Businesses have an obligation to account to society
Johannesburg, Tuesday, 28 April 2009 - Because business organisations consumed scarce resources and polluted the environment, it was incumbent upon them to provide a full report of their activities.
Addressing the issue of sustainability reporting in Johannesburg yesterday, Graham Terry, Head: Office of the Executive President at the South African Institute of Chartered Accountants (SAICA), pointed out that financial reporting was, but one dimension of an organisation's responsibility to report to society.
"Indeed, financial reporting on its own does not provide the user with sufficient information to assess organisational total performance. Furthermore, the range of stakeholders is far broader than the shareholders or owners. As citizens of countries organisations have a responsibility to account to society for their activities."
Terry referred to the recent Business for the Environment (B4E) Global Summit held in Paris, a leading international conference predicated on the following belief: "The world stands on the brink of an economic and environmental disaster."
He warned that as governments implemented strategies linked to sustainable development, they needed information to measure the success or otherwise of their initiatives and to report into global agencies.
"Therefore," said Terry, "governments and other stakeholders need organisations to provide them with a wide range of non financial information."
He emphasised that globally many organisations now prepared annual sustainability reports in which they provided information about their organisations' impact on sustainable development, while noting that in South Africa more and more organisations, especially those with global links, were preparing sustainability reports.
"The Draft Code of Governance (King III) recently released by the Institute of Directors suggests that companies should issue integrated sustainability reports."
Quoting from King III, Terry said that companies issuing integrated sustainability reports increased the trust and confidence of its stakeholders and the legitimacy of its operations.
It could increase the company's business opportunities and improve its risk management. By issuing an integrated sustainability report, internally a company evaluated its ethics, fundamental values, and governance and externally, improved the trust and confidence which stakeholders had in it. Terry said that chartered accountants justifiably prided themselves on their financial reporting prowess - which is why much was being done by SAICA to educate CAs(SA) about sustainability reporting.
"Currently, sustainability reports are frequently prepared by non financial professionals within organisations with very little input from the financial side," said Terry. "Yet given the growing importance of sustainability reporting in the larger scheme of things, chartered accountants can't afford to take their eye off the ball.
"Chartered accountants are well schooled in the principles of reporting and therefore have an important role to play in developing sustainability reporting." He suggested that the days of sustainability reports being prepared for a few "greenies" were long past. "Today they are used by a range of stakeholders and will become increasingly important in the future, as indicated by the new draft King Code."
Terry drew attention to the various agencies and bodies that had issued sustainability codes for organisations, among them:
- The United Nations Global Compact;
- The World Business Council for Sustainable Development; and
- The International Chamber of Commerce.
In addition, there were many guides covering elements of corporate social reporting, or sustainability reporting. These included the AA 1000 Series developed by AccountAbility, Carbon disclosure project and the sustainability reporting guidelines issued by the Global Reporting Initiative (GRI). The GRI guidelines were used by most organisations, sometimes in combination with others.
In South Africa, the Broad-based Black Economic Empowerment requirements and the King Code had set out requirements for various aspects of sustainability reporting.
SAICA had prepared a range of services and courses for its members on sustainability issues, as well as a booklet titled The Reporting and Assurance of Greenhouse Gas Emissions in South Africa.
"Sustainability is not a fad or a flavour of the month. It is our future. It is therefore time for chartered accountants to take a greater interest in sustainable development and, particularly, in sustainability reporting."
Footnote:
The B4E Business for the Environment Global Summit, scheduled to take place in Paris on April 22 and 23, is themed The Green Imperative: Leadership, Innovation and Technology.