United Nations: Corporate reporting can contribute to 2030 Agenda

Corporate reporting can provide an essential contribution to monitoring the implementation of the 2030 Agenda for Sustainable Development, according to the UN Conference on Trade and Development (UNCTAD).

This conclusion was highlighted in an UNCTAD Secretariat Note titled "Enhancing the role of reporting in attaining the Sustainable Development Goals: Integration of environmental, social and governance information into company reporting" prepared for a meeting of UNCTAD's Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR).

ISAR, comprising accountancy experts, is holding its thirty-third session from 4-6 October.

The main topics proposed for discussion at the thirty-third session are:

(a) Practical implementation of the monitoring of compliance and enforcement of accounting and audit requirements for high-quality reporting;

(b) Enhancing the role of reporting in attaining the Sustainable Development Goals (SDGs): Integration of the environmental, social and governance information into company reporting.

According to the UNCTAD Secretariat Note, reporting on sustainability issues has the potential to enhance investment decisions, inform policymaking at national and international levels and align the expectations of both companies and civil society in the pursuit of sustainable development.

"The Sustainable Development Goals pose additional challenges and underscore the need for harmonization, comparability and integration of sustainability reporting indicators into company reporting," it said.

According to an UNCTAD press release, with the establishment of the Sustainable Development Goals last year, the accounting community now has a clear set of goals for their reporting on corporate sustainability.

But incorporating social and environmental factors into global corporate accounting remains a sizeable challenge, said UNCTAD Secretary-General Dr Mukhisa Kituyi in the press release.

"Corporate sustainability reporting can be a powerful tool to measure the contribution of business towards the SDGs," Dr Kituyi said at the UNCTAD-hosted ISAR meeting on Tuesday.

ISAR is the UN body that deals with accounting and corporate governance matters and provides assistance to developing countries and economies in transition in implementing best practices of accounting and corporate governance.

"ISAR continues to be an important partner for our efforts to mobilize public and private involvement with sustainability reporting and to achieve the SDGs," the UNCTAD Secretary-General said.

He highlighted the tremendous challenge of going from single-issue financial reporting to reporting with social, environmental, and other sustainability factors.

Dr. Kituyi cited four main tasks:

• To adopt a "multi-stakeholder" approach that reaches beyond the accounting community and includes players from policy communities at national, sub-national and international levels;
• To ensure coherence between financial, economic, social and environmental policies;
• To harmonize standards and indicators with an integrated framework; and
• To provide a worldwide structure that will help small and medium enterprises to comply with standards and indicators.

"It is not easy to set these standards, but it is more difficult to implement them, especially in developing countries," Dr. Kituyi said.

"Many countries lack the knowledge and institutions to cope with implementation," he added.

The UNCTAD Secretary-General stressed that accountancy and development communities must find "new synergies" to overcome these challenges.

According to the press release, Dr Kituyi signed a Memorandum of Understanding between UNCTAD and the International Federation of Accountants (IFAC).

The press release quoted IFAC President Olivia Kirtley as saying that the agreement was the culmination of a long relationship with UNCTAD and that she looked forward to a fruitful collaboration in the future.

The UNCTAD Secretariat Note for the ISAR meeting elaborates criteria and principles for the selection of core indicators for the Sustainable Development Goals.

It also proposes specific indicators covering the economic, environmental, social and institutional areas.

As with most sustainability reporting initiatives, such indicators are primarily focused on listed or large private companies, it noted.

"Additional work may be necessary with regard to the specific challenges in Goals-related reporting by public sector companies and small and medium-sized enterprises, as well as the capacity-building needs of developing countries or countries with economies in transition with regard to Goals-related reporting."

Further guidance and consensus-building is necessary in order to select and implement core indicators for the Goals that are able to meet the common needs of key stakeholders, it said.

According to the UNCTAD Secretariat Note, in this regard, delegates at the thirty-third session of ISAR may wish to consider the following issues for deliberation:

(a) Would harmonization of sustainability reporting in line with Goals monitoring requirements enhance the role of reporting under the 2030 Agenda?

(b) Are selected indicators in the economic, environmental, social and institutional areas correctly addressing the issue of harmonization of sustainability reporting?

(c) Is consistency required between financial and non-financial reporting for the integration of environmental, social and governance aspects into company reporting? What are the main challenges?

(d) Should corporate indicators in line with the Goals be reported at a legal entity level or at a consolidated level? How should this challenge be addressed?

(e) What are the main challenges in aligning the Goals monitoring framework and the data reported by companies? Are there good practices to be shared?

(f) How can global forums such as the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting further contribute to consensus-building on the topic of sustainability and Goals reporting?

In 2015, Member States of the United Nations adopted the 2030 Agenda for Sustainable Development, which contains 17 Sustainable Development Goals and 169 targets.

According to the UNCTAD Secretariat Note, Target 12.6 explicitly encourages companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycles.

Indicator 12.6.1 requires data on the number of companies publishing sustainability reports.

Several other indicators refer to data already being provided by many enterprises in their reports, such as on the use of energy and water, carbon dioxide emissions, waste generation and recycling, and to human resource management, gender equality and community development, among others.

UNCTAD said that company reporting may therefore be an important data source for the newly established Sustainable Development Goals monitoring framework.

As a primary source of information on company performance, corporate reporting can enrich and enhance Goals monitoring mechanisms by providing stakeholders such as Governments and capital providers with the means to assess the economic, environmental and social impacts of companies on sustainable development.

"However, to achieve this objective, further efforts are needed towards harmonization and comparability in the area of sustainability reporting," said the Secretariat Note.

According to recent UNCTAD research on the sustainability reports of large companies globally, 71 per cent refer to the Sustainability Reporting Guidelines of the Global Reporting Initiative (including the G3 and G4 guidelines), 56 per cent to certificates issued by the International Organization for Standardization and 51 per cent to the United Nations Global Compact principles.

Company reporting on the 2030 Agenda is a complex issue that requires addressing a number of challenges, which may be grouped in two levels, namely those related to the harmonization of sustainability reporting in general and those that have recently evolved with regard to aligning sustainability reporting with the Goals monitoring framework and its indicators.

The UNCTAD Secretariat Note said that it does not address the issue of whether sustainability reporting should be mandatory or voluntary.

While there is a need to define ways of how the sustainability of companies and Goals-related reporting could be encouraged and provided in a comparable and consistent manner, countries need to decide on the best ways to make it happen, it said.

By Kanaga Raja.

Source: SUNS - South North Development Monitor, #8327 Thursday 6 October 2016.