TRANSPARENCY IS KEY TO AN ORGANIZATION’S SUCCESS

In a competitive business environment like Sri Lanka, many companies may place sustainable practices and transparency – which enable their stakeholders, the media and the general public to gain a greater understanding of their activities – at the bottom of their list of priorities.

However, the pandemic has proven the viability of the environmental, social and governance (ESG) agenda for stakeholders and investors. It presents both an enormous challenge and tremendous opportunities for reaching the 2030 Agenda and the Sustainable Development Goals (SDGs).

The SDGs are a roadmap for humanity. They encompass almost every aspect of human and planetary wellbeing and, if met, will provide a stable and prosperous life for every person and ensure the health of the planet. As such, this pressing need has brought to the fore the need to protect our precious environment and communities and the need to adopt best practices in corporate social responsibility (CSR). This has never been of greater importance than now.

The impact of the pandemic on business activities and business models also entails rethinking reporting practices. The pandemic has created an enormous need for investors and stakeholders in general for future-oriented information relating to the impacts of this event on organizations.

Integrated reporting, therefore, is an ideal tool to provide information related to the effects of the pandemic and provide a holistic view of the prospects of organizations. In this context, organizations need to come together and coalesce around best practice metrics and disclosures. We need to work to develop widely agreed-upon and high-quality standards.

That is why ACCA Sri Lanka’s committed to highlighting corporate accountability and transparency in our Sustainability Reporting Awards which recognise those organisations which report and disclose environmental, social or full sustainability information. The awards – in their twelfth year – also seek to encourage the adoption of integrated reporting which encompasses environmental, social and sustainability information, to raise awareness of corporate transparency issues and increase accountability for responsiveness to stakeholders.

ACCA has undertaken a lot of work in the sustainability arena over the past years. In 2014 we issued a paper called Sustainability Matters which looked at six policy topics, selected based on ACCA’s sustainability research – which are sustainability reporting, integrated reporting, the assurance of non-financial reporting and disclosure, climate change, natural capital, and the green economy. The policies serve as a reference for ACCA’s key stakeholders, as well as a means of summarising the outcomes and conclusions of ACCA’s research activities.

Accountants are well placed to use their skills and experience and apply these to help achieve a more sustainable future. Their professional skill-set in developing metrics, information systems, reporting and designing economic instruments, among other business attributes, will help make our economy greener, our companies more accountable, and achieve global and national measures that look beyond economic output to factor in non-traditional measures, such as human well-being and natural capital. In addition, the recent experience in developing the international financial reporting standards can be shared to develop global sustainability reporting standards and frameworks.

As we face the increasing challenges of climate adaptation, social inequality, protecting human rights, and a natural balance, the engagement of accountants in addressing these issues is critical. These policies reflect what ACCA sees as being the very real and material issues confronting business and the profession – and ultimately, ACCA believes that accountants can and will rise to these challenges.

The awards we hold not only aim to celebrate and endorse sustainability reporting but also seek to encourage the adoption of integrated reporting which encompasses environmental, social and sustainability information, to raise awareness of corporate transparency issues and increase accountability for responsiveness to stakeholders.

I am pleased to share this message on the occasion of the ACCA Sustainability Reporting Awards 2021. I congratulate the winners of this year’s awards and ACCA for its continuous commitment, over the last 15 years, in supporting sustainable growth through improved corporate reporting.

Sustainability reporting is seen as an enabler of the Sustainable Development Goals (SDGs). At a time when the world faces a global health and socio-economic crisis of an unforeseen magnitude, the SDGs remain more relevant than ever. We are at a critical juncture that requires an integrated, whole-of-society approach to not only accelerate progress towards the goals but prevents rapid deceleration.

Professional membership bodies have a critical role to play in this and I am pleased to note ACCA’s commitment to the SDGs with the prioritization of 9 goals where it adds the most value. The United Nations Development Programme (UNDP) is pleased to be associated with this year’s awards and I wish ACCA every success in its endeavours to support sustainable development in Sri Lanka.

ACCA Sri Lanka initiative on Sustainability Reporting Awards continued since 2004, recognizing the strong link between business strategy, corporate governance and sustainability from the very inception. The increasing emphasis on meaningful efforts towards arresting climate change attracted the attention of the governments, regulators, policymakers, businesses, institutional investors and asset managers throughout the world for building a better planet in the long term beyond the pandemic. The current move towards financial capital is increasingly drawn to businesses that are trusted, ethical, and environmentally friendly together with their ability to create long-term value for all in the society further strengthening the importance of comprehensive disclosures in the sustainability reports of business organizations.

REPORT OF JUDGES

Objectives

Organisations are under mounting pressure from investors, governments, non-governmental organisations and other stakeholders to demonstrate their efforts to manage the impacts of their operations. Public, environmental, social and sustainability reporting is now an important route through which corporate accountability and integrity can be demonstrated. ACCA awards assist in pushing these issues to the forefront.

ACCA Sri Lanka Awards for Sustainability Reporting was launched in November 2004. The objectives of the awards are to:

• reward and recognise those organisations which report and disclose environmental, social or full sustainability information within Sri Lanka
• encourage the uptake of environmental, social and/or sustainability reporting
• raise awareness on corporate transparency issues and increase accountability of responsiveness to stakeholders All organisations have an impact on the environment and society. These impacts can be direct (from day to day operations) or indirect (via the products used and services provided).

All organisations should be accountable to their stakeholders and as such, these Awards are open to all sectors and organisations of all sizes.

KEY FEATURES OF SUSTAINABILITY REPORTING:

An excellent sustainability report clearly acknowledges and explains the economic, environmental and social impact on its internal and external stakeholders. The report also demonstrates the organisation’s policies, targets and long term objectives towards the goal of sustainable development.

PANEL OF JUDGES:

Franklyn Amerasinghe, Consultant to the Panel of Judges, Sriyani Hulugalle, Dr Kennedy D Gunawardana, Dinesh Weerakkody, and Ramani Gunatilaka.

JUDGING CRITERIA :

The judging panel assessed the applications and focused on the following three key elements of an excellent report:

• Completeness
• Credibility
• Communication

EXAMPLES OF INDICATORS IN THE ACCA CRITERIA

Completeness (40%)

• Corporate context Key (direct and indirect) environmental impacts Environmental policy and management commitment
• Environmental targets and objectives
• Scope of the report (by an entity)
• Reporting and accounting policies
• Report audience identified

Credibility (35%)

• Contingency planning and risk management
• Compliance/non-compliance record
• Environmental impact data
• Environmental financial statements and full cost accounting
• Approaches to stakeholder dialogue
• Third-party statement

Communication (25%)

• Layout and appearance
• Understandability, readability, accessibility, appropriate length
• Innovative approaches
• Availability of a summary report and/or executive summary
• Use of internet
• Appropriateness of graphs, illustrations, photographs

JUDGES & ACCA COMMENTS

The judges for the year were Sriyani Hulugalle, Dr Kennedy D Gunawardana, Dinesh Weerakkody, and Ramani Gunatilaka. Franklyn Amerasinghe acted as a Consultant to the Judges.

The reports were by and large integrated and followed the International Reporting Council (IIRC) rules. Those who participated were conscious of their ability to meet the requirements of the contest and conformed to a focus on the performance of the organization relative to its economic sustainability, its concern and dedication to sustaining the planet and being relevant to the aspirations of people within and outside the organization. Many of them reported extensively on the response to the pandemic and consequential lockdowns.

The judges commented on some weaknesses in reporting especially in relation to the response from stakeholders pertaining to performance which was visible to them, and the lessons learnt from such interactions. The judges were concerned about assessing the challenges in the various sectors of business and how they coped giving special attention to how the human capital was treated in extraordinary and adverse conditions. The judges felt that some sector-specific impacts arising from pandemic conditions were ignored or inadequately dealt with.

The challenge is for the organization to produce a comprehensive report which has all the details required by a stakeholder, but although a comment was made last year as well, some organizations feel the weight of the report is an indication of its comprehensiveness! The report should not become cumbersome to evaluate performance. Easy access to the data in relation to performance, whether it compares with competitors, and expectations of shareholders is what is sought.

In response to the observations by the judges previously, many reports had focused on gender. Diversity is a key issue that needs attention in our society which strives to be inclusive and perhaps other details of the workforce could be revealing.

It is noted with great satisfaction that nearly all the companies checked their reports for compliance with the GRI which aids comprehensiveness. Because the reports are integrated, many organizations felt that one assurance from the external auditor would adequately cover sustainability expenses also, but the lack of an assurance that covers project costs is visible in many reports. The judges would like to congratulate all the participants who have made an effort to improve on their reporting and encourage them to keep up the good work.

FUTURE DIRECTIONS:

The comments are of a general nature:

• The need to focus on how the Pandemic caused new thinking in relation to business lines, finances and the human resources employed within and outside the workplaces even in the future. The judges wish to propose that companies should be addressing the issue of safe employment and productivity when employees work from outside physical supervisory control and report on failures and success.
• The companies individually, and their Chambers and Associations, need to show concern for retraining displaced persons and changing the mindset of the youth. An interesting challenge would be adjusting to the new retirement policy of the government.
• The Banks and Financial Institutions continue to do well and the challenge is for them to be more conscious of their obligation to reach out to micro businesses and people in the rural areas in their allocation of funds.
• There could be more information of actual interface with stakeholders and their concerns.
• Companies should have an annual action plan for the year, indicate the champions and report on implementation to demonstrate their sincere commitment to sustainability. A report of the specific functioning of the internal structures for sustainability and targets set would be useful in assessing the credibility of the report.
• An additional connected point is that by commissioning outsiders to do their reports, companies must ensure that the material which eventually goes into the report is factual.
• The report needs to have verified data that can be done in a more precise and concise manner without the need for voluminous publications.