Special report: Eelco van der Enden on the importance of sustainability reporting
By CA magazine
30 March 2023
Raising the standard
A series of announcements over the coming months is set to have a profound effect on how companies publish sustainability reports. They could significantly quicken the pace of the war against greenwashing. Ahead of what promises to be an important period of change, ICAS will be hosting a special summit on sustainability reporting, in London, on 26 April, with speakers such as Judy Kuszewski, Chair of the Global Sustainability Standards Board, which oversees the development of the Global Reporting Initiative (GRI)’s standards. This 10-page report features an interview with Eelco van der Enden, CEO of the GRI, alongside more details about the summit. Read below.
Ideally, reporting standards should become mandatory. But this, as outlined by van der Enden, can often feel like a complex world of various organisations competing to do much the same thing. ICAS supports mandating standards, but believes those of the International Sustainability Standards Board (ISSB) do not go far enough. We would prefer a reporting approach involving an alignment between the ISSB and GRI standards.
More broadly, sustainability is fast becoming an important part of an accountant’s day-to-day role. CAs are exceptionally well placed to work with sustainability experts and decision makers to drive the changes needed in the business, finance and public sectors to meet our collective UK and global net-zero targets. We speak to three CAs who are immersed in the business of sustainability. They explain how it impacts both their work and that of their clients. Read here.
And to highlight how big brands have used sustainability for their own ends – and to underline why the issue is so important – we close with a brief history of greenwashing. Read here.
As Chief Executive of one of the leading global standard-setters, Eelco van der Enden is at the forefront of the push to make sustainability part and parcel of accounting. He tells Kitty Finstad why financial professionals, and wider business, face a test of character
Eelco van der Enden does not mince words with his definition of greenwashing. “It’s fraud,” he says. “Plain and simple.” The CEO of the Global Reporting Initiative (GRI), speaking to CA magazine from a car weaving its way through the traffic of downtown Manila, is clearly a man on a campaign for transparency. Over his 25-year career, the Netherlands-born, Brussels-based tax accountant, author and ESG (environment, social, governance) leader has witnessed his share of business scenarios, from the complexities of compliance to what he describes as the “privileges of a Chapter 11”. Not, perhaps, a natural route to the world of global sustainability standards reform he oversees today, but the dots are all there to connect.
After completing a degree in tax law at University of Amsterdam, van der Enden went on work in compliance at Capgemini, becoming involved in treasury, risk management and corporate finance. It was here that he was made responsible for annual reporting packages and risk management reports. “This was when I was really confronted by what I would say and how I would say it: that risk management is not about getting the lowest premiums on your insurance policies but actually about mitigating risks,” he explains.
Getting into the gritty detail of social and environmental issues “really opened my eyes on how to deal with them and how to report on them – understanding that you’ve got to at least try to take charge of some of these issues. Because inevitably some of these topics would cause a problem, either with the audit committee or the bottom line,” he says.
A 15-year stretch as Partner at PwC followed, during which ESG really got under van der Enden’s skin. He was made Global ESG Platform Leader for Tax, Legal, People and Organisation Services, as well as a member of PwC’s global sustainability steering board. This deep understanding of ESG standard-setting has informed his governance and strategic visions for GRI, which he joined as CEO in early 2022.
But van der Enden is not someone who fails to see the bigger operational picture. “The digital transformation of our organisation – and I mean becoming fully digital – alongside our decentralisation strategy, our financial resilience and becoming more independent as a standard-setter” are just some of the items on his agenda at GRI, including vital on-the-ground relationship-building in the not-for-profit’s seven global offices. He’s committed to it remaining a not-for-profit organisation, but admits that “I love profits and I need GRI to be profitable” for it to grow the use of its standards in an “extremely competitive market”.
That market includes the International Financial Reporting Standards and its International Sustainability Standards Board. “We do not have the financial power that these bodies have,” says van der Enden. “But we do know the legislative power that an organisation like IFAC [International Federation of Accountants] has under the European Commission’s Corporate Sustainability Reporting Directive. And also the fear that the Securities and Exchange Commission in the US can inspire. And so we have to work hard to convince decision-makers that there is added value in using our standards for business.”
Those standards are set by the GRI’s own Global Sustainability Standards Board (GSSB), the independent body led from 1 April by Carol Adams, an international authority in corporate and public sector reporting. Under the aegis of the Due Process Oversight Committee, the GSSB works with other teams that provide information and support outside the GRI. It’s a complex multi-stakeholder operation that demands sufficient funding and, of course, its own risk management practices.
“So my role,” says van der Enden, “is to make sure that the strategy of GRI and our purpose remains intact while we enable the organisation to pursue its objectives. That within the seven offices we have across the world [Johannesburg (Africa), Amsterdam (Europe), Singapore (ASEAN), Hong Kong (Greater China Region), Bogotá (Latin America), New York (North America), New Delhi (South Asia), plus a satellite operation in Brussels] we make the correct decisions when it comes to using our precious resources in the most optimal way.”
In terms of improving and progressing sustainability reporting globally, van der Enden’s view is, as with greenwashing, unequivocal: make it mandatory and apply it to every sector. “It should be the same as with financial reporting – there are no sectors excluded,” he says.
“ESG reporting is relevant for investors, but also for other stakeholders and for society as a whole. Reporting is in fact long-term risk management. The issue we face now is the comparability of data and creating a level playing field. If you have no standard, it’s difficult for the profession to assess the quality of any reforms that are implemented.”
No hiding place
Mandatory adherence to global standards will, says van der Enden, lead to a global comprehensive baseline. However, he concedes that for now, he supports GRI’s standards remaining voluntary because of their relatively widespread adoption, especially in certain regions: “In Singapore, for example, the uptake is 100% by major listed entities. In Malaysia and the Philippines, it’s around 68% – it’s already widely used when it’s not mandatory.”
Asked about the fine line between reporting standards and greenwashing, van der Enden is clear that companies that think of their annual reports as something of a marketing gimmick will have nowhere to hide. He cites a couple of cases within the mining industry which appeared on the surface to be compliant when it came to pollution and worker safety. “In reality, the precautions taken were completely inadequate, leading to loss of life and pollution,” he says.
“I’ve also seen cases where companies made admirable net-zero commitments, but suddenly when the Russian gas supply stopped flowing, they were out of business because they hadn’t yet invested in a transformation plan for procuring or designing sustainable energy strategies. So what was that net-zero commitment worth? We also know of a couple of football clubs where it was not safe for women to work.
“So ESG reports aren’t just something for the marketing calendar. When you provide information upon which investors and other stakeholders make decisions, and they then make a decision based on a false representation of the facts… well, if you did that in a financial report, you would call it book-keeping fraud, or financial fraud – and that has repercussions in terms of reputational damage, lawsuits, criminal investigations… a hugely negative impact on the value of investments.
“If you provide a sustainability report that says everything is roses and moonlight and we’re all living happily together and that then appears not to be true, and I made an investment in a company that has a far higher risk profile than I was made to believe, then I call your reporting fraud. As simple as that.”
One approach to compliant reporting is the adoption of the concept of double materiality – financial materiality and impact materiality. “Everyone who works in reporting knows international accounting standards, which have been designed to provide financially material information on behalf of investors. That’s it. Financially relevant information around sustainability topics – for the benefit of investors. That’s all about ‘outside in’,” he says.
“But what are the enterprise value creative or destructive effects of environmental, social and governance issues on the bottom line? That kind of impact materiality is what GRI does. It means we enable businesses to report on their impacts, the effects those businesses have on the environment and socio-economic issues while they pursue their strategic objectives. This is an ‘inside out’ approach. In other words, what are the effects of business on the environment and society? So when you add up financial and impact effects, you have double materiality. And that’s exactly what the European Sustainability Reporting Standards are all about.”
Comply or explain
So how can a CA, for example, have a role in stamping out greenwashing and ensuring that companies are accurately measuring, reporting, communicating and improving their ESG targets?
“Firstly it’s about data management,” he says. “Having in place internal reporting and monitoring systems that can track data, including financial data. It’s not easy – I know this from direct experience. It’s a matter of ‘comply or explain’, and our standards at GRI mean that if you’re unsure about how to report on certain areas, then it’s better to explain why not. But my best advice is to make a plan, stick to that plan, be diligent and also accept that things will not always go smoothly every time.
“So you must dare to report on the things that do not go well. That’s not easy in litigious societies like, for example, the US. However, misrepresenting is far, far worse than admitting that you need more time to fulfil a certain project or target. It’s a character test in the end. There’s also the issue of capacity when it comes to mandating the adoption of global standards – effectively changing a global economic model,” says van der Enden.
Just that small task then. “But look,” he replies, “we’ve gone through the Industrial Revolution, we’ve had the technology revolution, the digital revolution – and now the sustainability revolution. We’re at a critical point where all businesses are reassessing supply chains and value chains and no one can get around that because it’s affecting the entire economy.
“Training, education, energy, renewables, digital transformation. Anything. Everything. It’s a big thing. And it’s not ‘woke’ – it’s a modern economic model and there’s a massive skills gap to plug, designing and developing the tools and platforms that make it easier to extract proper data. It’s about procurement, about legal issues, local issues, contractual issues, greening up the finance system… and about assessing how we deal with some really big problems and mitigating the risk.”
Unequivocal. Transparent. A living example of ESG.
ICAS Special Summit on Sustainability Reporting
Date: Wednesday 26 April 2023
Time: 2–6pm GMT
Location: One Great George Street, 1 Great George Street, Westminster, London SW1P 3AA
- What is the future of sustainability disclosure reporting?
- Should organisations be held accountable for the impact they have on our environment, society, social mobility and diversity? And if so, how?
- Should companies be held responsible for economic sustainability and staff wellbeing?
- How can we make sure that businesses report information which shows a true estimate of their impact, with no greenwashing?
The above are just some of the questions we hope to address at a special policy summit in central London. The ICAS Special Summit on Sustainability Reporting will be an opportunity for those closest to developing and implementing UK, European and international sustainability standards to discuss how we meet the information needs of users and stakeholders.
Why is ICAS holding this event?
We believe the accountancy profession has an important role to play, working with sustainability experts and decision makers to drive the changes needed in the business and financial sectors to meet our collective UK and global net-zero targets.
Who are the speakers and panellists?
- Bruce Cartwright CA, ICAS CEO
- Indy Singh Hothi CA, ICAS President
- Andrew Death, Deputy Director of the Department of Business and Trade
- Mark Vaessen, President of Accountancy Europe
- Mark Babington, Executive Director of Regulatory Standards, FRC
- Saskia Slomp, CEO, European Financial Reporting Advisory Group
- Philippe Diaz, Senior Manager, WWF Germany
- Judy Kuszewski, Chair, Global Sustainability Standards Board
- Matthew Forster, Director of Financial Planning & Analysis, Britvic
This event is free to attend for ICAS members. Register here
For more resources, visit the ICAS sustainability hub