Mandatory Environmental Corporate Social Responsibility: Can Canada become a leader?

CSR-title-graphic

Corporate Knights, 2011 [3]

Environmental Impact Assessment (EIA) has become an integral part of the corporate decision-making process. This acceptance of EIA as a project decision making tool with processes for identifying and evaluating impacts has translated into the world of corporate management with the creation of various public reports on corporate social responsibility (CSR). Over the past decade sustainable development reporting has been adopted by the majority of Canadian companies as a means of strengthening the link between the companies and their stakeholders [2]. Unfortunately, the comparison of those reports is hampered by the difficulty of defining corporate social responsibility [3]. As Cory Searcy states in his article [1] corporations have been struggling with the question of what information they should be sharing with the public and how should they be presenting it.

The issues of defining CSR and reporting how a company’s environmental, social and governance programs meet their corporate sustainable development goals can be addressed through the use of reporting standards. But what reporting standards should be used? There are a multitude of guidelines and standards for CSR reporting that have resulted in a very broad range in the quantity and quality of information in CSR reports [1]. The experience of the last ten years shows that voluntary reporting may not be serving stakeholders and the public very well. Analysis of 94 Canadian corporate sustainability reports showed that 585 different indicators were reported yet only three indicators were shared between the companies [1]. This degree of variance in the reports is surprising given the robust standard of the Global Reporting Initiative (GRI). Voluntary reporting may be widely accepted, but it clearly is not serving the needs of the stakeholders and the public.

GRI Reporting Cycle

GRI Reporting Cycle [4]

Mandatory reporting addresses most of the shortcoming of voluntary reporting. It allows for clearer corporate communication with mutually understood terminology and measures, and allows stakeholders to more easily compare the CSR statements of various companies [2]. In 1993 Canada was one of the leaders in mandatory reporting with the Whitehorse Mining Initiative, but has lagged since then. Corporate lobbying and government reluctance to regulate has left Canada with a poor voluntary reporting process and few standards. In countries where mandatory reporting structures have been adopted, socially responsible managerial practices have increased, and sustainable development key performance indicators have been implemented [2]. With a mandatory reporting structure in place, overall social responsibility increases due to improvements in communication and comparability.

How can Canada regain a leading position in CSR reporting? Adopting mandatory reporting standards based on the GRI guidelines for all companies would be a good start. The current reporting structure involving the financial and other regulated industries needs be expanded to incorporate the GRI standards. On the world stage, this would allow Canadian companies to better demonstrate their commitment to corporate sustainable development and would help Canada to repair its environmental reputation.

 

References:

[1] Searcy, Cory (2012) Mandatory reporting? Corporate Knights, 11(1), 38-39.

[2] CGA-Canada (2011) Regulating sustainability reporting – Is a mandatory approach better than a voluntary one? December 2011.

[3] Drohan, Madelaine (2011) Big country, small steps: Taking a critical look at the last decade of corporate social responsibility in Canada. Corporate Knights, issue 35, 25-28.

[4] Brown, H. S., de Jong, M., & Levy, D. L. (2009). Building institutions based on information disclosure: lessons from GRI’s sustainability reporting. Journal of Cleaner Production, 17(6), 571-580.

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