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Exposure Draft: 2002 Sustainability Reporting Guidelines

Comments from the Association of Chartered Certified Accountants (ACCA)

May 2002

The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to respond to the GRI's Exposure Draft: 2002 Sustainability Reporting Guidelines.

ACCA continues to be supportive of the GRI mission and the Guidelines document. We have reviewed the Exposure Draft, however, and believe that the points highlighted below require further work and/or clarification. The points are listed in page number order.

Specific Comments

PART A

Page 5, Footnote
States that governmental and non-governmental guidance will follow in the near future. Do you have any indication of when this will be? Will this be as a sector specific guidance document or included within the main Guidelines document?

Pages 5 - 7, Trends
The 'Trends' listed are biased towards businesses. To prevent isolating the Guidelines from public sector bodies and NGOs, GRI need to keep the trends as inclusive as possible. For example, the governments of Hong Kong and Canada have been particularly active in this area and could be included in the first paragraph.

Page 8, Confluence of need and opportunity
Lack of reporting could be mentioned as well as inconsistent reporting (as already included).

Page 11, Shaded box
Part C in the shaded box refers to providing 'guidance on compiling the report'. However, the final bullet point in the list above the box states 'the Guidelines do not offer instruction for preparing reports'. This inconsistency should be addressed.

Page 12, first paragraph
It is stated that as more public sector bodies use the Guidelines, the GRI will work to address their specific needs. However the Guidelines are written with businesses in mind thus limiting the take-up rate among public sector bodies. GRI should state more explicitly that guidance will follow (irrespective of take-up). This statement would be consistent with the statement made in the footnote on page 5.

Page 13, Issues Supplement
ACCA's suggestion for an 'Issues Supplement' would be corporate accountability within war economies.

Page 14, shaded box
Is the text within the box part of the flowing text before it, or is it meant to be read within a separate box? The box and its text need referring to in some way.

Page 16, Boundaries
Due to the many variables that can be factored in when considering boundary issues, many companies have different reporting boundaries. It is therefore important that they disclose their boundaries in their reports. ACCA recommends that the statement 'most organisations will have similar boundaries' be removed.

Page 16, Boundaries
Will the additional guidance provided by GRI on boundary issues be published as an 'Issues Supplement'?

Page 17, Structuring GRI reports
Reference could be made to the newly introduced 'Report contents' list here as its aim complements the logical framework referred to in the 'Structuring GRI reports' paragraph.

PART B

The reviews of the characteristics are, overall, very good.

Page 21, Introduction
A statement could be added to recognise that currently no company report demonstrates all characteristics in sufficient detail.

Page 21, Introduction
GRI requests companies to declare where they deviate from applying these principles. Where in the report do reporters disclose this declaration?

Page 21, Introduction
The principles and reporting characteristics are no longer two separate categories but have been rolled into one. The reporting characteristics are generally applicable and do not only apply to financial reports as implied in the Exposure Draft. By combining the two categories, the emphasis on the materiality and precautionary principles has also lessened.

Page 22, Boundary dimension
Completeness should be specified as the degree to which the organisation has reported on its performance within its self-declared reporting boundaries. The reporting boundary, in turn, needs to be specified in three dimensions. One is the organisational boundary; the second the impact boundary; the third, the time boundary. The current text rather blurs all these things together. However, the appropriateness of the reporting boundary is one of the matters which affect the credibility of the report, and may be the subject of a verifier’s comment.

Page 26, Transparency
As an overarching principle, 'Transparency' should be moved to either the beginning as an introductory principle or the end as a concluding summary.

PART C

Page 29, note 1
The information given in note one is repeating the Completeness principle given on page 21.

Page 29, note 1
GRI has requested reporters to explain any differences. Where in the report do reporters disclose this difference?

Page 29, note 2
GRI has requested that the GRI Technical protocols are used whenever possible. GRI should request reporters to state their reasons if they are not used. Advice should also be provided to show where this information should be disclosed.

Page 29, note 4
Need to stress that trend data and targets are required for all core and additional indicators.

Page 30, Overview
The description of profile could refer to an ‘organisation’s nature and structure’ rather than ‘organisation’s organisation’

Page 30, shaded box
Is the text within the box part of the flowing text before it or is it meant to be read within a separate box? The box and its text need referring to in some way.

Page 34, Vision and Strategy
'Strategy and vision' has been written on the first line. It would be best to write 'vision and strategy' to be consistent with the heading.

Page 36, indicator 2.6
Are the bullet points listed indicators and therefore should they be formatted in bold type? Is GRI requesting that reporters disclose all of the bullet points listed? This needs further clarification.

Page 38, indicators 3.5 and 3.7
The economic element of sustainability should be referred to, together with the existing social and environmental elements, in each explanation of these indicators.

Page 39, Stakeholder engagement
It would be beneficial to report users to have this stakeholder engagement information presented in a more dis-aggregated manner. For example, different stakeholders may involve different stakeholder identification processes or generate different stakeholder information.

Page 45, shaded box
The word 'organisation' on the seventh line requires an 's' to be added.

Page 56, GRI Content Index
ACCA agrees to having this but GRI should allow maximum flexibility so that companies can continue to format their reports as per 'tradition' and provide a reconciliation statement.

Assurance issues (Annex 3)

Broadly speaking ACCA concurs with the views expressed in the FEE comment letter concerning assurance issues. ACCA agrees that the GRI draft is generally to be supported for its treatment of assurance (the preferred terminology). Three additional points we would wish to raise are:

1. In view of the difficulty in providing assurance on the great breadth and depth of unquantified information, the likelihood of long form reporting should be allowed for.
2. The characteristics of assurance providers that could influence their selection (in section 3) looks aspirational rather than practical. It would be difficult in practice to find those 'not involved' (3^rd bullet) or those able to balance the interests of stakeholders (2^nd bullet).
3. The mention of "sufficient time" (4^th bullet) seems out of place as it is common to all consultancy or reporting engagements. Conversely, the selection process should include the need for the capability of the assurance provider (potentially) including a world-wide presence.

True and Fair

The phrase "True and fair" is generally used by an assurance provider in connection with the provision of a high-level assurance statement. However, it is not used in Canada or the USA and is therefore not globally understood. ACCA believes that, at this still early stage in the evolution of sustainability reporting, it would be better not to use the phrase "true and fair" in connection with a Board's assessment of its own organisation's sustainability performance. Instead, a statement such as "This report has been prepared in accordance with the 2002 GRI Guidelines. We believe that these guidelines enable us to give a balanced account of our organisation's sustainability performance" would be preferable.

Economic indicators

Although the section on economic indicators has been greatly expanded, we do not believe that it has achieved the necessary clarity or technical precision. Our main concerns are set out below:

Direct vs. indirect :
the distinction between direct and indirect economic impacts needs to made clearer. It is not acceptable to say that "indirect impacts are measurable" and then go on to add that "there is no practical way to predetermine a single, generic set of such indicators …… thus each organisation will have to makes its own selection…..".

Preparers of sustainability reports will need more specific guidance from GRI on what a potential set of indirect economic indicators might contain. E12 does not provide this at present.

Distribution indicators :
it seems to us that the proposed distribution indicators confuse two very different accounting models:

• a cash flow statement
  and
• a value added statement.

At present the distribution indicators seem to try to integrate the two, mixing cash flow related terminology (e.g. monetary amounts received and receivable") with a value added statement's stakeholder structure. Furthermore, the indicators are incomplete in the sense that they fail to consider retained profits (or value added reinvested) - an issue which is central to the continued financial/economic sustainability of the reporting organisation.

The end result is an indicator group that is neither familiar, nor of obvious practical use. ACCA recommends that the distribution indicators be remodelled to better reflect the "value added" statement approach. This would also have the advantage that the financial numbers can be relatively easily distilled from an audited balance sheet and income statement.

Distribution indicators should also be expressed as a % of value added relative to overall value added and disclosed over (say) a three year comparative period.

Finally, we strongly recommend that the basis for any segmental disclosures reflect the definitions established for financial reporting purposes by IAS 14 "Segment Reporting". To require a new segmentation of finance related data with little or no obvious justification or assessment of the compliance costs involved risks alienating the financial executive function and will not assist in building GRI's reputation with this important group.

We note that no guidance is given on core financial indicators. The text currently says that "….economic impacts … include but extend beyond financial performance" - nevertheless, other than at E9 no "core financial indicators" are either suggested or required. ACCA believes that the entire economic indicators should be reconfigured at follows:

1. core financial indicators (from balance sheet & income statement, including gearing and various measures of return or cover)
2. distribution indicators (based on classical value added theory)
3. indirect economic indicators: incorporating a set of suggested or potential indicators.

We believe that modifications to the economic indicators section of the consultation draft will result in a document that is immediately more user friendly that the current rather opaque and confusing text.

General Comments

• organisation and organization have both been used. Only one should be used for consistency.
• Executive Summary and executive summary have both been used. Only one should be used for consistency.

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