Why are disclosure standards so confusing?
As companies began to disclose their environmental, social and governance (ESG) practices, there was no framework for how to measure and how to publish corporate impacts. In an attempt to standardize specific industries or practices, many different methods were developed. Efforts are now being undertaken to ensure that corporate sustainability disclosures are increasingly clear, accurate, timely, comparable and balanced (positives as well as negatives disclosed).
In the process of trying to make things more straightforward, numerous methods were developed. These methods depended upon the type of operations being carried out or the stakeholder demographics being reached. Development of varying or even conflicting methods of reporting have reduced the stakeholder’s ability to compare one corporation to the next. Even when two companies are quite similar, it can be difficult (if not impossible) to compare their operations without consistent reporting requirements.
The purpose of sustainability reporting is to give stakeholders all of the information they need to make informed decisions about a product’s impacts. The most robust reporting is deliberate and meticulous; leaving no gaps in data that might influence a stakeholder’s assessment or decision making.
What is the difference between a disclosure, a disclosure framework and a certification?
A disclosure refers to any communication providing insight into corporate practices. A disclosure framework is a set of recommended statements that should be made in a specific way. A disclosure framework might outline specific quantitive metrics and how they are measured, or it may outline the qualitative (strategic, limited or regulated) approach or set of rules that governs operations.
A certification provides confirmation that certain standards were upheld in the development of a product. The standards may have to do with ethical operational, sourcing or distribution practices (i.e. Freedom Seal - Human Rights Due Diligence). Certifications may be specific to a certain aspect of a business (i.e. Fairtrade, Cruelty-free, EnergyStar). They may be specific to operational processes (i.e. Leadership in Energy and Environmental Design (LEED) or Carbon Neutral). They may indicate a more holistic approach to business development (i.e. BCorp) or comment upon giving strategies (i.e. 1% for the Planet). The certifying body provides third party verification.
What is third party verification?
Third party verification ensures that a respected or creditable source, or someone who has an ethical obligation to provide unbiased and reliable representation (i.e. a professional engineer, a chartered professional accountant, a lawyer etc) has validated a claim. Third party verification heightens the authenticity of a disclosure and generally indicates the highest standards have been upheld.
