How did Reporting Start?

When society first demanded information on sustainability, few organizations had experience in addressing environmental and social concerns, let alone providing this new type of information. Early reports had the following characteristics:

  • lacked rigor;
  • contained mostly narrative discussion; and
  • needed more quantitative indicators.

Unlike financial reports, which are prepared according to generally accepted accounting principles or GAAP, there were no standards to follow for sustainability reports. For these reasons, critics referred to these reports as green glossies and suggested that organizations were greenwashing, meaning that they were not actually doing what they said they were doing in the reports.

Consequently, these documents were not taken seriously and deemed to be aimed at improving an organization’s image without any substantial progress in actually improving environmental and social performance.

Although some reporting of social and environmental impacts was done in the 1970s, it quickly died as economic concerns were front and center during the 1980s. Some organizations continued to put selective information about social and environmental impacts in their annual reports. It was not until the late 1980s that a few organizations decided that the demand for environmental information warranted a stand-alone report, leaving the annual report to focus on financial information.

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In the 1970s and 80s organizations used separate sections in their annual reports (1-2 pages) to communicate with a more informed public.

Resource intensive industries, such as chemical, petroleum, forestry, and manufacturing, were targeted first. Demands came from owners of corporations through shareholder resolutions, not just the general public. Because sustainability reporting was new to organizations, they did not have the necessary resources to provide the information stakeholders (including shareholders) wanted. Not all organizations responded with the same urgency.In the mid-1990s, organizations began communicating with their stakeholders to learn what information was important to them. Organizations’ information systems improved and reports expanded with information that was useful not only to the organizations but also to their stakeholders. Most of the information reported was environmental in nature because the environment can be categorized into concrete aspects, such as air, land, and water. Except for safety information, little attention was given to the social dimension, as it was more difficult to conceptualize.In the 2000s, organizations began to provide assurances that the information in their reports is accurate and credible. Due to incremental improvements in information systems and experiences in reporting, organizations were providing more accurate data. With data improvements came verification by internal and external audit organizations. Quantifiable data can be verified by an auditor, but acceptable performance is assessed by a stakeholder panel. Therefore, stakeholder panels were used for assessing how well the organization adhered to the organization’s own policies and any external agreements or codes it had signed.In the early 1990s, leading organizations initially investigated what they had available in their information systems to prepare separate environmental reports.

Some of the systems were sorely lacking in information. Although financial statements have been around for nearly 400 years, and organizations still have problems getting the financial statements correct the first time, sustainability reports were entirely new and few organizations knew where to begin to make them as credible and accurate as the financial statements.Organizations started using guidelines and asked what might be useful to stakeholders on the three dimensions of sustainability (environmental, social, and economic).

Backed with some experience in environmental reporting, leading organizations followed reporting guidelines which suggested reporting on the economic and social dimension of sustainability as well as the environmental. They tried to define the social dimension more concretely, asking questions such as the following:

º Does social signify turnover of employees, worker benefits, training?
º Surely, it would include community relationships, but is it more than just giving money to the community?
º Does it mean volunteer hours or community engagement, number of community newsletters about operations, or number of aboriginal or small businesses that are supported?
Standard setting bodies for financial reporting are collaborating with standard setting bodies for non-financial reporting (sustainability reporting) to provide an integrated, holistic report on all aspects of performance.

Now with the business and financial communities recognizing environmental and social performance as integral to economic performance, some companies are integrating their sustainability reports with their financial reports. However, unlike the past, fully integrated means more than one or two pages tacked on to the financial aspects of the report.