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Federal efforts to require companies to report on environmental impacts and other sustainability measures in their financial filings have all but stalled, victims of the recession and a loss of momentum for federal climate policy.

But while official efforts have deflated, independent groups are ratcheting up the pressure. The case for greater transparency got a push today, with the announcement that the Amsterdam-based Global Reporting Initiative (GRI), is launching a U.S. effort to guide more American corporations to adapt GRI’s framework to disclose environmental, social and governance performance. Advocates make the case that increased transparency not only tends to boost profitability, but that such details are legally material to corporate financial statements.

Dubbed Focal Point USA, GRI’s US initiative debuted today at a breakfast meeting at NYSE Euronext on Wall Street. Pointing out that only hundreds of tens of thousands of US companies strive to document their broader impact, GRI Chief Executive Ernst Ligteringen asked the 230 attendees, “Why is America letting the world lead in sustainability reporting?”

Born of 1997 U.N. initiative, GRI has over the past decade evolved rules over addressing the needs of different sectors, from mining to media, and worked to win official endorsement of its guidelines from standards bodies such as the OECD and UN.

The value of sustainability practices as crucial to risk management echoed through comments made by a panel of executives whose companies presently follow GRI reporting guidelines. “What is the justification of the 75,000 corporations who don’t report on ESG [environmental, social and governance] issues to fly blind?” asked David Vidal, director, Center For Corporate Citizenship And Sustainability at The Conference Board.

At Avon, which relies on a sales force of 6.5 million independent resellers, GRI’s framework emerged a useful bridge, linking sustainability advocates among the company’s senior ranks, with financial executives. “GRI gives a formal framework that the bean counters can relate too, and get behind,” said Susan Arnot Heaney, Avon’s director of corporate responsibility.

Issues of sustainability resonate especially strongly with Avon’s nearly all-female sales force, Heaney emphasized, creating upward pressure on corporate managers. Avon has over one million direct sales representatives in Brazil alone, a group larger than the nation’s army, Heaney explained.

Simply standardizing sustainability data into more accessible standard forms has enhanced financial markets’ regard for the value of the information, said Curtis Ravenel, Director of Sustainability Initiatives, at Bloomberg LLP. The financial and news service recently has begun to include sustainability indicators alongside conventional financial analytics on one of the most widely viewed data screens in the Bloomberg terminal.

“As a private company Bloomberg didn’t have a culture of reporting or transparency,” said Ravenel. The media company plans to release its first GRI compliant report in 2011, following a three-year effort to compile the necessary data. The exercise helped convince management of the value of reporting on sustainability data internally, and via its terminals, Ravenel explained.

“This is a dynamic time for the Global Reporting Initiative, with sustainability reporting becoming a vital part of the business strategies of an increasing number of companies, including in the US,” said Mike Wallace, Director of the Global Reporting Initiative’s Focal Point USA.

The US launch follows similar announcements in China and India. Following the New York event, Focal Point USA is planning a breakfast meeting hosted by The World Bank in Washington, DC on February 3 and a roundtable event hosted by Ceres in Boston on February 4. For more information about these events and about GRI’s Focal Point USA, contact Mike Wallace or more information here.

_{NYSE photo CC-licensed by Francisco Diez.}

 

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For all the attention flowing into greener corporate practices, there’s scant agreement about how best to document these efforts. Standalone sustainability reports have become de rigueur for most multinationals, pressure is growing to integrate environmental and sustainability practices into a single annual report.

The push for such so-called “integrated reporting” was the topic of a meeting at the BSR 2010 conference, When CSR and Financial Reporting Meet: Integrated Reporting, where “AK”Adam Kanzer, managing director and general counsel of Domini Social Investments, emphasized that the issue is likely to end up on the “to do” lists for many boards of directors and investment relations offices as the SEC moves towards setting rules about treating the “materiality” of sustainability issues to earnings and reporting.

In advance of SEC rulemaking, Kanzer points out many companies are headed in the same direction for strategic reasons. Over 90% of CEOs, when polled, report that sustainability is critical to future success. “If it’s material to business, then it’s inadequate not to include it in the annual report,” Kanzer said. “The ultimate question is: why do separate reports?”

As yet, just a handful of companies — mostly European, such as Astra Zeneca — are producing integrated reports, and there is scant consensus on how to prepare such reports. And while guidelines remain hazy, Kanzer said, lawyers in investment relations offices are always likely to opt out until rules are set.

“The SEC definition of materiality is based on what a reasonable investor would need to make an investment or voting decision,” said Kanzer. “Take that broad interpretation, then put it in hands of corporate counsel, and you end up with boilerplate disclosure, something not very useful to investors.”

Investors should therefore be pressing for integrated reporting ahead of the rules, Kanzer argues. Mainstream financial analysts are more likely to integrate these issues into their recommendations when sustainability factors are presented along side conventional financial metrics in an same annual report. Left to an external report, Kanzer concedes, sustainability issues are more likely to be ignored.

Kanzer, who has served on an SEC advisory committee on sustainability reporting standards, explained that determining what is “material” to earnings is still more art than science, which complicates the decision about how to report such issues.

For instance, Kanzer recounted, Costco recently changed its seafood purchasing practices in response to pressure from Greenpeace and other NGOs. “If Bluefin tuna goes extinct, neither Costco nor its competitors will sell it anymore,” so they’ll be equally affected, plus sales reduction will be undetectable to the company’s bottom line, Kanzer explained. “So it’s hard to make a case that the decision is material to Costco’s financial reporting. But it is clearly material to our evaluation or the company as an investor.”

_{Photo CC-licensed by featheredtar.}