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How do South African companies report on sustainability?

- Wits University

Warren Maroun examines how companies are reporting on different sustainability metrics in their integrated reports.

Maroun, a Professor in the Wits School of Accountancy, recently started research into the corporate reporting by JSE-listed companies, including how they communicate the impact of serious environmental and social issues to their stakeholders.

While South Africa is seen as a world leader in terms of integrated reporting, companies fall short of linking the impacts of their social, human, manufacturing and environmental capital in their reporting, mainly due to a lack of knowledge of how this should be done.

“If you think about accounting, the first thing you think about is income statements and balance sheets. How do you take non-financial issues like the extinction of species, global warming and social unrest into account?

How do you work out what their cost to the company is? How do you report that information in your annual integrated report?” he asks.

“What companies are supposed to do is to give you a very complete picture of how they create value.”

A good integrated report includes traditional financial performance but must also take into account environmental, social and ethical considerations. This is something which companies are struggling to achieve.

“A traditional accounting system is rand and cents focused.  We measure everything in terms of rand value. Now we have to take into account these important performance issues and it is very difficult or almost impossible to quantify them,” he says.

As an example, he asks how a mining company explains to investors the cost of improving the accommodation of mine workers so that they do not have a Marikana-type incident. How do they measure how satisfied the employees are with the reforms that they have introduced? How do they communicate the impact that the reforms have had on their financial returns and how do they understand and quantify the improvement in efficiency in operations in their manufactured capital as a result?

“A truly good integrated report is able to explain links between different types of capital - financial, manufacturing, social, human and environmental capital. It describes the relationship between these types of capital and quantifies the relationship,” says Maroun.

“The companies are able to identify the capital and they are able to describe the relationship but the actual interconnection and the quantification of the relationship between the capital is extremely difficult to achieve.”

While he is only seven months into the project, Maroun is confident that he will be able to come up with some answers.

However, the deeper he gets into the research, the more questions arise.  Maroun is a Chartered Accountant and a Wits lecturer.  He holds a PhD from Kings College, London.