Two influential documents – the Rio+20 negotiating text and the recommendations of the U.N. secretary general’s High Level Panel on Global Sustainability – both propose tighter sustainability reporting requirements for businesses, according to Chatham House fellow Paul Hohnen, writing in the Guardian.
In “Resilient People, Resilient Planet – A Future Worth Choosing,” published yesterday, the U.N. panel said one idea to consider is mandatory reporting by companies with market caps over $100 million. The paper also said that business groups should work with governments and international agencies to come up with a framework covering sustainable development reporting.
Zero Draft, the negotiating text for the U.N. Conference on Sustainable Development (known as Rio+20), calls for global policy to require all listed and large private companies to integrate sustainability into their reporting. According to Hohnen – formerly a diplomat, director of Greenpeace International and director of the Global Reporting Initiative – the language in the text echoes that which emerged from the 1992 Rio de Janeiro and 2002 Johannesburg summits, encouraging voluntary reporting.
The fate of these recommendations during negotiations in the next few months is “anyone’s guess,” Hohnen says. But in a new Chatham House paper, he argues that they are just the right questions for governments to be discussing now.
He says that sustainability reporting as practiced today suffers from several problems that need to be addressed. Among them, only a small proportion of multinationals currently report on their sustainability impacts, and the reporting varies greatly in quality.
Hohnen says that sustainability reporting will not reach its full potential without government mandates, at least for the biggest companies. He says the best way to do this would be for the participants at Rio+20 to adopt a “report or explain” framework, meaning that all governments would agree to require large companies to either disclose sustainability performance or explain why they don’t. Governments could enact this type of system – already in place in Denmark – through policy and regulation or through stock exchange listing requirements.
Earlier this month the Brazilian stock exchange, BM&FBOVESPA, recommended that its listed companies follow a report-or-explain protocol. And last year environmental groups in the U.K. made their case for the value of mandatory carbon reporting after a government study put a price tag of about $9.8 billion (£6 billion) for the cost of such a reporting policy to British businesses over ten years.