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From Transparency to Performance: A new Method for Industry Based Sustainability Reporting on Key Issues

The IRI at Harvard and Arup collaborate on materiality based approach to reporting that will enable companies to focus disclosure efforts and improve sustainability performance

From Transparency to Performance: A new Method for Industry Based Sustainability Reporting on Key Issues

The IRI at Harvard and Arup collaborate on materiality based approach to reporting that will enable companies to focus disclosure efforts and improve sustainability performance

Published 09-16-10

Submitted by Initiative for Responsible Investment

A research report published in June by the Initiative for Responsible Investment (IRI), a project of the Hauser Center for Nonprofit Organizations at Harvard University, puts forth a model system for developing key performance indicators (KPIs) appropriate for mandatory sustainability reporting. The report was written in conjunction with Arup.

The report, From Transparency to Performance: Industry-Based Sustainability Reporting on Key Issues, is co-authored by Steve Lydenberg, a senior research fellow of the Hauser Center and chief investment officer of Domini Social Investments LLC, Jean Rogers, a principal at Arup, and David Wood, director of the IRI.

"An increasing number of governments and stock exchanges encourage or require sustainability reporting," notes Lydenberg. "Corporations and financial markets in the United States run the risk of diminishing their competitiveness in sustainability."

The report develops a system to identify key KPIs by industry sector, with the goal of creating a regulatory regime with concise, comparable metrics that set a mandatory floor for sustainability reporting. The report applies this method to five sample industries to demonstrate how such a system might hypothetically be implemented within a US reporting context. These KPIs are based on three core principles -- simplicity, materiality, and transparency.

"We believe that clear, concise guidance to companies regarding what is material to them has the potential to drive companies to compete on sustainability measures, and help entire sectors move in a more sustainable direction," says Rogers.

Among the report's key findings are:

  • Mandatory reporting regimes create better disclosure, which, when incorporating key sustainability performance indicators, can lead to better performance in those areas most crucial to stockowners, other stakeholders, and society.

  • Defining a limited number of KPIs that relate to core business activities can help contribute to a balanced reporting regime that serves the dual demands of comprehensiveness and practicability.

  • A method for identifying KPIs for all industry sectors that is simple, material and transparent can be developed and implemented with a reasonable degree of effort by oversight bodies.

  • Mandatory reporting on a basic of set of KPIs is ultimately necessary to fill varying disclosure needs of our diverse society and complete the convergence of financial and sustainability reporting.

According to Wood, "Only a system involving mandatory KPI reporting will assure that this crucial data on corporate social performance is available to the wide range of stakeholders for whom it has value."

A copy of the report can be downloaded HERE.

View CSRwire CEO's, Joe Sibilia's, blog series about the IRI's report, From Transparency to Performance - Industry-Based Sustainability Reporting on Key Issues HERE.

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Initiative for Responsible Investment

Initiative for Responsible Investment

The Initiative for Responsible Investment (IRI), a project at the Hauser Center for Non-Profit Organizations at the Harvard Kennedy School of Government, was founded to research and catalyze markets for responsible investment. The IRI focuses on responsible investment theory and practice across asset classes, and on the information that investors need to make informed choices that result in the generation of long-term wealth for investors and society alike.

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