There is a number of international sustainability reporting systems and frameworks available for use today. These include amongst others the GRI Reporting Framework (incorporating the GRI Reporting Guidelines), the balanced scorecard, the sustainability balanced scorecard, ISO 14000 series and AccountAbility AA1000s. The GRI Framework is considered the current leading framework today for both private and public organizations as highlighted by Dumay et al. (2010), who stated ‘as with the private sector, it appears that the GRI dominates the current reporting practices of public and
45 third sector organizations’ (p.544). This framework will firstly be reviewed, followed then by a discussion of a number of other frameworks.
3.4.1 The Global Reporting Initiative (GRI) Framework
The GRI is a global reporting framework for businesses to report information measuring their economic, environmental and social performance. In 2000, the GRI Sustainability Reporting Guidelines were released, with a revised version issued in 2002 and a further revised version, known as G3, released in 20064.
This framework today is internationally known as the leading source of guidance in sustainability reporting (Morhardt et al. 2002). Of the top 100 global companies, it has been reported that 64% utilize the GRI guidelines as the basis for sustainability reporting (http://www.globalreporting.org accessed 08/11/10). In a recent report of corporate sustainability reporting in Australia, 70% (350 companies) of Australia’s top 500 companies who produced a sustainability report for 2006 followed or made reference to the GRI guidelines (KPMG 2007 p. 10). From a public sector perspective, in a recent international mail survey, it was found that nearly 50% of respondents (thirty respondents) were utilizing the GRI guidelines in their sustainability reporting (Dickinson et al. 2005).
GRI’s purpose in producing a reporting framework was to make sustainability accounting as routine and comparable as financial reporting (Simnett and Nugent 2006). It is designed for use by organizations of any size, sector or location. The framework is made up of three components (GRI 2006);
The sustainability reporting guidelines. The guidelines provide the principles for defining the report content, reporting guidance and standard disclosures, including
indicators to outline a framework that organizations can adopt
4
An updated version of the GRI Guidelines, entitled G3.1 was released in March 2011 with expanded reporting guidance provided on human rights, local community and gender. A further update, G4 is planned to be published in 2013. Due to the timing of the G3.1 version, for the purposes of this study, the focus is on the G3 Guidelines.
46 (http://www.globalreporting.org/ReportingFramework/ReportingFrameworkOver view/). They are the foundation of any GRI reporting document.
Technical and indicator protocols. These protocols assist users in applying the GRI guidelines. They contain the key definitions and other technical references.
Sector supplements. The supplements exist to supplement the core guidelines and
attempt to capture the unique set of sustainability issues faced by different industry sectors. There are currently fifteen sector supplements that cover a wide array of sectors including construction and real estate, financial services, mining and metals, telecommunications and public agency.
These three components of the GRI framework can be shown diagrammatically, as follows:
Figure 2
The GRI Reporting Framework5
5
Source: Global Reporting Initiative. (2006). Sustainability Reporting Guidelines. Global Reporting Initiative. Amsterdam. The Netherlands.
47 3.4.1.1 How Does the GRI Framework Report on Sustainable Development?
There are two main stages that are suggested in the development of a GRI sustainability report, as follows.
1. Define Report Content, Quality and Boundary – The broad content of the report, the quality and the boundaries of the report need to be determined. The GRI framework provides for flexibility in that organizations can choose what level to comply with the guidelines – whether it be full compliance or just a component of the guidelines. (GRI 2006 p.5-6).
2. Standard Disclosures – The framework specifies the core content that should appear in a sustainability report. There are three different types of disclosures; disclosures that provide a high-level understanding of the organization’s strategy, profile and governance policies; disclosures that focus on the organization’s management approach and disclosures that focus on performance indicators on the economic, social and environmental performance of the organization; with the main form of disclosure being the performance indicators.
The framework provides the performance indicators for reporting of an organization’s performance. They are divided into reporting aspects across the three categories, which are then further divided into core and additional indicators. Organizations are encouraged to report on the core indicators as a minimum, unless they are deemed not material. The aspects for economic, social and environmental indicators, as provided in the framework are provided in Table 3.1 (with the number of core and additional indicators indicated in brackets for each aspect).
48 Table 3.1
Categories for Economic, Social and Environmental Indicators
Thus, there are thirty-four aspects which provide for a total of seventy-eight indicators (49 core, 29 additional as shown in Table 3.1) split across three categories that could Economic Performance
Aspects
Social Performance Aspects Environmental Performance Aspects
Economic Performance (4 core)
Labour Practices and Decent Work Materials (2 core) Market Presence (2 core, 1
additional)
Employment (2 core, 1 additional) Energy (2 core, 3 additional) Indirect Economic Impacts (1
core, 1 additional)
Labour/Management Relations (2 core) Water (1 core, 2 additional) Occupational Health and Safety (2
core, 2 additional)
Biodiversity (2 core, 3 additional)
Training and Education (1 core, 1 additional)
Emissions, Effluents and Waste (7 core, 3 additional)
Diversity and Equal Opportunity (2 core)
Products and Services (2 core)
Human Rights Compliance (1 core)
Investment and Procurement Practices (2 core, 1 additional)
Transport (1 additional)
Non-Discrimination (1 core) Overall (1 additional) Freedom of Association and Collective
Bargaining (1 core)
Child Labour (1 core)
Forced and Compulsory Labour (1 core)
Security Practices (1 additional) Indigenous Affairs (1 additional)
Society
Community (1 core)
Corruption (3 core)
Public Policy (1 core, 1 additional)
Anti-Competitive Behaviour (1
additional)
Compliance (1 core)
Product Responsibility
Customer Health and Safety (1 core, 1 additional)
Product and Service Labeling (1 core, 2
additional)
Marketing Communications (1 core, 1
additional)
Customer Privacy (1 additional)
Compliance (1 core)
Total Indicators = 9 (7 core, 2 additional)
Total indicators = 39 (25 core, 14 additional)
Total indicators = 30 (17 core, 13 additional)
49 potentially be reported on. It is recommended that organizations collate the data into a single consolidated sustainability report (GRI 2006 p. 37). It is interesting to note that the weighting of the indicators is heavily biased towards social indicators, with over 50% of core indicators being in this category. No explanation is provided in the guidelines why this is so.
Ever increasing numbers of organizations support and utilize the GRI framework world- wide today. In view of this, the framework will now be examined critically in an effort to determine its adequacy as a reporting framework for local government in Australia. 3.4.1.2 Criticisms of the GRI Framework
There have been numerous questions raised as to the adequacy of the framework both from a private and public sector perspective. Moneva et al. (2006) reported that a key criticism of the guidelines was the lack of an explicit definition for sustainable development. However, this situation has been rectified in the G3 version of the guidelines with the document referring to the Brundtland definition as being the goal of sustainable development (GRI 2006 p.2).
Another criticism of the guidelines is the reductionalist approach through the use of the suite-of-indicators approach for the three components of sustainability and the eradication of an integrated view of sustainable development (Moneva et al. 2006). By reducing sustainable development to this level, the GRI guidelines run the risk of losing sight of the big picture for sustainability and obstructing an integrated view of sustainability to the point where the guidelines are no more than an administrative reform (Larrinaga et al. 2002; Owen et al. 1997). Simply providing a table of indicators for the three components of sustainability can lead to little more than an exercise in compliance rather than a reporting process leading towards sustainability (AccountAbility 2006). Such reporting tends to create compartmentalization (Lozano and Huisingh 2010) which can lead to issues of trade-offs between the pillars during decision-making (Giddings et al. 2002).
A further criticism of the guidelines is that they allow for the organization to determine the level of ‘compliance’ with the guidelines, that is, whether to report against the full
50 GRI framework or to phase in reporting as they self-determine (GRI 2006 p. 5). Whilst it is recommended that organizations self-declare their level of application (A, B or C), this approach still allows organizations to ‘cherry-pick’ the data and it can lead organizations to focus on those activities at which they are performing better and which provide better reputation (Bebbington et al. 2008; Guthrie and Farneti 2008; Hedberg and von Malmborg 2003).
This type of reporting was clearly shown in an Australian study that examined the level of sustainability reporting against GRI indicators by a sample of Australia’s top 500 companies (Frost et al. 2005) who produced discrete sustainability reports. It was found that the average number of GRI categories disclosed was 7.24 for discrete reports and 6.28 for corporate websites (against a possible total of forty categories as detailed in the GRI, 2002).
There was also found to be huge variations amongst companies sampled as to their levels of compliance. For example, BHP Billiton reported against twenty-four of the forty possible GRI indicators while Hanson, Fletcher Challenge and MacMahon Holdings each reported against only three of these indicators (p. 94). It was concluded by Frost et al. (2005) that reporting in Australia against the GRI guidelines is inconsistent and there are frequent gaps in the types and levels of sustainability reporting.
A further criticism of the framework is its development basis. The framework is purposely designed to be applied to organizations of any size, sector or location (GRI 2006). However, smaller organizations have found the guidelines too complicated, overly burdensome and demanding whilst potential users of GRI reports find them insufficiently specific or standardized (Brown et al. 2009). Further, the framework was designed based on the experience of use in the private sector (GRI 2005 p.11). To apply a private sector framework to public-sector organizations, is ‘clearly a challenging task’ (GRI 2004 p. 4).
Dingwerth and Eichinger (2010) in their study on the underlying policies and principles of the GRI concluded that the GRI reporting principles offer only soft guidelines for preparing a sustainability report. They found a lack of precise definitions and a lack of
51 comparability between GRI reports with the information that is provided in the reports of limited practical use. Whilst Hussey et al. (2001), in evaluating the environmental reports of nine global corporations against the GRI guidelines, found no company provided adequate data on all GRI reporting elements. Moreover, they were unable to determine if any company were actually moving in the direction of sustainability.
Further, a growing number of commentators has concluded that the GRI guidelines represent a source of fundamental confusion over what actually constitutes sustainability and they fail to address directly the real issues of sustainability (Guthrie et al. 2009; Isaksson and Steimle 2009; Archel et al. 2008; Milne et al. 2008; Gray 2006a and b; Gray and Milne 2004, 2002).
These criticisms highlight the numerous issues that surround the GRI guidelines as a reporting framework. Granted, most frameworks are not without their critics. However, with the emphasis that this framework places on the suite-of-indicators reporting approach and the varied issues in doing so, with its developmental foundations grounded in the private sector, utilizing this approach in developing a framework for local government would appear to be inadequate. The GRI have recognized these limitations with the development of a sector supplement specific to public agencies. This supplement, whilst at pilot-stage has been designed to assist the public sector in the development of sustainable development reporting.
3.4.1.3 Public Agency Sector Supplement (PASS)
With its release in 2005, the PASS was designed to complement the GRI guidelines (GRI 2005 p. 4) by providing extra resources for public sector organizations in the development of a sustainability reporting framework specific to their sector. These additional requirements will now be discussed followed by an analysis of the criticisms that have been levelled at the supplement since its development.
3.4.1.4 Additional Reporting Requirements of the PASS
The PASS provides a number of additional disclosures and elements that are specifically tailored to public agencies (Table 3.2). Such disclosures include the reporting of key
52 public policies, priorities and implementation measures in relation to sustainability (GRI 2005 p. 13). The additional disclosures are meant to ‘help report readers understand the process by which sustainable development policies were prioritized, how related implementation measures were developed, and how progress is being monitored and measured’ (p. 33).
Table 3.2
Disclosure Elements for Public Agencies Number Disclosure Element
PA2 Definition of Sustainable Development used by the public agency and identify any statements or principles adopted to guide sustainable development policies.
PA3 Identify the aspects for which the organization has established sustainable development policies.
PA4 Identify the specific goals of the organization for each of the aspects identified in PA3 above. PA5 Describe the process by which the aspects and goals in both PA3 and PA4 were set.
PA6 For each goal, provide details on the implementation measures, results of relevant assessments, targets and key indicators used to monitor progress, description of progress, actions to ensure continuous improvement and any post-implementation assessment and targets for the next time period.
PA7 Describe the role of and engagement with stakeholders with respect to the items disclosed in PA6.
These six elements (Table 3.2) are quite useful in providing particular background information to the sustainability report in the public sector. They provide a core set of elements that discuss such issues as the definition of sustainable development utilized by the organization, sustainable development policies that have been developed and short- term and long-term goals and the strategies, targets and actions required to meet these goals.
In addition to the new disclosures, three new indicator aspects have been provided in the PASS to meet the specific reporting needs of public agencies. Two aspects are in the area of economic performance, being expenditures and procurement practices with the third aspect in the area of social performance being administrative efficiency. Commentaries have also been added to some of the existing indicators to explain how to interpret them in the context of the public sector.
53 With public sector sustainability research still very much in its infancy, only time will tell if these additional disclosures and indicators will provide the needed resources to assist the public sector in the development of a reporting structure. In a recent GRI review (Tort 2010), discussion highlighted the prospect of progressing the pilot-version of the PASS to a final version. In doing so, it was suggested that a final version should encourage improved sustainability reporting by public agencies (p. 12). From preliminary research, however, the initial conclusions that have been drawn consider the supplement to be too generic and inadequate for public service organizations (Farneti and Guthrie 2009; Guthrie and Farneti 2008). These criticisms will now be discussed in view of utilizing such a framework in local government reporting.
3.4.1.5 Criticisms of the PASS
Since its development, perhaps the main objection to the PASS has been its development basis - being the GRI guidelines. The supplement was developed by building on the GRI guidelines and was always intended to add to, but not to replace, them. With the GRI guidelines being modelled on the private sector (GRI 2005 p.11), the guidelines have been developed on different objectives, different operating environments and different scopes compared to the public sector (Simpkins 2006; Ball 2004a). These differences will then flow into how sustainability programs are developed and how sustainability is reported (Ball 2004a). If the original framework of the PASS has not been developed from a public sector perspective; no matter what additional reporting requirements are provided for under the PASS, the supplement cannot be expected to meet the individual needs and requirements of public sector organizations. A further issue with the PASS guidelines is the ability of the supplement to be blended together with the GRI as one reporting framework for public sector entities. However, with the small number of additional disclosures and indicators that are required through the PASS, it is assumed that there would not be a major issue.
As previously stated by Moneva et al. (2006), one of the key criticisms of the GRI framework was the lack of an integrated framework through the reductionalist approach
54 with three separate indicator pillars. Attempts are made to correct this discrepancy in the PASS (GRI 2005), as follows.
‘In addition to the specific indicators relating to the economic, environmental, and social impact of the agency, there may be cross-cutting indicators that relate to more than one element or more than one agency. The reporting agency is encouraged to include such measures in their report and should refer to the Guidelines for further guidance on cross-cutting and integrated indicators’ (p. 47).
However, a thorough search of the guidelines has not provided any further enlightenment on these cross-cutting and integrated indicators. This was an opportunity for the PASS to provide leadership and to promote an integrated framework. Unfortunately, it does not appear to have been successful in doing so.
Further objections to the guidelines include the inadequate attention given to the central issue of policy responsibilities and impacts (Ball and Grubnic 2007). This view was supported by the National Audit Office (UK) (2005) which argued that the supplement would need further adaptation because of its focus on disclosure of operational activities rather than on a broader strategic and policy approach (p.7-9).
An additional objection to the guidelines was the insufficient number of sector-specific variables making the PASS too generic (Guthrie and Farneti 2008). With the three different public sector levels that exist today in Australia, (Commonwealth, State and Local Government), perhaps a PASS that was able to meet reporting needs across all levels of the public sector was far too ambitious from its conception. Taking these criticisms into account, though, the PASS does provide a number of disclosure reporting elements specific to public agencies that could provide assistance in the development of a local government framework. These elements, as previously indicated in Table 3.2, include the reporting of the sustainable development definition utilized by the organization, those aspects for which the organization has developed sustainable development policies and the linking of the aspects to the specific goals of the organization.
55
Development of a Local Government Framework
Contribution Number 2: PASS – Reporting Disclosure Elements
Further reporting disclosures that may contribute towards a local government framework are contained in the GRI guidelines themselves. While the focus of the GRI is the performance indicators, there are two other forms of disclosure that are included in the GRI guidelines –strategy and profile disclosures and management approach disclosures. The strategy and profile disclosures provide disclosures that set the overall context for understanding the organization’s performance. Such disclosures include a statement about the relevance of sustainability to the organization, description of key impacts, risks and opportunities and the organizational profile. These disclosures could provide assistance in the development of a framework for local government authorities.
Development of a Local Government Framework
Contribution Number 3: GRI (2006) – Strategy and Profile Disclosures
3.4.2 Other Frameworks Available