Sustainability Reporting—Where’s the Context and What is Your Role?

No company would ever think of reporting its financial performance without including some measurement of costs or expenses along the way. Yet that is exactly what most organizations do when preparing their non-financial reports. Here, the term non-financial reporting refers to the process of measuring and disclosing a company’s sustainability performance, mainly in terms of its impacts on society and the environment. Standards for such reporting are now firmly in place.

Far and away the leading such standard for sustainability, or non-financial, reporting is the Global Reporting Initiative (GRI). GRI is explicitly organized around the so-called triple bottom line, an organizing principle for sustainability measurement and reporting that highlights a company’s impacts on the environment, society and the economy. All of this is in addition to financial reporting per se, which has its own bottom line. In total, then, there are four bottom lines to contend with, not three.

Clearly, financial reporting in the absence of costs is meaningless. A report that simply reflects revenue but no expenses fails to provide meaningful, transparent knowledge of a company’s actual, financial, bottom-line performance. Costs, in this regard, create a context or standard of performance, in that a company’s revenue must at least equal its costs in order to achieve solvency or financial sustainability.

Non-financial reporting, too, requires context in order to be meaningful. What, then, is the equivalent of costs in such reports? How does the leading standard for sustainability reporting (GRI) address context or standards of performance?

GRI, to its credit, does in fact address the issue of context in non-financial reporting. The operable term here is sustainability context. GRI defines such context as follows:
Information on performance should be placed in context. The underlying question of sustainability reporting is how an organization contributes, or aims to contribute in the future, to the improvement or deterioration of economic, environmental and social conditions, and developments and trends at the local, regional or global level. Reporting only on trends in individual performance (or the efficiency of the organization) will fail to respond to this underlying question. Reports should therefore seek to present performance in relation to broader concepts of sustainability. This will involve discussing the performance of the organization in the context of the limits and demands placed on environmental or social resources at the local, regional or global level.

Despite this recommendation, GRI fails to provide guidelines for how to include context in sustainability reports, and also treats it as discretionary. Thus, of the many thousands of GRI reports prepared since the standard was first launched in 1997, few if any of them have ever included context. The result, then, has been a proliferation of triple top-line reporting, not bottom-line reporting. Like cost-free financial reporting, this arguably fails to achieve the one thing it sets out to achieve: to make it possible to understand the performance of a company—non-financial performance, in this case.

Given the absence of guidelines for how to include context in GRI reports, some companies are attempting to develop procedures of their own. This is the vanguard of sustainability measurement and reporting at this time—the state of the art, as it were. Cabot Creamery Cooperative, for example, recently launched a project to systematically bring context into its own sustainability measurement and reporting efforts. Importantly, the strategy being pursued there is based on the concept of vital capitals and their relevance to human and non-human well-being. Such capitals comprise exactly the kind of context required for transparent, meaningful reporting.

The vital capitals approach to sustainability management is largely patterned after the logic of financial reporting, where performance is measured in terms of impacts on financial capital (e.g., profits, earnings per share, and monetary assets in general). Indeed, the regulative ideal in the financial case is to at least cover costs, and then maximize profits. In the case of non-financial reporting, a similar approach can be taken, albeit with some important differences.
First, the type of capital must be changed. Instead of financial capital, we have both natural capital (for assessing environmental performance), and what we call anthro capital (for assessing social and economic performance). Natural capital consists of natural resources and ecosystem services. Anthro capital consists of human, social, and constructed (or built) capital, all of which are human-made, or anthropogenic.

In the case of the environmental bottom line, performance is a function of not exceeding an organization’s share of related natural capital. In the case of the social and economic bottom lines, performance is a function of not falling below an organization’s share of what is required to maintain anthro capital (i.e., at levels required to ensure human well-being). Armed with these principles, any organization can do a proper job of managing and measuring its own sustainability performance, with context taken fully into account. The measurements become meaningful, transparent and standards-based, providing a better assessment of performance.

Cabot Creamery’s own efforts to bring context to GRI-type reporting—and to sustainability reporting, in general—is now under way. Among the issues it is currently considering are: 1) which specific areas of impact (i.e., vital capitals) should be addressed in the early stages of their program, and 2) what should their own standards of performance be for measuring and assessing their related impacts? These are just the kinds of questions that any company interested in doing meaningful sustainability reporting must address—and the sooner the better. What better way to show leadership and commitment to sustainability in business than to put context back into reporting where it belongs?

This article was written by Mark W. McElroy, executive director of the Center for Sustainable Innovation. It was excerpted from the PR News Guide to Best Practices in Corporate Social Responsibility, Volume 2. To order a copy, visit the