies to focus on ‘what matters, where it matters’. ‘Boundaries’ on the other hand help a company define where each impact occurs, and it can be internal or external to the organization.

Together, assessing materiality and boundaries help a company to identify and determine which sustainability areas are critical to its business and have the most impact. In this way, the company is better able to align its sustainability efforts in areas that are most strategic to its business. Its sustainability reports will therefore be more focused, credible and easier to navigate for their readers.

  • Stakeholder Engagement: It is important for a company to understand and engage its stakeholder so that it can establish the materiality and boundaries of its sustainability impact. G4 guidelines emphasize on the role of stakeholder as a key element in the reporting process. A reporting company is required to establish a systematic process for stakeholder engagement as part of its materiality assessment, and this will be included in the report.
  • Reporting options: Unlike sustainability reports produced using the G3.1 guidelines which are given a grade after application level checks, reports produced using the G4 guidelines will be classified under two options – ‘core’ or ‘comprehensive’, depending on the level of disclosure in the report.

For instance, if a company has identified 10 aspects that are material to its operations, it needs to report against at least one indicator for each of the aspect that it has identified in order for its sustainability report to be ‘in accordance’ with the ‘core’ option. To be ‘in accordance’ with the ‘comprehensive’ option, the company would have to report against all the indicators available in the G4 guidelines under the 10 aspects which it has identified as material.

In other words, sustainability reports produced using the G4 guidelines would not have a grade assigned for application level check. Have more questions about G4 guidelines? Click here

Getting your sustainability report checked

A sustainability reporter using G3.1 guidelines today can submit the report for a GRI Application Level Check, to confirm the extent to which the report has addressed the disclosure items in GRI's framework and guidelines. The check helps to make reports more comprehensible for report users by confirming the completeness and correctness of a report’s GRI Content Index - and its effectiveness as a navigation mechanism for report users.

All GRI-checked reports receive an Application Level Check Statement, which has a grade of ‘A/A+’, ‘B/B+’ or ‘C/C+’. It is worth noting that the grade indicates the extent to which the framework has been applied for the report, and does not indicate the quality of or the information disclosed in the report.

The application level check is complementary to an external assurance of the report and should be included in the published report as formal confirmation of the report's Application Level. Reports that are externally assured receives a ‘+’ rating.

The application level checks will cease with reports using the G4 guidelines. (Find out more about the difference between the G3.1 and G4 frameworks here). With the G4 framework's focus on materiality so that sustainability reports focus  on the organisation's most critical sustainability-related issues, the GRI has introduced a 'Materiality Matters' Check, where reports are assessed on the identification of material aspects and boundaries instead of the completeness of information disclosed. Organisations with reports that are found to be satisfactory by GRI in its materiality disclosure will be given a 'Materiality Matters' icon, which can include in the final report.

Why reports are externally assured

Having a sustainability report externally assured lends credibility for the company. The external assurance is conducted by an individual or group that is independent from the company that produced the report and its stakeholders, and is therefore able to assess and publish an objective and impartial opinion on the sustainability report.

An external assurer assesses whether the report provides a reasonable and balanced presentation of performance, taking into consideration the accuracy of data in the report and the overall selection of content and the extent to which the reporter has applied the GRI Reporting Framework and the Reporting Principles.

Singapore Compact

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