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A view from the Top: Interview with Nelmara Arbex, Chief Advisor on Innovation and Reporting at GRI – The road to mandatory sustainability disclosure in North America
May 13, 2016
By Kalee Brown
SAR: How do you see mandatory sustainability reporting evolving in North America?
NA: There is a global trend around mandatory disclosures, as environmental reporting has been a requirement in many jurisdictions. This will continue to grow as governments become more involved with sustainability reporting and eventually enforce mandatory disclosures such as climate change and human rights requirements. This trend has even become apparent in different sectors such as the oil and gas industry in the energy sector. I think North America will follow suit and play a critical role in tackling major issues such as ecosystems protection, waste management, and climate change. I am confident that society and regulators will begin asking more companies, especially larger companies, to disclose their environmental and social impact or about how they mitigate related issues or help society tackle them.
SAR: Which organization do you think would mandate that?
NA: In many countries, organizations like the U.S. Securities and Exchange Commission (SEC) define which type of disclosures should be published by companies, or at least disclosed to certain organizations like governmental agencies. Therefore, there is a good chance that the SEC will play a leading role with mandatory disclosures in the United States and I think companies are expecting them to.
SAR: What is the role of the investment community on the road to mandatory disclosure in North America?
NA: I have attended numerous forums in North America addressing sustainability reporting, performance disclosures, and regulations and the consensus is that companies are waiting for the SEC to enforce mandatory disclosures. On the other hand, investors play an important role in shaping this and will likely play an even more important role in the future. However, the way in which investors are analyzing risks has changed. There are new topics emerging in risk analysis, especially those related to sustainability performance. Investors are becoming more interested in environmental impact and issues, social impact, ethics in governance, and other related sustainability topics.
SAR: If the SEC enforces mandatory disclosures, how do you think the GRI would fit into this?
NA: GRI created an internationally accepted language for measuring social and environmental impact to describe companies’ commitment to challenges that society is facing. GRI guidelines and materials were created using a global dialogue involving representatives from different businesses, trade unions and pension funds from the US and Canada. In this sense, GRI could be an inspiration and be used as an asset in creating these disclosures. I think the main role that GRI will play is to offer an internationally accepted platform that can be used as a starting point or a reference for those that want to regulate. Secondly, GRI could use its network to work together with any organization that is regulating this field to accelerate the process and get companies and stakeholders to participate.
SAR: GRI predicts a new format for sustainability data exchange using search engines. Do you see this as an eXtensible Business Reporting Language (XBRL) initiative requiring data tagging or more of an online Google language?
NA: The next generation of reporting will be digital and access to this information will be much easier so users can analyze this information to make correlations and participate in discussions. This will likely be made up of many different formats. I think regulators in government prefer the tagging system, for example the XBRL taxonomy, because it defines exactly which type of information is needed and the transaction costs for producing it, as if you’re attaching a barcode to your indicator. However, it’s important to note that companies will have to communicate with stakeholders and address society more frequently and participate in real-time data exchange. Stakeholders will no longer be satisfied with waiting a year to learn about a given company’s social and environmental impact. This is what we refer to as the “interactive side” of the next decade of sustainability disclosures. In regards to mandatory disclosure, there will likely be requirements related to XBRL taxonomy. I also believe a Google type of search, a super Google or an analytical Google if you will, may exist in the future.
SAR: What level of commitment to a single formalized taxonomy do you predict will be required? How extensive would you envision it and who would develop it?
NA: I think the more we transition towards mandatory reporting, the more regulators enter into this field because they’re interested in how companies are performing in relation to the challenges society is trying to overcome. This will likely create a general trend for taxonomy, as these institutions often prefer this method. Given my global experience in this area, I think that although hundreds of North American companies already report extremely well using GRI guidelines and many other standards, regulations will still play an important role in North America.