Sustainability Reporting: Earth in the Balance Sheet

Sustainability reports offer plenty of eye candy, but can they actually help managers make better decisions?

Proventia offers software that does precisely that, either in a stand-alone version or in a version that works with performance-management software from Hyperion (recently acquired by Oracle). Oracle, SAP, SAS Institute, and other software companies see opportunities in integrating financial and nonfinancial data into systems that address sustainability and related reporting needs such as compliance and governance.

“Once companies start to capture this data more efficiently,” says John O’Rourke, senior director of product marketing at Oracle, “they realize that it can function like ‘traditional’ performance management, in that it gives them current information they can actually use to make decisions about emissions, energy usage, and other critical business matters.”

Valtonen says that one client, a plastic-packaging manufacturer, gathered data on the energy used in three different modes of manufacture and realized that one technique was 12 times more efficient than another, prompting the company to embrace the superior method more widely.

Patricia Finn, vice president of Global Public Policy for SAS, says that while some of the company’s customers are applying performance-management and business-intelligence software to sustainability reporting, “the uptake has been slow.” SAS is working with the Organization for Economic Cooperation and Development and the World Economic Forum to develop a common reporting standard or set of metrics, which Finn believes will lead to a greater embrace of IT — and better reporting. “If one company plants a tree for every car it sells, and another cuts its water use by 25 percent, who’s more green?” she says. “There is a lot of gimmickry out there right now.”

Investors Want More Data

While the GRI framework is widely used, it is not an officially sanctioned standard. Nonetheless, the GRI may further propel the quality of sustainability reporting through the addition of XBRL (extensible business reporting language), which facilitates the gathering and analysis of business-performance data by assigning a “tag” (a small piece of code) to each piece of data.

The GRI has created an XBRL taxonomy for the many indicators itemized in its sustainability framework. This will greatly aid a more automated approach to sustainability reporting in much the same way that the SEC believes XBRL will aid the production and dissemination of financial reports.

In fact, the use of XBRL for sustainability reporting may drive a nascent but promising trend: the combining of standard financial data with sustainability data in a single annual report. A handful of companies already do this, and Eric Israel, a managing director at KPMG, believes more will follow suit. “There is a serious need for IT support to make this happen,” he says. “It’s missing now, but as expectations change and sustainability reporting becomes less about PR and more about satisfying investors’ need for data, more automation will become essential.”

Although that might seem to be a mandate for a company’s chief information officer, Israel believes that CFOs may well drive the trend. As reports encompass more data, he says, “you have to ask whether a public-relations person or an environmental-affairs person is best qualified to verify whether the data is accurate and up-to-date. That’s really an area of expertise for CFOs and finance departments.” He expects to see CFOs play a stronger role going forward.

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