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Companies have at last been given guidance on the extent to which their
sustainability reports should cover the outer reaches of their
operations.
A set of boundary protocols produced by the Global Reporting Initiative lays out for the first time how firms should decide whether to cover the social impacts of non-core parts of their business such as subsidiaries, suppliers, partners and joint ventures.
Apart from 'materiality' - the question of what subjects should be covered - the issue of 'boundaries' has become what the GRI cites as 'one of the toughest questions associated with sustainability reporting'.
The GRI says that, while many companies have taken a default position of reporting only on those parts of their business under their legal ownership and direct control, others 'have begun to experiment with expanding their reporting boundaries to better reflect the unique sustainability footprint of their organization and its activities'.
Work on the protocol, funded by the Dutch government, began in 2003. It has been drawn up
by a working group including representatives from ABB, Telefonica, Ford, Canon, the Dreyfus Corporation and General Motors.
It is now available for public use after a long consultation period but is likely to be modified in light of comment from companies using it.
The protocol says reporting boundaries encompass those operations where a company has 'control' or 'significant influence'. It defines control as being 'the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities', and says this could include, for example, a subsidiary or joint venture where the reporting body has voting rights.
It defines significant influence as 'the power to participate in the financial and operating policy decisions of the entity even if there is no control over those policies', for example in joint ventures where the company lacks majority voting rights but has operational control.
Once a company has decided the entities over which it has significant influence or control, it should then look at whether they have significant impacts.
If a company has control over an entity that has significant impacts, then the report should include operational data - such as key performance indicators - on the entity.
If it has significant influence over an entity that has significant impacts, it doesn't need to produce operational data but should publish information on systems the entity has in place for managing its social and environmental performance.
If there is no control and no significant influence but the entity has significant impacts, the company should produce a narrative on the strategy it is adopting in relation to that entity and the dilemmas it faces in that area.
If there is no control, no significant influence and no significant impacts, then reporting is not needed.
A set of boundary protocols produced by the Global Reporting Initiative lays out for the first time how firms should decide whether to cover the social impacts of non-core parts of their business such as subsidiaries, suppliers, partners and joint ventures.
Apart from 'materiality' - the question of what subjects should be covered - the issue of 'boundaries' has become what the GRI cites as 'one of the toughest questions associated with sustainability reporting'.
The GRI says that, while many companies have taken a default position of reporting only on those parts of their business under their legal ownership and direct control, others 'have begun to experiment with expanding their reporting boundaries to better reflect the unique sustainability footprint of their organization and its activities'.
Work on the protocol, funded by the Dutch government, began in 2003. It has been drawn up
by a working group including representatives from ABB, Telefonica, Ford, Canon, the Dreyfus Corporation and General Motors.
It is now available for public use after a long consultation period but is likely to be modified in light of comment from companies using it.
The protocol says reporting boundaries encompass those operations where a company has 'control' or 'significant influence'. It defines control as being 'the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities', and says this could include, for example, a subsidiary or joint venture where the reporting body has voting rights.
It defines significant influence as 'the power to participate in the financial and operating policy decisions of the entity even if there is no control over those policies', for example in joint ventures where the company lacks majority voting rights but has operational control.
Once a company has decided the entities over which it has significant influence or control, it should then look at whether they have significant impacts.
If a company has control over an entity that has significant impacts, then the report should include operational data - such as key performance indicators - on the entity.
If it has significant influence over an entity that has significant impacts, it doesn't need to produce operational data but should publish information on systems the entity has in place for managing its social and environmental performance.
If there is no control and no significant influence but the entity has significant impacts, the company should produce a narrative on the strategy it is adopting in relation to that entity and the dilemmas it faces in that area.
If there is no control, no significant influence and no significant impacts, then reporting is not needed.
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