July 17, 2015
Today’s sustainability reporting model is bloated, burdensome, and broken. Its benefits do not outweigh its costs, and it should be discarded.
That was the deliberately provocative statement of the debate I moderated at Facebook’s “Sustainability@Scale” event at their Menlo Park headquarters last month. Michelle Edkins of Blackrock, Ellen Jackowski of HP, Steve Lippman of Microsoft, and Natalie Teear of PwC got into the spirit of the debate—and sometimes argued positions that were not necessarily their own.
To begin, we ran a text-message-based audience poll. Majorities in the 200-strong audience stated that they use sustainability reports to make informed decisions and to improve performance. But when asked if the reporting model is bloated, burdensome, and broken, and should be discarded, 56 percent either agreed or strongly agreed with the statement, compared to just 24 percent disagreeing or strongly disagreeing. The remaining 20 percent were neutral.
As the debate got into full swing, it was clear that the provocative question served us well by bringing key issues to the fore. This was not another dull panel on reporting.
Those in favor of the statement cited the poor quality of sustainability reporting. It is too focused on imagery and story, while the quality of the underlying data is abysmal. The lack of standardization hinders good comparability and informed decision-making, and significant issues only come to the fore as a result of “social shaming,” not as a result of thoughtful materiality assessments. The fragmentation of reporting standards—CDP, GRI, IIRC, RAFI, SASB, and all—makes for an overwhelming and confusing model.
Those against the statement underlined both the value of reporting and the evolutionary phase we are now in. Reporting helps build trust with stakeholders, and the fragmented standards actually allow for significant flexibility and innovation. And substantially increased transparency on key topics—such as diversity, privacy, and climate change—has driven progress on challenging issues, many of them material to investors. Improved data visualization methods are about to make reports more engaging.
To close the debate, we repeated the audience poll, and the results were reversed. This time, just 38 percent either agreed or strongly agreed with the statement, compared to 47 percent disagreeing or strongly disagreeing. The remaining 15 percent were neutral.
Spending an hour talking about today’s reporting model improves its standing, albeit with significant dissent. Why might this be?
I think three key points highlighted that today’s reality is much more nuanced than the deliberately provocative debate statement suggests.
First, we have come a very long way on sustainability reporting over the past 15 years. While by no means perfect, we know more about company sustainability performance today than at any point in our history.
Second, today’s sustainability reporting model works well in the context of the constraints of what reporting alone can and can’t accomplish. No one ever claimed reporting alone would save the world.
Finally (and for me this is the key point), the reporting model is evolving, and it is in our collective power—as companies, report users, and standards setters—to continue that evolution.
Today’s reporting model certainly has bloated and burdensome features, but it has trim and buff features as well. The path forward is to improve on what we have, not to discard it altogether.
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