Finance

Carrots & Sticks 2020 – Sustainability Reporting Policy: Global trends in disclosure as the ESG agenda goes mainstream

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2020

Carrots & Sticks 2020 – Sustainability Reporting Policy: Global trends in disclosure as the ESG agenda goes mainstream

  • By the Global Reporting Initiative (GRI) and University of Stellenbosch Business School (USB)
  • JULY 2020

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What is the report about?

The Carrots & Sticks (C&S) reports take stock of the regulatory landscape of non-financial and sustainability reporting. It shows how sustainability reporting has become more mainstream and more mature over the years.

The 2020 edition of this report gives public and private sector users an overview of hundreds of reporting provisions covering more than 80 countries, including the world’s 60 largest economies. This includes mandatory and voluntary requirements and guidance from regulators, capital markets, professional associations, industry bodies and other organisations.

The ESG&E (environmental, social, governance, & economic and general) agenda continues to provide reporting topics. Climate change, human rights, labour and anti-corruption are dominant themes among disclosure requirements.

Carrots & Sticks is an initiative of the Global Reporting Initiative (GRI) and the University of Stellenbosch Business School (USB), with contributions by the UN Environment Programme (UNEP).

What did the report find?

Key findings of C&S 2020 include the following:

  • The UN’s Sustainable Development Goals (SDGs) have become a global framework that influences policy development. Yet, very few of the policies covered in the 2020 C&S report explicitly refer to the SDGs. The SDGs most often addressed in reporting provisions are SDG 12 on responsible production and consumption, SDG 16 on inclusive societies and accountable institutions, as well as SDG 8 on decent work and economic growth. Few provisions provide for business disclosure on SDGs 3 to 4, linked to health and education, although the Covid-19 pandemic may change this. As one interviewee said, “The SDGs are useful in two ways. Firstly, companies can measure and report their impacts in relation to the SDGs and implement new ideas that improve the business, reducing their footprint and minimizing overall negative impacts. Secondly, organizations can use the SDGs as inspiration and design criteria for new product development and business process innovation, developing products and services that contribute to solving real global challenges while meeting human needs.”
  • Europe continues to drive the ESG disclosure agenda, accounting for 245 reporting instruments, while the Asian markets (174) are increasingly active. North America has a low number of reporting provisions (47), a fact that in part reflects the lower number of national jurisdictions in North America. At country level, higher numbers of reporting provisions, including reporting requirements and resources, were found in the UK, Spain, USA, Canada, Brazil, Colombia, Japan, China, India and South Africa.
  • Most reporting provisions are issued by governmental bodies, rising by 74% since 2016 to almost 400, while engagement by financial market regulators including central banks has also grown significantly. Provisions targeting the private sector, and in particular large and listed companies, account for around 90% of the C&S 2020 listing. Provisions that apply to SMEs and the public sector are largely unchanged since the 2016 C&S report.
  • The disclosure of decision-useful information is becoming increasingly important to decision makers and stakeholders of reporting organisations. Greater collaboration is therefore needed among standard setters, reporters, information users, regulators and policymakers to streamline requirements and improve the quality of disclosure. Also, agreement on the preferred disclosure format is still lacking.

The 2020 Carrots & Sticks report primarily targets policymakers from the governmental, regulatory and non-profit communities. It supports their drive to develop regulatory frameworks and requirements that secure the disclosure of more relevant information. This in effect supports accountable stewardship, leading to a more sustainable future.

More about the report

  • Carrots & Sticks 2020 – Sustainability reporting policy: Global trends in disclosure as the ESG agenda goes mainstream. Global Reporting Initiative (GRI) and the University of Stellenbosch Business School (USB).

Download full report

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finance function leadership in the integrated enterprise

CFO as value creator – finance function leadership in the integrated enterprise

The Steinhoff Saga Management review - University of Stellenbosch Business School

January – June 2020

finance function leadership in the integrated enterprise

CFO as value creator – finance function leadership in the integrated enterprise

  • By Shari Littan, Kristine Brands, Dr Cornis Van der Lugt and Brad Monterio
  • JULY 2020

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What is the report about?

In the past, corporate social responsibility was often seen as a stand-alone project farmed out to the marketing department. However, stakeholders like customers, employees, policy makers and citizens increasingly call for an integrated approach to sustainable business. Over and above making profit, businesses must also play a role in global issues such as corruption, climate change, deforestation, ocean plastic pollution, and the fair use of human talent, which includes embracing diversity and inclusion, and engaging with employees.

What role should the chief finance officer (CFO) play to help ensure a sustainable business? To find out, the authors of this report interviewed various CFOs and grouped the findings into 10 themes:

  • Governance, champions, and collaboration
  • Sustainability 101: Information sharing on the basics
  • Improving the reporting agenda
  • Improving information quality
  • Decarbonising operations
  • Measuring the value of human capital resources
  • Improving supply chain oversight
  • Risk management: Climate and other material ESG risks
  • Operations, strategy and planning
  • Connecting sustainable business performance measurements to value.

The CFA as value creator

Companies all over the world are taking steps to incorporate sustainable business activities and adopt an integrated approach to their governance, strategy and operations. This evolution is affecting the day-to-day role of the CFO and the finance and accounting professionals in the CFO’s reporting unit (collectively, finance).

The CFO is uniquely qualified to serve as a critical collaborator in sustainable business and integrated enterprise activities. These activities include evaluating project alternatives, implementing new work streams, delivering decision-quality information, assessing performance, and measuring connections to value.

The board and executives establish the company’s purpose and values while the CFO takes a leadership role by instituting structures for collaboration. Finance’s expertise brings a targeted approach to measure and analyse data and improve processes. In this role, finance serves as a true business partner helping the organisation to draw up a strategy, assess risks, and innovate for the long term.

As one interviewee said, “Once the finance people get involved, they are more demanding and don’t simply take numbers at face value. Their involvement helps with the realization that the focus is not just on fluffy stuff.”

It starts with collaboration

When the CFO team and the sustainable business team begin to collaborate, it typically leads to a series of meetings that can be described as “Sustainability 101”. This partnership brings tremendous value, also in terms of mainstreaming external sustainability reporting.

For CFOs to take on leadership responsibilities, they need to gather decision-useful information across different disciplines, including the concepts around sustainable business and fostering an integrated enterprise. Equipped with best practices, they become real value creators in their organisations.

More about the report

  • Littan, S.H., Brands, K.M., Van der Lugt, C.T., & Monterio, B.J. (2020). CFO as value creator— finance function leadership in the integrated enterprise. Institute of Management Accountants, and the Association of Accountants and Financial Professionals in Business.
  • Dr Cornelis van der Lugt is a Senior Lecturer at the University of Stellenbosch Business School.

Download full report

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