Sustainability reporting - a perspective from the private sector

By Laura Kreiling

Unlike common financial reporting, sustainability reports are vehicles of companies for external reporting. While the former, primarily in the form of annual reports, is rather oriented towards the past, containing primarily quantitative data, sustainability reports ideally report in a future-oriented perspective and provide stakeholders with “a window on the character and competency of a company” which is the fundamental difference between SR and common financial reporting.[1] In 2008, the combination of both reporting forms in an ‘integrated’ manner started to surface. For example, Filipiuk suggested that companies should complement financial reporting with statements relating to a company’s stance on ethical, ecological, social, societal and economic topics and issues; these ‘decision useful information’ like ‘soft’ or non-financial and forward-looking information are the core building blocks of SR. [2] This integration of both reporting forms could lead to a more holistic reporting with a greater level of transparency for all stakeholders, on the one hand. However, the challenges today are not only the lack of a common terminology which results in a glut of sister concepts in the English language - CSR reporting, CR reporting, non-financial reporting, ESG [Environmental, Social, Governance] reporting [3]- but also a lack of stringent reporting standards on the other hand. [4] “Greenwashing” in the form of marketing brochures rather than profoundly based SR based on real effort is often the reality today. [5]  These are issues which will not be discussed further at this point. Instead, the three key motivations to engage in SR are elucidated which relate to different perspectives on the evolution of this reporting form.

Corporate Social Responsibility (CSR) as a strategic management concept has been evolving at the intersection of business and its environment for several years now. [6] As Hohnen (2007) noted, especially multinational and stock-listed companies are subject to scrutiny and have to ensure a solid CSR foundation on a global level as they cope with different legislations, regulatory and competitive frameworks. [7] A company’s communication is a crucial vehicle and a common channel to transfer information and to shape a stakeholder’s understanding about a firm.  In fact, it is a vital means for companies to ensure recognition and to reap the internal benefits off their CSR efforts. [8] To inform stakeholders and other interested parties and to show accountable and transparent business behaviour, SR was introduced as a way not only to take account of but also communicate CSR efforts. [9] This is the proactive perspective to see the evolution of this reporting form.

On the contrary, the reactive perspective suggests that corporate scandals, e.g. at Enron and WorldCom in the U.S. and Ahold and ABB in Europe, led to increasing uncertainties of consumers causing a fundamental decrease of stakeholder trust and ‘public confidence’ so that claims for more transparency and accountability arose. [10] Consequently, CSR became increasingly important as ‘the business as usual approach’ was found not to be longer viable, argued by the independent Stern review[11] in 2006. [12] In light of these developments, information demands shifted and stakeholder started to request from companies the disclosure of sustainability information and the conduct of accountable and transparent business behaviour. [13] As conventional reporting forms had difficulties fulfilling these changing information needs, SR as a new reporting form emerged. [14]

Besides the connection of CSR and SR in the proactive and reactive perspective, there is a third way, the holistic perspective, to apprehend the evolution of this reporting form. It reflects that stakeholder attention shifted from focusing solely on financial measures to rather investigate more holistically also on non-financial performance.[15] Owing to growing dissatisfaction with the information provided in conventional reporting forms, especially investors broadened their horizon by requesting increasingly also non-financial performance data because it is increasingly seen as an indicator of management quality, the company’s opportunities and its risks profile. In this vein, a new investment form emerged: Socially Responsible Investing. [16] This shows that SR is now seen as a key element in risk management. [17]

Notwithstanding the ongoing challenges to establish as a common reporting form with accepted standards and terminology, it can be concluded, based on Klein 2005, that SR bears advantages not only internally by helping to improve employee morale and as tool for benchmarking, but also externally, increasing transparency on its non-financial performance, thereby making a company more accountable to all of its stakeholders.


[1]White 2005, p.5., Trans. Fischer/Lenz2009, p.,37.

[2]Fischer/Lenz 2009, p.7., Trans. Filipiuk 2008, p.122.

[3] White 2005, p.1.

[4] The Global Reporting Initiative (, a non-profit organization, produces one of the world's most prevalent standards for SR.

[5] Trans. Braun et al. 2009, p.7.

[6] Porter/Kramer 2006, 3; Trans. Braun et al. 2009, p.5.

[7] Hohnen 2007, p.7, 35, 52.

[8] Fogelberg et al. 2010, p.10,11; Cf. White 2005, p.1.; Trans. FAZ Delbrück 2010, p.B2.

[9] White 2005, p.5; Cf. Fogelberg et al. 2010, p.6, 9; Trans. Filipiuk 2008, p.122. Trans. Braun et al. 2009, p.7.

[10] White 2005, p.1.

[11] More commonly known as the “Stern Report”

[12] Gardner/Prugh 2008, p.7.; Cf. Zu 2009, p.18.

[13] Fogelberg et al. 2010, p.11; Trans. FAZ Schneider 2009, B1.

[14] Trans. FAZ Schneider 2009, B1.

[15] Trans. Bergius 2009, p.1; Cf. KPMG 2000, 2.

[16] PWC 2007, p.4.

[17] Klein 2005, p.21;Cf. GRI 2009, Executive Summary, p.2.



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