Research report on sustainability reporting in Canada

Earlier this week Benita Steyn asked me if I knew of any research relating to “enterprise strategy in Canada,” for use in her current research. Although information on that specific area seems light on the ground at this stage, I did recall the detailed research report conducted two years ago by our national body, the Certified General Accountants Association of Canada.

From its June 7, 2005, media release: “There is a widely recognized global movement towards sustainability reporting,” says Rock Lefebvre, FCGA, vice-president, research and standards, “But Canadian companies are relatively new to the game. We’re nowhere close to the point where Canadians can expect mandatory reporting guidelines.” Lefebvre explains that implementation of globally accepted guidelines, such as those provided by the Global Reporting Initiative (GRI)1, together with third-party assurance, will go far in addressing credibility concerns.

Following is the published fact sheet, as well as links to PDF files of the full report (in three parts). Thanks to my colleague Taylore Ashlie, director, communications, Certified General Accountants Association of Canada, for pointing me in the right direction/time period for this report.

Measuring Up: A Study on Sustainability Reporting in Canada
from the Certified General Accountants Association of Canada

Corporate Sustainability Reporting Fact Sheet

Report from the Certified General Accountants Association of Canada Reveals Inconsistencies in Canadian Sustainability Reporting Practices (June 2005)

In an effort to advance understanding of sustainability reporting and advocate for transparency in reporting, in the fall of 2004, the Certified General Accountants Association of Canada, in partnership with the Certified General Accountants Association of Canada’s Research Foundation, commissioned its first national survey on the practice of sustainability reporting in Canada. Researchers analysed survey results of more than 200 companies listed on the Toronto Stock Exchange and TSX Venture Exchange. The results are considered to be accurate within plus or minus 5.5 percentage points, 9 times out of 10.

Key Findings

Corporate sustainability reporting growing in Canada

• Half (49.8%) of the companies surveyed provide some coverage of their social or environmental performance.
• 18.4% of all companies produce a dedicated sustainability report, while approximately 5% spend more than $100,000 annually to report on sustainability issues.

Stakeholders driving sustainability reporting

• Regulatory requirements (49.5% of respondents), stakeholder pressure (21.4% of respondents), and corporate image objectives (12.0% of respondents) most influence the decision to report on corporate sustainability.

Despite the growth in sustainability reporting, companies still taking a traditional approach to reporting

• Shareholders continue to rank as the most important stakeholders when reporting, with 99.0% of respondents ranking shareholders as one of their primary stakeholders.
• On average, 68.8% of reporting budgets are devoted to reporting on financial performance, while only 4.0% is spent reporting on sustainability issues.
• Only 15.5% of respondents plan on increasing the amount spent on reporting sustainability performance, while 16.0% of non-reporters plan to have some coverage of sustainability issues in the near future.

Issues with sustainability reporting practices and guidelines

• Added cost and excessive reporting leading to information overload were two of the main reasons why organizations have not adopted a comprehensive sustainability reporting function.
• Although almost half (48.6%) of sustainability reporters have adopted a comprehensive sustainability reporting program, lack of credibility of reports (31.4%) is the biggest issue for members of this group.

Larger companies more likely to embrace sustainability reporting than smaller ones

• Over half (55.9%) of the companies with a market capitalization greater than $1 billion currently issue an integrated annual report or dedicated sustainability report.
• Smaller companies are less likely to produce a dedicated sustainability report or provide coverage of their non-financial performance.

Establishing guidelines through the Global Reporting Initiative (GRI)1

• Only 24.8% of respondents are aware of the initiative. Of those that are aware of the GRI, more than 75 per cent support the initiative.
• 43.8% of those that are aware of the GRI support adoption of the GRI’s Sustainability Reporting Guidelines. Support for adoption of the GRI guidelines is much lower among larger companies and those more likely familiar with the Guidelines, suggesting that the market is not yet ready for mandatory sustainability reporting standards.
• The GRI’s Guidelines represent the best approach for achieving the goal of standardized sustainability reporting. Support for this initiative is confirmed by the more than 650 companies worldwide that currently report using these Guidelines.
• Current regulatory requirements, especially with new guidance for the Management Discussion and Analysis (MD&A), serve as a positive minimum standard for disclosure of sustainability issues for reporting issuers, especially smaller companies.

Key Recommendations

The current corporate environment places increasing pressure on companies to improve their accountability and corporate governance. Key recommendations include:

• Globally accepted sustainability reporting guidelines are necessary to maintain efficient capital markets and allow for comparable, consistent, and credible reporting.
• Reporting guidelines must be efficient to ensure reporting is not too costly or over-burdensome for stakeholders; and flexible to accommodate the diverse needs of stakeholders and companies operating in various industries. They should remain voluntary, at least in the short-term, to gain from the experiences of reporters and to allow companies to report to the extent market forces deem necessary.
• Companies must take steps to improve the credibility of their reports and avoid problems of “greenwashing” associated with sustainability reporting. Third-party verification or assurance offers the best method for improving credibility.
• For those companies that go beyond the regulatory minimum, to improve comparability, GRI Guidelines should become a mandatory requirement for sustainability reporting.
• In addition to business, governments, and regulators, society has a role to play in driving corporate social responsibility and corporate sustainability reporting.

Measuring Up: A Study on Sustainability Reporting in Canada
(Part 1)
[PDF — 523 K]
Measuring Up: A Study on Sustainability Reporting in Canada
(Part 2)
[PDF — 2.1 MB]
Measuring Up: A Study on Sustainability Reporting in Canada
(Part 3)
[PDF — 548 K]

(To read the report online, access www.cga-canada.org, visit the Advocacy and Research section in the top navigation bar, then from Selected Publications, access: 2005-06-07, Measuring Up: A Study on Sustainability Reporting in Canada.)

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One Reply to “Research report on sustainability reporting in Canada”

  1. Judy, you are doing almost as well as your dedicated business researcher, Greg, in uncovering hidden information! Thanks for this–it is not only my master’s student Lynne who is working on this topic, but also a previous colleague at Univ Pretoria, Estelle de Beer. (You might have seen her earlier post re the Grunigs as well as the King Report). Estelle is doing her doctoral thesis on the subject of strategy, corporate governance and sustainability. I will alert her to this post, because I know that today she is sitting in on the 60-strong committee meeting (chaired by her supervisor, Judge Merwyn King) that is developing the framework for the King 3 report on Corporate Governance for South Africa, to see the light in the next year. (What I would have given to be a little bird on the wall in that meeting today!)

    When I read the King 2 report the first time a few years ago, I got palpitations. It was though I was reading a document on strategic stakeholder management. I put it on the reading list of my masters students straight away and it has been there ever since (MTech in PR Management at the Cape Peninsula University of Technology). When King 3 comes out, we will share it with you here. The King Reports are widely considered to be some of (if not the best) of its kind in the world (because of its strong emphasis on stakeholders–read communication).
    BS

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