Global Reporting Initiative Aims for High Standards

By Donald Sutherland

BOSTON, Massachusetts, January 19, 2000 (ENS) - Twenty-one international companies are participating in the first pilot testing of a program for reporting corporate environmental sustainability - the Global Reporting Initiative.

The program encourages companies to adopt and publicize environmentally sound practices through the use of standardized environmental financial reports.

An increasing number of corporations are seeing the value of environmental and sustainability reporting. A study by the Institute for Environmental Management and the accounting firm KPMG shows over 35 percent of the world's 250 largest corporations are voluntarily releasing green reports to the public to promote corporate environmental performance, and to attract customers and investors.

The Global Reporting Initiative (GRI) was established in 1997 by the non-profit Coalition for Environmentally Responsible Economies (CERES) in an effort to develop a worldwide format for corporate sustainability reporting.

GRI relies on the active participation of corporations, non-governmental organizations, international organizations and United Nations agencies, consultants, accountancy organizations, business associations, universities and other stakeholders from around the world.

factory

Plastic cups, nylon carpets, polyethylene ice chests and hundreds of other products are made from petrochemicals produced at Sunoco's refineries and chemical plants. Sunoco was the first Fortune 500 company to endorse the CERES Principles - a comprehensive environmental code of conduct for corporations. (Photo courtesy Sunoco)
The first GRI Sustainability Reporting Guidelines were released for pilot testing in March 1999. Baxter International Inc, the Body Shop, British Airways, Electrolux, Royal Dutch Shell, Sunoco, Procter and Gamble, General Motors, Ford Motor Co. and Bristol Myers Squibb are among the companies now using the GRIís Sustainability Reporting Guidelines.

Eventually, the Global Reporting Initiative hopes to elevate corporate sustainable development reporting to the same level of general acceptance and practice now found in financial reporting.

The companies are responding well to the ideals behind the GRI, but some are finding the actual paperwork problematic, particularly where it does not coincide with reporting guidelines already in place.

"We see value in the GRI and what it's trying to do with guidelines for sustainability reporting components - social, economic and environmental - particularly for a global company like ourselves, but it still has a long way to go," says Verie Sandborg, manager of corporate environment, health and safety for Baxter International Inc., a global medical products and services company. "The particular guideline questions aren't flexible enough to accommodate our style of region and division reporting, but we support the GRI going further then just environmental reporting," she says.

So far, the U.S. is the only country to require publicly traded corporations to file significant environmental material expense reports, both quarterly and annually. These companies must provide this information to shareholders under U.S. Securities and Exchange Commission (SEC) regulations, including filing an SEC 10-K annual report.

"In 1992, we responded to stakeholders' demands to report on corporate progress on environmental initiatives, and we made internal reports public information with a goal to be state of the art in environmental programs," says Sandborg. "We aren't going to change our environmental SEC financial reporting with the GRI - at least right now - but you have to be sensitive to what stakeholders want, and the main audience is in a different place at this point for a combined GRI and SEC 10-K annual report."

The Global Reporting Initiative is reviewing all current corporate environmental, social and economic reporting mandates to avoid duplication in the Sustainability Reporting Guidelines, but is not attempting to replace or supersede the U.S. SEC's 10-K financial environmental filing regulations.

"GRI is well aware of the U.S. SEC's S-K financial environmental disclosure regulations. But we made a conscious decision to not get involved with the SEC and U.S. environmental Generally Accepted Accounting Principles currently in place for corporate filing of significant environmental material expenses," says Allan Willis, a representative of the Canadian Institute of Chartered Accountants (CICA) on the GRI Steering Committee.

Treschow

Michael Treschow, president and CEO of Electrolux says the home products company will lead the development of environmentally sound products and processes and work to create demand for them. (Photo courtesy Electrolux)
"The current SEC 10-K filing of significant environmental material expenses is not reader friendly, and is filed with a volume of material," says Willis. "But it may be a possible to interface the SEC 10-K report with the GRI ten years down the line."

Independent verification of environmental and sustainability reports is a major issue to be reviewed by the GRI this year. "GRI sees many companies charging to make environmental disclosures without generally accepted accounting principles and that makes it hard to see if it isn't just green washing," says Willis.

"We are working to find a way through existing standards such as the International Organization for Standardization's environmental management standard ISO 14000," says Rob Graff, an associate scientist with the nonprofit research and consulting organization Tellus Institute, which sits on the GRI Steering Committee. "Some countries want these internal reporting requirements to be made external," says Graff.

Financial accounting standards have been in place for over 60 years in the U.S., but are still not uniformly applied, Graff says. Serious environmental financial reporting has only been going on for the last five to 10 years, he says.

In other countries, environmental reporting is even more patchy. There are general government proclamations for corporate disclosure of environmental performance in the Netherlands, Denmark and Thailand, for example, but no laws enforce these recommendations.

"GRI is trying to figure out a general consensus of an environmental performance report, and that is ambitious enough," says Willis. In addition to the environmental reporting, GRI is conducting social and economic reporting, all on a voluntary basis.

It will take time to work out the bugs in the Global Reporting Initiative, according to members of the GRI Steering Committee, but they say there is a desire for uniformity among shareholders.

"The GRI has more work then ever before," says Judy Kuszewski, director of corporate programs for the Coalition for Environmentally Responsible Economies. CERES was recently awarded more than $3 million in grant funds from the Turner Foundationís donation to the United Nation Environmental Program, Kuszewski says, which should help GRIís parent group expand its efforts to standardize corporate environmental reporting and promote the transformation of environmental management within firms.

Since its formation in 1989, CERES has pioneered innovative, practical approaches toward encouraging greater corporate responsibility on environmental issues. Over the past 10 years, the CERES coalition brought 15 major U.S. environmental groups together with an array of socially responsible investors and public pension funds. The investors, representing more than $150 billion in invested capital, range from the California and New York City public pension systems to an assemblage of more than 200 Protestant denominations and Catholic orders.

The revised GRI Sustainability Reporting Guidelines are expected to be released in early June 2000.

Find out more online at: http://www.globalreporting.org/