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Canada’s accounting profession calls for reporting of corporate social and environmental activities
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“We view this as a breakthrough in corporate reporting,” said Eugene Ellmen, Executive Director of the Social Investment Organization. “For the first time, Canada’s accounting profession is calling on Canadian corporations to disclose their social and environmental responsibility activities as part of their recommended disclosures to investors.“ Given the importance of social and environmental responsibility to investment performance, this will become an increasingly important level of disclosure in the future.” The guidelines, outlined in a document entitled Management’s Discussion & Analysis: Guidance on Preparation and Disclosure, call on companies to list key performance drivers that are “critical to successful implementation of the company’s strategy and achievement of its goals.” The guidelines were published Nov. 28. The guidance document cites the following examples of key performance drivers: market share, research and development and new product development, cost containment and operating efficiency, workforce, workplace organization and culture, customer satisfaction, adaptability, leadership and governance, capacity and utilization, innovation, technology, reputation and brand equity, financing, safety, environmental responsibility and social responsibility. While welcoming the addition of social and environmental responsibility drivers, the SIO expressed disappointment that the CICA did not recommend specifically that companies disclose social and environmental risks. In a recent brief to the CICA, the SIO recommended specifically that social and environmental risk factors be cited in the guidance document. However, the CICA does not recommend specific areas of risk that should be disclosed. “With the increasing importance of sustainability risks, due to issues such as global warming, and social risks, such as human rights issues, social and environmental risk should have been specifically cited in the document,” Ellmen said. He expressed confidence that the CICA will emphasize reporting of social and environmental risk factors in the future. The CICA states that full and complete disclosure is increasingly important for companies to maintain the confidence of the capital markets. “The MD&A and the financial statements together form the foundation for business reporting and comprise a stand-alone disclosure package,” states the guidance document. The Canadian Securities Administrators, the umbrella group for Canadian securities commissions, is currently reviewing continuous disclosure regulations and could add additional weight to the requirements by enshrining the principles in regulation. For more information, visit www.cica.ca.
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