Mandatory Sustainability Reporting?

Last week the Global Reporting Initiative that has led the movement behind Sustainability Reporting (which goes by several other names as well) called for reporting to be mandatory in light of the recent financial crisis and even lower lack of trust in business that this is generating. This is a real change from their previous position that reporting should be voluntary; though they did encourage reporters to use certain criteria.

However, I think what needs to happen is not just for reporting to be compulsory, but that the contents of Reports needs to be mandated in one specific (and new) way. Every company should have to set a level of risk and be required to report any event or activity that is above that level from both a historic perspective, and future perspective.

Thus a Report would say:
"Last year there were 9 events or actions (etc) that represented a significant risk to the business. These 9 events were xxx and we responded by yyy, and to prevent these happening again we have/will do zzz"

"We expect this year, that the major risks will be around ffff, ggg and hhh. Thus we are doing iiii to prevent them".

Right now Reports are too opportunity focused and are not really providing investors (or other stakeholders) with a real assessment of their CR related risks (or indeed business risks, depending on how you define CR). There needs to be a degree of honesty from companies about what has gone wrong in order to ensure stakeholders the company is dealing with this.

In this sense, CR reports could be a very useful, strategic and forward-looking, activity that is adding real value. I still struggle to find many reports that mention any of the negative aspects of a company's work.

Whether the kind of CR report I mention needs to be publicly available is not particularly important. Of course the report needs to be (legally) available to regulators and to investors -and as such, this report does not need to be succinct -instead it needs to be comprehensive and large companies are going to need to, presumably, have long reports if there were so many activities that breached the threshold (that should be set by the company through a stakeholder dialogue that meets some minimum legal level).

If a company chooses to make the report publicly available (and easily navigable online), this would be a bonus; though I would expect certain contents would need to be kept our of the public-eye for privacy, regulatory and competitive reasons.

As previously proposed, many of us 'rich' are unable to take responsibility for our own lives. We need the government to build barriers in the road to stop us crossing the road when it is unsafe, we need companies to reduce their promotion of bad foods, as we cannot stop ourselves eating too much of them, we need regulations to restrict smoking, because we smoke too much. This is not new, but it is depressing. However, we are educated, and we know what choices we are making and the sacrifices we are making.

The poor though, are not as well educated, so do they have an excuse for making such bad choices, which an interesting article in the Stanford Social Innovation Review proposes they regularly do, with significant negative impacts. As the author notes:

The consequences of bad choices are bad for everyone, but even worse for the poor, who lack the resources—financial, psychological, social, and political—to compensate for their errors.

A recent field study in Sri Lanka reveals that more than 10 percent of poor male respondents regularly spend their entire incomes on alcohol.

More generally, poor people “could easily save more without getting less nutrition by spending less on alcohol, tobacco, and food items such as sugar, spice, and tea,” Banerjee and Duflo conclude. For example, the typical poor household in Udaipur could spend up to 30 percent more on food if it did not spend money on alcohol, tobacco, and festivals.

Evidently education is not the answer to this conundrum, since the rich have education too -or, a fairer comparison might be that the poor in the rich countries have good education (comparatively) but still make the same mistakes. Or is the answer that our education, one that is influenced by school, peers, families, media and more, all geared towards taking away our sense of personal responsibility, or focusing too much on short-term, or personal, gain? If it is, then this could be changed. Whereas, if this is more genetic and evolutionary, then it might be harder to change. Food for thought...