International Corporate Reporting

Chapter 13
Corporate social responsibility
and sustainability
Global Reporting Initiative (GRI)
• Helps businesses and governments worldwide
understand and communicate their impact on
critical sustainability issues such as climate
change, human rights, governance and social
well-being.
• Enables action to create social, environmental
and economic benefits for all.
GRI standards
• Core product are the Sustainability Reporting
Standards.
• To prepare a sustainability report in accordance
with the GRI Standards, an organisation applies
the Reporting Principles from GRI 101 to identify
its material (significant) economic,
environmental, and/or social topics.
• These material topics determine which topic-
specific standards the organisation uses to
prepare its sustainability report.
GRI Standards
• Universal standards
• GRI 101 Foundation (principles for reporting)
• GRI 102 General disclosures (contextual
information about an organisation)
• GRI 103 Management approach (how an
organisation manages each topic)
• Topic-specific standards
• GRI 200 Economic
• GRI 300 Environmental
• GRI 400 Social
Case study: GRI in annual report
OCI NV. Annual report 2018 (www.oci.nl)
Sustainability review is presented in pages 46-72.
The main headings are:
• Our commitment
• Our communities
• Our employees
• Health & Safety
• Our environment
Table in pages 193-5 links each of the relevant GRI
standards to a section of the annual report.
GRI database
For each company in the database, a checklist of
specific compliance with other guidance, including:
• The UN Global Compact;
• Sustainable Development Goals;
• OECD Guidelines (all explained further in this
section);
• AccountAbility standards AA1000; AA1000;
• ISO 26000;
• The Carbon Disclosure Project;
• CSR Europe; and IFC.
UN Global Compact

Calls companies to align their strategies and

operations with universal principles on human
rights, labour, environment and anti-corruption,
and take actions that advance societal goals.

The overall aim is a path to end extreme poverty,

fight inequality and injustice, and protect our planet
by the year 2030.
Ten principles of UN Global
Compact
• Human Rights. Businesses should:
• Principle 1: support and respect the protection of internationally
proclaimed human rights; and
• Principle 2: make sure that they are not complicit in human rights
abuses.
• Labour Businesses should uphold:
• Principle 3: the freedom of association and the effective
recognition of the right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory
labour;
• Principle 5: the effective abolition of child labour; and
• Principle 6: the elimination of discrimination in respect of
employment and occupation.
Ten principles (contd)
• Environment. Businesses should:
• Principle 7: support a precautionary approach to
environmental challenges;
• Principle 8: undertake initiatives to promote
greater environmental responsibility; and
• Principle 9: encourage the development and
diffusion of environmentally friendly technologies.
• Anti-Corruption
• Principle 10: work against corruption in all its
forms, including extortion and bribery.
•  
Sustainable Development Goals

1. No poverty
2. Zero hunger
3. Good health and well being
4. Quality education
5. Gender equality
6. Clean water and sanitation
7. Affordable and clean energy
8. Decent work and economic growth
SDGs (contd)
9. Industry, innovation and infrastructure
10.Reduced inequalities
11.Sustainable cities and communities
12.Responsible consumption and production
13.Climate action
14.Life below water
15.Life on land
16.Peace and justice strong institutions
17.Partnerships for the goals
•  
Case study: UPM-Kymmene
(Finland)
• Annual Report 2018 is UPM Biofore Beyond Fossils.
• Page 27 of the Annual Report 2018 shows the contribution to
SDGs.
• Pages 96-97 provides the GRI contents index, in a short version.
• Page 98 Independent Practitioner’s Assurance Report refers to the
Annual Report and to website in the Responsibility section. It
refers to the AA1000 AccountAbility Principles.
• Main contents are:
 Practitioner’s responsibility
 Limited assurance conclusion (‘nothing has come to our attention….’)
 Observations and recommendations (relating to AA1000 Principles)
 Practitioner’s independence, qualifications and quality control
Human rights
• UN endorsed the Guiding Principles on Business
and Human Rights in June 2011. EU endorsed
also in CSR Strategy.
• UN recommends members to encourage and,
where appropriate, require business enterprises
to communicate how they address their human
rights impacts.
• Financial reporting requirements should clarify
that human rights impacts in some instances may
be material (significant) to the economic
performance of the business enterprise.
Principles for Responsible
Investment
• 2005, the UN Secretary (Kofi Annan) invited a
group of the world’s largest institutional investors
to join a process to develop the Principles for
Responsible Investment (PRI).
• A 20-person investor group drawn from
institutions in 12 countries was supported by a
70-person group of experts from the investment
industry, intergovernmental organisations and
civil society.
• The Principles were launched in April 2006 at the
New York Stock Exchange.
Principles for Responsible
Investment
1: Incorporate ESG issues into investment analysis and
decision-making processes.
2: Be active owners and incorporate ESG issues into our
ownership policies and practices.
3: Seek appropriate disclosure on ESG issues by the entities
in which we invest.
4: Promote acceptance and implementation of the Principles
within the investment industry.
5: Work together to enhance our effectiveness in
implementing the Principles.
6: Each report on our activities and progress towards
implementing the Principles.
OECD Guidelines for MNEs
• Non-binding principles and standards for
responsible business conduct in a global context,
consistent with applicable laws and internationally
recognised standards.

• The Guidelines are the only multilaterally agreed

and comprehensive code of responsible business
conduct that governments have committed to
promoting.
EU strategy for CSR
• European Commission believes that CSR is
important for the sustainability, competitiveness,
and innovation of EU enterprises and the EU
economy.
• The EU has reviewed its progress in implementing
the UN guidance on human rights and has
pointed to the Directive on non-financial
reporting.
• Guidelines on application of the Directivetake
account of 21 national, EU-based or international
frameworks.
Task force on Climate-related
financial disclosures
• TCFD was set up in 2015 by the Financial Stability
Board (FSB) to develop voluntary, consistent
climate-related financial risk disclosures for use
by companies, banks, and investors in providing
information to stakeholders.
Recommendations of TCFD
1 Disclose the organisation’s governance around
climate-related risks and opportunities.
2 Disclose the actual and potential impacts of
climate-related risks and opportunities.
 3 Disclose how the organisation identifies,
assesses, and manages climate-related risks.
 4 Disclose the metrics and targets used to assess
and manage relevant climate-related risks and
opportunities.
AccountAbility standards AA1000
• global consulting and standards firm that works
with business, governments and multi-lateral
organisations to advance responsible business
practices and improve their long term
performance.
• AccountAbility provides principles-based
Standards and Frameworks (the AA1000 Series of
Standards) used by global businesses, private
enterprises, governments and civil societies to
demonstrate leadership and performance in
accountability, responsibility and sustainability.
AccountAbility structure and
standards
• The Standards Board is composed of individuals
representative of a cross -section of global
constituencies, including business, regulators,
academia, NGOs and policy-makers.
• The foundation of the Series of Standards is the
AA1000AP (2018) (Accountability Principles),
from 2019, replaced the previous AA1000AS
(2008) (Assurance Standard).
Case study: assurance report
Hyundai Motor company (South Korea)
The CSR 2018 report includes an Independent Assurance Statement,
signed by an AA1000 Licensed Assurance Provider. The main
headings are:
• Responsibility and Independence
• Assurance Standards (AA1000AS and ISAE 3000)
• Limitations
• Methodology
• Findings and Conclusion (relating to GRI standards)
• Inclusivity: Stakeholder Engagement
• Materiality: Identification and Reporting of Material Issues
• Responsiveness: Organization's Response to Issues
• Recommendation
• *
Carbon Disclosure Project (CDP)
• Independent not-for-profit organisation aiming to
create a lasting relationship between
shareholders and corporations regarding the
implications for shareholder value and commercial
operations presented by climate change.
• Goal is to facilitate a dialogue, supported by
quality information, from which a rational
response to climate change will emerge.
CDP repository
• CDP website claims to be the largest repository of
self-reported environmental data in the world.
• Works on behalf of large institutional investors to
seek information on the business risks and
opportunities presented by climate change and
greenhouse gas emissions data from the world's
largest companies.
• Website provides reports based on submissions of
FT 500 and S&P 500 companies in response to
information requests sent out by the CDP.
Country-by-country reporting
• Influential groups such as the Tax Justice
Network and Christian Aid pointed out that while
the annual reports of a transnational corporation
(TNC) contain a wealth of economic and financial
information, the approach to segmental reporting
allows a high level of regional aggregation. There
might be separate information for ‘Africa’ or
‘Europe’ or ‘rest of the World’ but it would be
impossible to work out what had happened in
each country.
• Lobbying has led to change (chapters 12 and 16)
CSR Europe
• Claims to be the leading European business
network for CSR. At 2018 it had 48 corporate
members and 42 National CSR organisations,
through which it gathers over 10,000 companies,
and acts as a platform for those businesses
looking to enhance sustainable growth and
positively contribute to society.
•  Publications include a useful and informative
survey, and de jure comparison, of how member
states have implemented the Directive on Non-
financial and Diversity Information.
Sustainability Accounting
Standards Board
• Mission is to help businesses around the world
identify, manage and report on the sustainability
topics that matter most to their investors.
• The SASB Foundation, based in San Francisco,
USA, is governed by the SASB Foundation Board
of Directors. Standards Board sets, interprets and
updates the SASB standards.
• 77 industry-specific standards designed to assist
companies in disclosing financially material,
decision-useful sustainability information to
investors.
ISO 26000
• International Organization for Standardization
(ISO).
• Independent, non-governmental international
organisation whose members are national
standards bodies.
• These are not accounting or auditing standards;
they relate to products and services.
International Finance Corporation
Sustainability Framework (2006, updated 2012)
consists of:
•  Policy on Environmental and Social
Sustainability, which defines IFC's commitments
to environmental and social sustainability.
• Performance Standards, which define clients'
responsibilities for managing their environmental
and social risks.
• Access to Information Policy, which articulates
IFC's commitment to transparency.
Corporate Reporting Dialogue
• Platform convened by the IIRC made up of
Carbon Disclosure Project, the Climate Disclosure
Standards Board (CDSB), the GRI and the SASB.

• CRD formed in 2014 to promote alignment and

compatibility between the various reporting
disclosure frameworks of its participant bodies.
CRD projects
Three projects:
1. Which of the UN Sustainable Development Goals are
addressed by each of the frameworks.
2. To show that the various frameworks are built on the
same fundamental principles and therefore can be used in
conjunction with each other.
3. ‘The Better Alignment Project’ began in 2018 and aims to
be completed in 2020. Asks participant bodies to map
their respective standards and frameworks to identify the
commonalities and differences between them, and to
identify how non-financial metrics relate to financial
outcomes.
ESG ratings
Environmental, Social and Governance
• Principles for Responsible Investment support
incorporating ESG issues in investment analysis
and decision-making.
• Investors ask on how ESG factors can impact the
long-term risk and return profile of institutional
portfolios.
• ESG risks and opportunities are analysed and
scored by commercial ratings agencies using
extensive sources of data.
ESG and corporate reports
• ESG ratings are significant in investment
decisions, so that companies have enhanced their
corporate reporting to include ESG reporting.
• There are no specific reporting standards but
stock exchanges may set guidelines.
• The London Stock Exchange Group has issued a
global guide, available on-line to both issuers and
investors globally, setting out recommendations
for good practice in ESG reporting.
• Location of information in annual report may
vary.
Dow Jones – RobecoSAM
ESG-Sustainability Indices
• Companies are invited to be assessed.
• Sustainability assessment is based on responses
to a questionnaire and the contents of documents
provided by the company, including the annual
report.
• Increasingly focuses on assessing publicly
available information.
• Seen as useful mechanism to promote increased
corporate disclosure on underreported or
emerging sustainability topics.
FTSE4Good indices
• Launched in 2001, designed to measure the
performance of companies demonstrating strong
ESG practices.
• FTSE4Good indexes can be a source from which
to identify environmentally and socially
sustainable companies, or a reference point
against which to assess the progress and
achievements of companies.
• Criteria are applied to the FTSE Emerging
Indexes, covering over 20 emerging countries,
launched in 2016.
Is CSR reporting effective for
sustainability?
• Sustainability applies at the level of an eco-
system rather than at the single organisation.
• Can one organisation report on sustainability?
• Might be changed to ‘social responsibility’ or
‘environmental management’, less demanding on
the organisation.
• Socially responsible practices may assist
profitability, then becomes economic outcome
rather than human values.
Possible developments
• Full costing- taking in not only the costs
incurred within the organisation but also those
incurred externally as a consequence of the
organisation’s activities.
• Sustainable consumption and production.,
e.g. through Certification schemes.
• Accountability, pointing to weaker groups in
society to make story heard.
Research examples
Human rights and accounting. Literature review
indicates range of research methods possible.
Association of CSR disclosures with financial
performance. Creating disclosure scores from a
framework.
Detecting greenwashing in CSR reports.
Qualitative and quantitative methods of research.
Descriptive surveys. Provided by accountancy
firms and research institutions.