Global Reporting Initiative launched their first Sustainability Reporting framework in 2000.  Those looking for Sustainability (non-financial) reporting information exclaimed “At last, now we have everything!” But that was just the beginning.   In 2002, 35 investors signed a request for greenhouse gas emissions (a key contributor to climate change) reporting, providing the impetus for the Carbon Disclosure Project (CDP).  Sustainability Accounting Standards Board (SASB) saw a need for investor-quality disclosures in financial filings, consistent with existing securities and reporting law; thus, a new framework.  Sentiment for a single report led to the Integrated Reporting Framework.

Each Non-financial Reporting (NFR) framework was developed to meet a specific need.  Each has been revised (multiple times) since their original launch.  Even companies committed to top ESG performance (and with ample resources to do so) face challenges to keep up.

DHC helps clients sort through the many purposes, frameworks, and stakeholder expectations. We help organizations tailor NFR programs to suit their needs. We also help Clients develop or improve processes and controls to improve the reliability of information included in these reports. We audit the content of these reports, or we help clients get “audit ready” for another assurance provider.

DHC’s experience on all sides of this issue make for distinctive perspectives that add value.

• Environmental, Health & Safety
• Non-financial reporting and financial reporting and disclosures
• Program design and implementation
• Advisory and (external) assurance
• Compliance and risks

The Institute of Internal Auditors developed the “Three Lines (of Governance)” model over 15 years ago; it has become widely adopted and referenced.  Mr. Hileman has experience in all three lines – plus a bonus fourth! – unmatched by few in the professional services field.  First line is operational and in-house compliance; second line is corporate management and internal topical (EHS) auditing; third line is Internal Audit (reporting to the Board).  DHC suggest that external assurance (e.g., financial audits) are yet another wave of governance – a “fourth line.”  Mr. Hileman has supported financial audits, and conducted external assurance per the SEC’s conflict minerals rule.  Mr. Hileman served as the senior environmental management and audit specialist on the Volkswagen Monitor Team; this is yet another type of governance.

Throughout it all, DHC retains the perspective from roots in facility operations and compliance.  The hands-on experience on night shifts and weekends provides distinctive experience to drive simple, practical solutions and procedures.  Applying these perspectives to the complicated and dynamic area of NFR helps clients go further, faster, and more efficiently.

Companies should take care that the content of their Non-Financial Reports (there are several) are fit for purpose.  This is harder than it sounds.  Different stakeholder groups will seek out public Non-Financial Reports and use them for their own purposes.  Drivers for NFR include those listed below.

• Statutory or regulatory
• Financial filings
• General ESG frameworks
• Topical standards and frameworks
• Global frameworks or expectations
• Organizational discretionary

 

Fraud or greenwash?  Who’s to say?  The content of Non-Financial Reports is marketing, in its own way.  Stakeholders compare NFRs of companies to make important decisions in investments, supply chain decisions, purchases, or their own employment.  We understand “tastes great, less filling” as marketing, and that taste is subjective.  Claims and assertions in NFR rely on data and information from many sources.  The nexus between source of information and use is not as clear as consumer marketing.  Yet the uses of this information continue to migrate closer to that of financial reporting – indeed, SASB is all about ESG disclosures in submittals to the SEC.  The Volkswagen exhaust emissions scandal got everyone’s attention, but there are opportunities, incentives and rationalization to deceive others for gain in the ESG space.  Standard practices to prevent and detect fraud should be adopted.