OCC - Voluntary sustainability reporting practices in Germany: a 2008. 8. 25.آ first part, 45...
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Voluntary sustainability reporting practices in Germany: a study on reporting quality
Reiner Quick darmstadt University of technology
Accounting and Auditing firstname.lastname@example.org
(Recebido em 30 de Maio de 2007; Aceite em 30 de Março de 2008)
Sustainability reports are a modern concept of interdisciplinary reporting. they indicate the simultaneous integration of economic, environmental and social elements. this study evaluates the quality of German sustainability reports by using GRi guidelines as a benchmark for developing and applying a scoring model. this allows assessing whether sustainability reporting is a suitable instrument to achieve positive effects such as cost-reductions, risk reductions or competitive advantages. twenty-six reports from companies listed on the dAX30 and the MdAX were analysed. the reports scored well in their depiction of the respective companies but were of inadequate quality in relation to sustainability performance. the depiction of social and environ- mental aspects scored an average of approximately 40 per cent, which reveals no more than a mediocre understanding of the prevailing requirements. in comparison, the average degree of achievement with respect to economic dimension was only 13.83 per cent. A weak positive correlation was found between the financial strength of a company and the quality of sustainability reporting. Furthermore, there was a positive relationship between length and quality of the reports. the findings document a need for sustainability repor- ting standards as well as mandatory external audits of such reports.
Keywords: economic performance, environmental performance, GRi guideli- nes, interdisciplinary reporting, social performance, sustainability reports
Contabilidade e Gestão, n.º 5, 7 – 35
Many business crises of the past few years and resultant stock market crashes have had profound consequences on accounting and auditing.1 the information needs of capital providers are not being met adequately by traditional reporting methods because financial statements primarily concern the past. Stakeholders are interested to obtain further informa- tion on the impact of corporate activities (o’dwyer et al., 2005). After various attempts in the areas of social and environmental reporting (e.g. the eco-Management and Audit Scheme of the eU), so-called sustaina- bility reports have emerged in an attempt to respond to demands for interdisciplinary reporting. they reflect a simultaneous integration of eco- nomic, environmental and social factors into corporate behaviour with the aim of sustaining resources for future generations (e.g., eppel 1999, p. 42). However, sustainability does not mean improving the environmental performance of a company at the cost of economic or social objectives. What is far more decisive is a linkage of all three issues (dyllick & Ho- ckerts 2002, p. 132), in which the prevailing goal conflicts, interdepen- dencies and synergies are used advantageously (Steven 2001, p. 29). With respect to the various dimensions, which need to be integrated, this approach is also referred to as the triple bottom line of sustainability.
Sustainability reporting can be explained by legitimacy theory (Gray et al., 1995). it assumes an implicit contract between companies and socie- ty (Mathews 1993). By reporting on economic, social and environmental issues a company can demonstrate that it fulfils its part of the contract and that its activities coincide with the value systems of society. this can prevent or mitigate future regulatory requirements that would constrain the strategic options of the company. thus, the company can maintain its status and reputation in society. instrumental stakeholder theory re- gards sustainability reporting as a means to address the demands of a company’s stakeholders (Solomon & Lewis 2002). Following agency theory, voluntary disclosures on economic, social and environmental is- sues can decrease the information asymmetry between management and stakeholders of a company and therefore reduce agency costs (ness & Mirza 1991). these disclosures can avoid future legislative actions against the company (Gray et al. 2001).2
For national and international companies, optional sustainability repor- ting constitutes a substantial challenge entailing opportunities and risks. the costs of sustainability reporting (Geiger 1993, pp. 149-151) and the general risk of exposing oneself to public criticism must be contrasted
with possible advantages. these include cost-reduction (insurance pre- miums), risk reduction (image losses)3, competitive advantages (diffe- rentiation advantages with respect to competition, listing in sustainability indexes) and an improved company in terms of its organization resulting from formulation and publication of sustainability reports.4 the success- ful implementation of the objectives of sustainability reporting therefore primarily requires recognition of three central aspects: addressees, prin- ciples, and contents of sustainability reports.
the interest groups with respect to sustainability reports comprise a va- riety of possible internal and external stakeholders.5 Since the mid-nineties, more and more initiatives have been proposed to deal with sustainability. the Global Reporting Initiative (GRi) can be regarded as leading in the worldwide dissemination and standardisation of sustainability reporting. the 2002 GRi guidelines provided a very appropriate set of principles.6 Based on the GRi, an expanded model is presented below, with the grey areas representing fra- mework principles, which refer to broad aspects of reporting. the principles given in the white areas are supplementary qualitative attributes. the first column contains requirements in terms of the type of information presented. the second column comprises norms for ensuring a certain quality of sustai- nability reporting. the third column of qualitative requirements deals with the accessibility of sustainability reports.
Figure 1: Reporting principles according to the GRi model (Based on Global Reporting initiative (GRi) 2002, p. 20)
type of ivnformation Quality / Reliability
of information Accessibility
comparability AvailabilitySustainability context
A successful implementation of the objectives of sustainability reporting also requires establishing generally applicable report contents. to establish fundamentally important report contents, various contributions on envi- ronmental and social reporting, as well as more current contributions on sustainability, can be used.7 due to the rapid development of sustainability reporting and lack of timeliness of most literature sources, an analysis of published reports can give an indication of possible sustainability report con- tent. Another way of determining such contents might be to consider rankings of sustainability reports by various organizations.8 the weights they use for their evaluation models indicate the relevance of different report contents.
the objective of this survey was to investigate to what extent printed9 vo- luntary sustainability reports by companies listed on the HdAX10 fulfil or ex- ceed the requirements already provided in the literature and practical guideli- nes.11 By doing this, the survey should also give information on the extent to which sustainability reporting is a suitable instrument to achieve the positive effects that have been discussed previously, or whether they are mere public relations instruments. in this context, conspicuous weaknesses in reporting practice ought to be revealed. in addition, it is analysed whether the quality of reporting is associated with other attributes, such as the index, where the reporting company is listed.
Such an analysis is necessary because comparable studies from the 1990s, dealing with the quality of environmental reports, revealed deficiencies. clau- sen & Fichtner (1996, pp. 63-80) as well as Steven et al. (1997, pp. 63-155) found such reports to be of a low quality. the findings concerning environmen- tal statements, according to the environmental Management and Audit Sche- me (eMAS) of the eU, are less negative: Freimann et al. (1996) concluded that many requirements were fulfilled, but companies tend to emphasize improve- ments while withholding weaknesses. in particular, companies were reserved when reporting on environmental objectives and environmental programmes. Furthermore, differences in the design of environmental statements, and thus a limited comparability of these statements, were identified. A study by Bec- horner and Freimann (1999) showed that German companies complied close- ly with the eU-eMAS regulation, but in comparison to companies from other member states, the quality of their reports was weaker regarding environmen- tal management issues. Wicenec (1998) had similar results. He observed a strict application of the eU regulation, insufficient statements on environmen- tal policy, and a lack of relevant figures (e.g. concerning the consumption of raw materials or noxious emissions). Lange et al. (1998; 2001, pp. 93-177) found that most environmental statements included all aspects required by eMAS but varied considerably concerning contents, form, and detai