The Future of Corporate Sustainability Reporting: A Rapidly Growing Assurance Opportunity
EXECUTIVE SUMMARY * To satisfy the information needs of external and internal stakeholders, more organizations are measuring and reporting on their social and environmental performance. CPAs can play an important role in providing the needed information and helping to verify its accuracy. * Corporate sustainability reporting (CSR) involves reporting financial and nonfinancial information to key stakeholders on the company's operational, social and environmental activities and its ability to deal with related risks. * The most dominant CSR regulations are those of the Global Reporting Initiative (GRI), which issued its first comprehensive reporting guidelines in 2002 and its G3 Reporting Framework in October 2006. As of October 2006, more than 1,000 international companies had registered with the GRI and issued corporate sustainability reports using its standards. * An opportunity exists for CPAs to audit the information companies present in corporate sustainability reports. As of yet interested parties have not fully agreed on what information can and should be audited. Concern exists about the suitability of the criteria used to prepare the reports and what performance and reporting standards the auditor should use. * A joint task force of the AICPA and the Canadian Institute of Chartered Accountants (CICA) concluded the 2002 GRI standards had not yet reached a point where they were suitable criteria to be considered generally acceptable and allow a set of generally accepted assurance standards for CSR reports to be developed. Two exposure drafts offered by accountants in the Netherlands on assurance engagements related to sustainability reporting are currently under review by international accounting organizations including the AICPA. ********** Faced with increased pressure from internal and external stakeholders, more organizations are measuring and reporting on their social and environmental performance as well as the usual financial reporting measures. Stakeholders have been pressing companies to publicly report this information either in annual financial reports to shareholders or in voluntary corporate performance reports. The worldwide growth of socially responsible investment funds, investment rating systems such as the Dow Jones Sustainability Index and investment policy disclosure requirements also have put financial pressures on companies to make these kinds of nonfinancial disclosures. As this trend grows, so, too, will the role of accountants and auditors. CPAs within organizations will play a key role by providing and measuring the social and environmental information, using their skills to improve its quality and facilitate its use to make sound business decisions in areas such as investment appraisal, budgeting and strategic planning. Auditors also will have a significant role in verifying the accuracy of the reported information as well as the systems and practices from which it is derived. This article provides all CPAs with an overview of corporate sustainability reporting and the role it may play in businesses worldwide. BEYOND THE BOTTOM LINE Organizations have come to realize that meeting stakeholder expectations is as necessary a condition for sustainability as the need to achieve overall strategic business objectives. While maximizing shareholder value continues to be an overriding concern, companies will not be able to do that over the long term if they don't meet other key stakeholder interests. According to a PricewaterhouseCoopers report, The Value Reporting Revolution: Moving Beyond the Earnings Game, "to create long-term economic value for society--shareholders and other stakeholders alike--sustainability says that companies must also create social and environmental value." To create transparent reports that provide accurate and reliable data, as well as a fair picture of overall performance, many companies are now reporting results across the "triple bottom line" of economic, environmental and social performance. …