Corporate Sustainability

ANN BROCKETT is the Americas Assurance Leader for Climate Chang and Sustainability Services at Ernst & Young. Ms. Brockett serves a broad range of clients to identify and develop alternatives that address emerging risk areas and in providing financial and non-financial assurance services. ZABIHOLLAH REZAEE is the Thompson-Hill Chair of Excellence and Professor of Accountancy at the University of Memphis. He served a two-year term on the Standing Advisory Group (SAG) of the Public Company Accounting Oversight Board (PCAOB).

• Preface xiiiAcknowledgments xixPART I: AN INTRODUCTION TO SUSTAINABILITY PERFORMANCE, REPORTING, AND ASSURANCE 1Chapter 1: Introduction to Business Sustainability and Accountability Reporting 3Executive Summary 3Introduction 4The Case for Sustainability 5Current Status of Sustainability and Accountability 6Drivers of Sustainability Initiatives and Practices 7Best Practices of Sustainability Programs 10Principles of Business Sustainability 14Business Sustainability and Corporate Accountability Framework 14Key Performance Indicators 16Emerging Issues in Sustainability Reporting 17Promotion of Sustainability Development, Performance, and Disclosures 21Conclusion 22Action Items 22Notes 23Chapter 2: Brief History of Sustainability Reporting 27Executive Summary 27Historical Perspectives 27Recent Developments and Initiatives 29Status of Business Sustainability and Sustainability Reporting and Assurance 31Going Forward 32Conclusion 33Action Items 33Notes 34Chapter 3: Business Sustainability and Accountability Initiatives, Reporting, and Assurance 37Executive Summary 37Multiple Bottom-Line Dimensions of Business Sustainability 37Usefulness of Sustainability Information 39The Sustainability Reporting Process 41Sustainability Reporting in Action 46Promotion of Sustainability Reporting 47Future of Sustainability Reporting 48Mandatory versus Voluntary Sustainability Reports 51Sustainability Assurance 53Continuum of Assurance on Sustainability Information 57Internal Controls Relevant to Sustainability Performance 58Sustainability Risk Management 58Conclusion 61Action Items 62Notes 62PART II: DIMENSIONS OF SUSTAINABILITY PERFORMANCE 67Chapter 4: Sustainability, Corporations, Capital Markets, and the Global Economy 69Executive Summary 69Global Economy and Financial Crisis 69Capital Markets 71Role of Corporations in Society 72Sustainability Information Needs of Investors 74Corporate Reporting 77Recent Initiatives in Corporate Reporting 79Web-Based Corporate Reporting 83Predictive Business Analytics 84Narrative Reporting 85Governance, Risk Management, and Compliance (GRC) Reporting 86Sustainability Reporting 87Conclusions 88Action Items 88Notes 89Chapter 5: Economic Vitality as a Component of Sustainability 91Executive Summary 91Introduction 91Economic KPIs 92Public Trust and Investor Confidence in Financial Information 92Internal Control Reporting 98Internal Control Reporting Requirements 101Integrated Financial and Internal Control Reporting 105Conclusion 109Action Items 110Notes 110Chapter 6: The Corporate Governance Dimension of Sustainability 113Executive Summary 113Corporate Governance Definition 114Drivers of Corporate Governance 114Global Convergence in Corporate Governance 116Sarbanes-Oxley Act of 2002 117Dodd-Frank Act 121The United Kingdom’s Financial Regulatory Framework 122Listing Standards Related to Corporate Governance 123Corporate Governance in the Post-Crisis Era 123Corporate Governance Functions 128Board Committees 131Proxy Voting for Sustainability 134Emerging Corporate Governance Issues and Challenges 138Corporate Governance Reporting and Assurance 139Conclusion 142Action Items 143Notes 144Chapter 7: The Social Dimension of Corporate Sustainability 147Executive Summary 147Introduction 147Social Performance 148Social KPIs 150Corporate Social Responsibility (CSR) 151CSR and Financial Performance 159CSR Performance Measurement 160CSR Programs 161Components of CSR 163CSR Reporting 164Conclusion 167Action Items 168Notes 168Chapter 8: The Ethical Dimension of Sustainability 171Executive Summary 171Business Ethics 172Ethics and Law 172Ethics KPIs 176Workplace Ethics 177Training and Ethics Education 182Corporate Culture 183Corporate Codes of Ethics: Rules and Best Practices 185Financial Reporting Integrity 185Ethics Reporting 187Conclusion 190Action Items 191Notes 191Chapter 9: The Environmental Dimension of Sustainability Performance: Government Policy, Societal Forces, and Environmental Management 193Executive Summary 193Introduction 194Emerging Environmental Issues 194Environmental KPIs 196Environmental Regulations in the United States 198Global Environmental Initiatives and Regulations 203European Union Emissions Trading System (EU ETS) 208Carbon Reduction Commitment (CRC) 209California Assembly Bill 32 209Global Progress 209Societal Actors Influencing CorporateEnvironmental Behavior 215International Organization for Standardization (ISO) 220Environmental Management Systems (EMS) 222Environmental Reporting 226Environmental Assurance and Auditing 229Conclusion 230Action Items 231Notes 232PART III: EMERGING ISSUES IN SUSTAINABILITY PERFORMANCE, REPORTING, AND ASSURANCE 237Chapter 10: Business Sustainability in Action: Global Initiatives and Emerging Issues 239Executive Summary 239Introduction 240Global Initiatives on Business Sustainability 240Social Accountability International (SAI) 244Macro Sustainability Issues 248Climate Change 250Sustainability KPIs 254Business Sustainability in Action 259Lessons Learned from Sustainability 260Emerging Issues in Sustainability 263Conclusion 266Action Items 267Notes 267Chapter 11: The Future of Business Sustainability: Sustainability Reporting and Assurance 271Executive Summary 271Introduction 271The Emergence of Business Sustainability 272Sustainability Reporting 274Sustainability Assurance 287Sustainability Assurance and Internal Control 297Emerging Trends in Sustainability Reporting 297Sustainability Assurance in Action 298Sustainability Database 299Sustainability Education 300Conclusion 300Action Items 301Notes 302About the Authors 305Index 307