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Shareholders want to invest in profitable companies, so they demand accurate and representative corporate financial statements. An increasing number of corporate stakeholders, however, are beginning to evaluate companies on other dimensions.
There has been a growing demand over the past 10 years for information on corporate behavior, which could include environmental impact, employee health and safety initiatives, community development, supply-chain practices, and a host of other topics. A lot of these issues are addressed through sustainability reporting.
Sustainability reporting usually covers the nonfinancial factors that have potential impact on future performance, income generation, and value preservation.1 Often a companion to financial reporting, sustainability reports symbolize an ever-growing demand by stakeholders for more transparency. Although there are no guidelines comparable to GAAP for the form and content of sustainability reports, a steadily increasing number of companies are providing stand-alone reports. This article provides some background on sustainability reporting and offers suggestions for CPAs who would like to provide assurance services related to sustainability reports.
Sustainability Reporting
Sustainability reports include terms such as corporate social responsibility (CSR), environmental reporting, and triple-bottom line (economic, environmental, and social performance). "Sustainability," though, is the most frequently used term. Sustainability encompasses a wide range of corporate initiatives related to environmental impacts, employee programs for healthier living, community development programs, customer safety programs, and fair trade practices. Varied stakeholders, such as socially responsible investors, consumers of "green" products, and community groups show interest in these issues. As evidence of this trend, professionally managed assets invested with a social responsibility focus have grown dramatically over the last 10 years.2
Efforts to establish standards for this kind of reporting are ongoing. In 1997, the Boston-based nonprofit Coalition for Environmentally Responsible Economies (CERES) started the Global Reporting Initiative (GRI), with the United Nations Environment Programme joining as a partner in 1999. The GRI released its first sustainability reporting framework and guidelines in 2000, .and its G2 revision in 2002.1 GRI's reporting framework outlines principles and performance indicators thai organizations can use to measure and report on six categories: environmental, human rights, labor practices and decent work, society, product responsibility, and economic.4 The framework is in its third generation, introduced in 2006 and updated as G3.I in March 2011,s G3.1 includes expanded guidance for reporting...