Are companies ignoring International Management Standards in sustainability reporting?

NOVEMBER 11, 2015

A new Nelson Mandela Metropolitan University (NMMU) Business School study of sustainability reports suggests that SA companies may be ignoring international guidelines for sustainability reporting.

NMMU Business School MBA faculty member Heidi Janse van Rensburg and Prof. Miemie Struwig of the NMMU Faculty of Business and Economic Sciences examined the sustainability reports of five South African listed companies, assessing the reporting practises of five JSE-listed companies to develop a framework of standards and indicators for sustainability reporting.

“If sustainability reporting in South African companies is to maintain its integrity and value as an analytical reflection of corporate practises, we need to critically assess reporting practices against international standards and practices,” said Janse Van Rensburg.

Janse van Rensburg said that growing social and environmental injustices, high profile corporate scandals and the global financial crises have resulted in pressure for more comprehensive sustainability reporting.

Sustainability, also referred to as social responsibility, corporate citizenship, sustainable development and similar labels, must be applied on an ‘apply or explain’ basis since the Johannesburg Stock Exchange incorporated the King Report on Governance for South Africa 2009 (King III) into its listing requirements.

”Our exploratory study found that integrated reporting has increased both the quantity and the qualitative dimension of sustainability reporting in South Africa, but these companies did not fully reflect the guidance provided by international sustainability management standards.

“Currently, there is no consensus on the meaning and definition of the term sustainability – nor a common shared framework of criteria or indicators for companies to adopt.

“For the most part, superficial guidance on corporate sustainability refers only to three dimensions of the triple bottom line concept of planet, people and prosperity. This is problematic because businesses also have an impact on the world in areas of capital such as financial, intellectual, built, and eco-system services.”

The South African research cases primarily use two frameworks which are compliance driven to meet JSE requirements and the sustainability reporting guidelines of good corporate governance as recommended by King III.

“In terms of voluntary initiatives, on the other hand, the five researched companies reported only on the King Code, with a few also reporting on the Consumer Protection Bill.

“Ethics and integrity were reported on by the majority of companies, with some reporting on its organisational profile. For the most part, voluntary initiatives - which include material aspects and boundaries, as well as integrated indicators of sustainability – were neglected.

“Companies are required only to report on an ‘apply or explain’ basis, suggesting that a trade-off may well occur between costs and benefits when determining optimal levels of disclosure.

“The recommendation is for an additional set of disclosures to be included that would aid in the assessment of the sustainability of a company.”

The study’s recommendation on additional disclosures for sustainability reporting include:

  • The adoption of voluntary initiatives, such as the Consumer Protection Bill, that go beyond governmental regulation
  • The adoption of international sustainability management standards, such as ISO 26000 and United National Guiding Principles on Business and Human Rights
  • Information on material aspects and boundaries of sustainability reports
  • The use of integrated indicators, such as eco-efficiency, socio-efficiency and ecological equity.

“Previous research has shown that the adoption of global standards stimulate businesses to step up their sustainability reporting activities and have a distinctive role to play in addition to domestic legislation.” 

Janse van Rensburg said an integrated set of indicators would also allow the separate elements of sustainability to be brought together and assembled in a coherent picture, which would better enable analysis of the dynamic relationships between standards and indicators.