History of Sustainability Reporting

Sustainability reporting is an activity that many EnergyElephant users undertake, along with thousands of other organisations on a global scale. But when did sustainability reporting begin and become a well known corporate practice? The answer is not as long ago as you may think.

Historical progress of reporting, from parchment and quill; to pen and paper; to computer based

Sustainability and ESG (Environmental, Social, and Governance) reporting is an activity that many EnergyElephant users undertake, along with thousands of other organisations on a global scale. But when did sustainability reporting begin and become a well known corporate practice? The answer is not as long ago as you may think.

In the early 1990s environmental concern and demands for sustainability became increasingly relevant in discourses in many sectors of society, including economic and corporate spheres. There was a shift towards developing robust frameworks for sustainability. International summits such as UN Summit on the Environment and Development, held in Rio de Janeiro in 1992, and in Johannesburg in 2002 played an important role in the emergence and development of the concepts, of sustainability and sustainable development.

These summits influenced

1. The adoption of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992,

2. The adoption of the Kyoto Protocol in 1997.

The Convention encouraged industrialised countries to stabilise their GHG emissions, and the Protocol committed them to undertaking this, through national strategy.

A major contribution to sustainability frameworks in the corporate sphere was conceived in 1994 by Elkington, it was known as “The Triple Bottom Line”. It was a sustainability framework that aimed to balance a company’s social, environmental and economic impact. The triple bottom line concept was adopted by many corporations in the late 1990’s as it offered a first step for companies to balance their environmental and social responsibilities with their economic goals. Elkington developed the concept as he noted the shift towards a sustainable business paradigm, this was intended to be a tool to aid corporations in this shift.

As this shift towards sustainable development and business occurred, the beginning of what would become sustainability (and ESG) reporting began to develop. The first separate environmental reports were published in 1989, by several of the largest multinational companies. Every three years, starting in 1993,  financial services corporation - KPMG has assessed across several countries on how many of the top 100 largest companies in those countries have produced sustainability reports. Figure 1 gives an overview of KPMGs assessment from 1993 to 2002, showing a fluctuating but generally increasing trend across all 11 countries. In 2001, Morhardt also acknowledged the increasing number of company sustainability reports, as well as the increasing availability of these reports electronically via the Internet.

As more corporations began to produce sustainability reports, there was a need for a tool to provide a framework and standards which companies could report against. The Global Reporting Initiative (GRI) was founded in 1997, as the ‘first accountability mechanism to ensure companies adhere to responsible environmental conduct principles’. By 2003, nearly one third of the sustainability reports produced by companies were following the format presented by the GRI. The discussion of third party auditing of sustainability reports also entered the discourse in the early 2000s to ensure quality and substantiation.

The GRI as an organisation went on to dedicate itself to sustainability reporting and in 2010, the United Nations recognized the GRI guidelines as the basis for sustainability reporting. In 2014, the GRI set up the Global Sustainability Standards Board (GSSB) and in 2016, the GRI published its first sustainability reporting standard set. Corporations used these standards as a way of creating reports that disclose their sustainability activities, standards allowed for the information to be comparable, therefore of use to investors and other stakeholders. Further initiatives and standards were developed to aid corporations in disclosing their sustainability and environmental activities and impacts, some of which are depicted below. However, sustainability reporting was still a voluntary endeavour, it was a social expectation, rather than a legally binding expectation.

1. 1997 - Global Reporting Initiative (GRI):

  • International organisation founded in 1997 that provides common reporting language to help other organisations communicate their impacts.

2. 1998 - Greenhouse Gas Protocol:

  • Provides standardised frameworks on a global scale for GHG emissions measuring and mitigation.

3. 2000 - Carbon Disclosure Project (CDP):

  • Non-profit that aids companies in disclosing their environmental impacts.

4. 2010 - International Organisation for Standardisation Guidance on Social Responsibility (ISO 26000):

  • Developed to help organisations address social responsibilities and contribute to sustainable development.

5. 2011 - Sustainability Accounting Standards Board (SASB):

  • A non-profit organisation that designs sustainability accounting standards.

6. 2015 - Sustainable Development Goals (SDGs):

  • Seven interlinked goals that aim to promote sustainable development on a global scale.

7. 2015 - Science-Based Targets Initiative (SBTi):

  • Provides help and assesses science-based targets for companies.

8. 2015 - Task Force on Climate-Related Financial Disclosures (TCFD):

  • A framework aimed at public companies in relation to climate-related financial risk disclosures.

However, the landscape of sustainability reporting changed significantly, when legislation was introduced by the EU in 2014. The EU adopted Directive 2014/95/EU, also known as the Non-Financial Reporting Directive (NFRD). It addresses the rules surrounding the disclosure of non-financial information by approximately 11,700 large public-interest companies, including banks, insurance companies and other listed companies. This directive was developed as the first legally binding obligation for corporations to report on non-financial information, including social responsibility and sustainability information. This directive aimed to regulate the reporting of sustainability information, similar to how financial reporting is regulated. This would in turn ensure that sustainability reports would become more comparable and transparent, thus providing critical and reliable information on sustainability issues to both investors and other stakeholders.

However, on April 21st 2021 the EU Commission adopted a proposal to amend the NFRD and extend its scope. This proposal was referred to as the Corporate Sustainability reporting Directive (CSRD), and will affect up to 50,000 organisations across the EU. It introduces several new requirements, including the required limited assurance of information, digital tagging of reports, and detailed mandatory reporting requirements, with an aim to further increase the comparability of sustainability reports. Another key element of the CSRD is its terminology, the EU replacing ‘non-financial’ with ‘sustainability reporting’ is a key message in conveying the importance of sustainability issues. It infers that corporations require a greater understanding of the aim of sustainability reporting, and why they are carrying it out.

Sustainability reporting has come a long way in the past 20+ years, and the landscape continues to change. A greater imperative has been placed on companies and organisations to adhere to frameworks in order to accurately disclose their impacts on the climate. It is a major step in reducing greenhouse gas emissions on both a local and global scale and in future more and more companies will move towards these reporting frameworks in much the same way they currently report on their accounts and finances.