Commentary

Disparity Between Impact Initiatives Must End

Professor Carol A Adams of Durham University Business School says it’s time for consolidation on impact and SDG reporting.

I’ve spent the last couple of days at the UNCTAD ISAR conference where the focus has been on reporting on sustainability and the UN Sustainable Development Goals (SDGs). This is an important conference where regulators and others can share and learn from their approaches and experiences. Questions and comments from the audience and discussion with delegates revealed that significant confusion remains about the future of sustainability reporting standard setting and the role of guidance and frameworks from various UN bodies.

UNCTAD has developed Guidance on Core Indicators for entity reporting on contribution towards implementation of the SDGs. The UN Global Compact has produced a new questionnaire for organisations completing a Communication on Progress towards its Ten Principles. The Guidebook accompanying the UNGC questionnaire usefully links the questions to other sources, particularly the standards of the Global Reporting Initiative (GRI). The UNDP has developed SDG Impact Standards for Enterprises which aim to help organisations integrate sustainability and contributing to the SDGs.

Delivering on SDG commitments

Some national regulators have realised that implementing the forthcoming ISSB standards alone will not help their governments meet their commitments to the SDGs, nor will it meet all the needs of investors. Many are unaware that the GRI standards set by the GSSB are developed through a rigorous process on a par with accounting standard setters. Some are seeing the need for both GRI and ISSB Standards.

There is now one key body, the ISSB, addressing the financial impact of sustainability on an organisation, along with task forces such as the TNFD. However, there are several initiatives addressing the impact of the organisation on society and the environment. Whilst this underscores the importance of impact reporting and action to enhance overall contribution to the SDGs, the disparity across these initiatives limits their overall effectiveness. Alignment and collaboration in the spirit of SDG 17 is called for.

The various UN bodies can rightly claim they own the SDGs and that their various initiatives have been important in increasing corporate accountability for social and environmental impacts. But it’s time for the continued disparity between these impact initiatives to be addressed. The initiatives are partially aligned and largely subsets of issues and topics covered by GRI standards, but with some lack of consistency. They are frameworks or guidance that don’t go through the rigorous approach of a standard setter and so cannot be mandated by regulators.

Power through alignment

How much more powerful would it be for these initiatives to align more closely with each other and the GRI standards? This would facilitate more jurisdictions adopting GRI standards alongside the ISSB’s financial materiality standards. The European Commission has already adopted GRI standards through EFRAG’s work, and other UNCTAD ISAR delegates, such as from Kenya, also spoke of mandatory requirements based on GRI standards. It is not a purpose of the ISSB standards to enhance action and accountability for corporate impacts on sustainable development. Impact reporting and action to contribute to the SDGs will not follow from the adoption of ISSB standards.

UNCTAD, the UNGC and UNDP could encourage their regulatory, corporate and public agency networks to use their respective guidance and tools to work towards reporting using the GRI standards. This would assist in building capacity prior to mandatory enforcement of impact reporting. It would also lead to improvements in SDG reporting which is much needed according to KPMG’s 2022 survey of sustainability reporting. The survey shows an increase in both GRI and TCFD reporting, the latter of which will be further strengthened by the ISSB’s proposed IFRS S2 standard.

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