Some Applaud Rise in Sustainability Reporting, Others Remain Skeptical

SocialFunds.com

NEW YORK, July 17, 2006 - Corporate sustainability reporting is on the rise, according to a new study of S&P 100 companies released by the Social Investment Research Analysts Network (SIRAN) based on research conducted by socially responsible investing (SRI) research firm KLD Research & Analytics. More than three-quarters (79 companies) of the S&P 100 now have special website sections disclosing their environmental and social policies and performance, up 34 percent from 59 companies in last year's inaugural study. The percentage of companies using Global Reporting Initiative (GRI) guidelines rose from a quarter of the S&P 100 in 2005 to more than a third (34 companies) this year.

While many observers applaud this rise in sustainability reporting, researchers from the Center for Social and Environmental Accounting Research (CSEAR) at Scotland's St. Andrews University question the basis of sustainability reporting, arguing it may do more harm than good. Professors Rob Gray and Jan Bebbington turn the "business case for sustainability" on its head, pointing out that our current capitalist system essentially structures corporations to be "un-sustainable."

"'Corporate Sustainability' has more than a little of the oxymoron about it," write Profs. Gray and Bebbington in a paper entitled "Corporate Sustainability: Accountability and the Pursuit of the Impossible Dream," a chapter in the forthcoming Handbook of Sustainable Development. "[A]n organization which is demonstrably using non-renewable natural capital and/or failing to replenish or substitute for other forms of natural capital and which can be shown to be exploiting and advancing social inequality and/or other forms of social injustice is clearly, in itself, un-sustainable."

"Further, if all (or most) economic organizations could be seen to be significantly un-sustainable then we may conclude that our economic system is, itself, un-sustainable," they add. "[W]e are entirely convinced that the un-sustainability we currently face is deep, systemic, and only barely, recoverable . . . we are unable to imagine substantial reductions in un-sustainability without profound structural and systemic changes -- and soon."

Corporate sustainability reporting, Profs. Gray and Bebbington argue, does not seek to reform the system, but rather to highlight tweaks in social and environmental performance from within capitalism's structure (that prioritizes profit above social justice or environmental stewardship.) Therein lies the fatal flaw of sustainability reporting, according to the authors -- that it holds out a false hope of companies achieving true sustainability when in fact the best they can do is disclose their degree of un-sustainability.

"The danger, of course, is that . . . the very concept on which the future of the planet depends -- sustainability -- will be emasculated, appropriated and destroyed by (at best, well-meaning) assertion in the interests of corporations," state the authors. "As things currently stand, we believe we must treat the current crop of 'sustainability reports' with the profoundest mistrust as one of the most dangerous trends working against any possibility of a sustainable future."

Steve Lippman, a member of the SIRAN steering committee and vice president of social research at Trillium Asset Management, shares the authors' concerns over the limitations to voluntary corporate sustainability. He also sees the need for a system of laws and regulations that require certain environmental and social performance from companies rather than hoping the marketplace and voluntary action will lead to the goal of sustainability. However, he does not share their depth of cynicism over sustainability reporting.

"I think it does help promote a move towards sustainability when financial markets begin asking companies to report how they are managing long-term environmental and social challenges, from climate change to employee diversity," Lippman told SocialFunds.com. "And with a growing number of investors, employees, business-to-business customers, and others looking at sustainability reports, I think companies that try to greenwash only paint themselves into a corner where they have to take more action to meet the expectations they've raised for themselves with their key stakeholders."

In the end, the differences between Lippman's perspective and those advanced by Profs. Gray and Bebbington boil down to evolution versus revolution. Sustainability reporting either moves corporations toward the ultimate goal of social and environmental sustainability, or it impedes progress because this goal cannot possibly be achieved until the current capitalist structure is replaced by one prioritizing sustainability over profit.

What that new structure might be remains undefined by Profs. Gray and Bebbington in this paper. In the meantime, they argue for sustainability reporting that takes accountability for the extent to which corporations cannot be sustainable. Even this, though, may prove an elusive goal.