The Efficacy of Voluntary Disclosure: A Study of Water Disclosure by Mining Companies Using the Global Reporting Initiative Framework

By Dennis, Philip; Connole, Heidi et al. | Journal of Legal, Ethical and Regulatory Issues, January 1, 2015 | Go to article overview

The Efficacy of Voluntary Disclosure: A Study of Water Disclosure by Mining Companies Using the Global Reporting Initiative Framework


Dennis, Philip, Connole, Heidi, Kraut, Marla, Journal of Legal, Ethical and Regulatory Issues


INTRODUCTION

The Global Reporting Initiative is a multi-stakeholder network facilitating the development and application of sustainability reporting. Conceived as a vehicle to advance the standardization of non-financial corporate reporting in 1997 (GRI a, 2007), the GRI has been working to develop guidelines for sustainability reporting since the late 1990s and as of the time of this study, was on its "third generation of Guidelines (G3)" (GRI, 2006 b). The G3 Guidelines, the foundation of the GRI Sustainability Reporting Framework, set out basic principles and standard disclosures for companies using the Sustainability Reporting Framework to follow in order to ensure completeness of reporting.

Corporate issuance of sustainability reports is a wholly voluntary endeavor. Since 2003, the year-over-year growth rate of sustainability reports based on the GRI framework has consistently increased annually by 20%. Despite the growing interest in participating in sustainability reporting, there are questions of the quality and comprehensiveness of the information that is reported. Adams and Evans (2004) identified completeness and credibility as two limitations relevant to all forms of social performance reporting due to its nature as voluntary and self-monitored.

In order to establish a baseline from which the substantive content of sustainability report disclosures using the GRI framework can be discussed, the authors have identified water as the subject of analysis in this study of sustainability reporting. The GRI identifies both water specific and water-referencing indicators which allow a comprehensive examination of how this specific resource is captured in sustainability reports. Company reports from the mining industry were chosen in order to examine reporting within a water-intensive industry (the mining industry both utilizes and impacts water resources in a significant way).

This study was confined to a single year's (2010) reports in order to provide a "snap-shot" of the comprehensiveness of the reporting.

Corporate Disclosure Requirements

Corporate disclosure requirements and corporate reporting are based on the general premise that information about a firm must be made available in order for informed decision-making. The traditional approach to corporate reporting has focused primarily on financial performance. Notwithstanding Securities and Exchange Commission (SEC) and Financial Accounting Standards Board (FASB) standards requiring "material events or uncertainties known to management that would cause reported financial information not to be necessarily indicative of future operating results or future financial condition" (17 CFR 229.303), environmental disclosures have gone under-reported (Chan-Fishel, 2006; Repetto, 2005). Further, according to Levinson et al. (2008, p.3), "corporate disclosure of water-related risks is seriously inadequate and is typically included in environmental statements prepared for public relations purposes rather than in the regulatory filings on which most investors rely."

Morikawa et al. (2007) performed a study of corporate sustainability and social responsibility reporting on water in 11 water-intensive industries and found the majority of companies in those industries do report water information in their non-financial reports, but there was a general lack of understandability and usefulness of the data, and inconsistency with regard to measurement hindered comparability of the data. The mining industry was one of the water-intensive industries covered by this study. Among the mining companies reviewed, water use measurement, stakeholder engagement, commitment to continuous improvement, strategic partnerships, and water policy or management approach statements were commonly reported, while water risk assessment was not commonly reported (Morikawa et al., 2007).

Corporate Social Responsibility and Sustainability

In addition to the practical aspect of disclosing water related risks in response to regulatory requirements, business is now faced with new expectations for corporate disclosure. …

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