Section 10.1: Corporate governance and sustainability
Section 10.2: Sustainability reporting
Section 10.3: Global reporting initiative (GRI)
Section 10.4: Evaluation of sustainability performance
While sustainability reporting has increased rapidly and many large companies now report on their triple bottom line, it is important to evaluate if what companies do has a meaningful impact. To do so, evaluation of sustainability actions and performance is important. Evaluation can be done internally within firms, but also externally by other stakeholders.
Effective evaluation ensures that sustainability actions result in long-term, beneficial outcomes.
A survey by Accenture and the UN Global Compact of 766 CEOs in 2011 identified that an overwhelming 96% believe that sustainability principles should be fully embedded into a company’s strategy and daily operations. The development and integration of measures of sustainability metrics, as well as evaluation methods to track and record progress is crucial for this to materialize.
Sustainability performance evaluation can be distinctly classified into two groups – Internal evaluation methods and external evaluation methods. The summary table below presents some of these methods.
Internal Evaluation Methods
Internal audits
Internal audits provide management with a reflection of the company’s operations. It allows management to get comfort over their operational data before it is disclosed for public scrutiny. Internal audit procedures may reflect issues that can be re-mediated before data is made public. It also leverages resources already familiar with the company’s data and financial systems.
Spot checks
Spot checks are a simple method of day-to-day evaluation of sustainability performance. Spot checks are done without much prior notice. This is done to ensure checks spontaneous and effective in detecting operational issues that may affect the company’s sustainability objectives.
Sustainability reporting structure
An established sustainability reporting structure provides a standardized method of reporting issues, identify potential risks, and track actions to mitigate these issues and risks. The absence of a standardized sustainability reporting framework makes it difficult for management to determine what information is material to the company and how it should be presented to in its sustainability reports.
“In Accordance” GRI reporting
A company preparing a report in accordance with the GRI Standards can choose one of two options (Core or Comprehensive), depending on the degree to which the GRI Standards have been applied. For each option, there is a corresponding claim, or statement of use, that the company is required to include in the report. These claims have set wording. The criteria to claim that a report has been prepared in accordance with the GRI Standards can be found here.
An organization is required to notify GRI when it makes an in accordance claim in any report or published materials. This creates consistency between all reports produced and assessed under GRI guidelines.
External Evaluation Methods
External audits
External audits involves the examination of truths and fairness of sustainability statements of company by an external auditor who is independent of the organization, against a given criteria or framework.
External audits serves to provide credible assurance to the claims made by the company. It functions as a measure to boost stakeholder confidence.
External audits can also be used as a “readiness assessment”. In this manner, it is able to identify opportunities for improvement and allows for time to fix any gaps in information or action required.
Shareholders and proxy voting
Spot checks are a simple method of day-to-day evaluation of sustainability performance. Spot checks are done without much prior notice. This is done to ensure checks spontaneous and effective in detecting operational issues that may affect the company’s sustainability objectives.
Sustainability reporting structure
Shareholder and proxy voting is a formal method by which shareholders can exercise their right to express their views on a variety of issues pertaining to the company. The votes of the shareholders can be regarded as a reflection of their views on the performance of the company, including its sustainability objectives.
Stakeholder feedback
Feedback is an informal method of sensing the opinions of stakeholders on issues of a company’s operations that are of concern to them. The feedback received reflects how the company’s performance is perceived by stakeholders and the public alike.
Sustainability Indices, ranking and awards
Independent sustainability indices, rankings, and awards assist companies bolster their green credentials and responsible business practices. These indices and rankings score companies on their performance along environmental, social, and governance factors (ESG).
Some prominent rankings include the Financial Times Stock Exchange’s FTSE4 Good Index Series, the Dow Jones Sustainability Indices (DJSI), Corporate Knights’ Global 100 index. In the local context, the Singapore Apex Corporate Sustainability Awards. These indices, rankings, and awards highlight the sustainability performance of the company.
Supplementary Resources
Pearce (2014) “Monitoring Corporate Behavior: Greening or Merely Greenwash?”
Corporate Sustainability Management 