Sustainability Reporting

Sustainability reportingand assurance

An analysis of assurance practicesin South Africa

Ben Marx and Vanessa van DykDepartment of Accountancy, University of Johannesburg,

Johannesburg, South Africa

Abstract

Purpose – The purpose of this paper is to provide an overview of sustainability reporting and theassurance thereof in South Africa.

Design/methodology/approach – The paper takes the form of a literature review and a study ofempirical evidence obtained through content analysis of the sustainability reports of companies listedon the Johannesburg Securities Exchange Socially Responsible Investment Index for 2009.

Findings – Although sustainability reporting and the independent assurance thereof are widelyresearched and advocated in the literature, only a limited number of companies obtained independentassurance on their sustainability reporting.

Originality/value – The paper supports the recommendations of King III (effective from 1 March2010) that companies should provide integrated reporting in terms of both their finances andsustainability, and that the sustainability reporting and disclosure should be independently assured.

Keywords South Africa, Corporate governance, Social responsibility, Sustainability, Assurance,Corporate citizenship, Stakeholders, Sustainability reporting, Socially Responsible Investment (SRI) Index

Paper type Research paper

1. IntroductionCorporate governance issues became prominent in the nineteenth century when the firstlimited liability companies were formed, a process that saw the separation (formally andlegally) of the management and ownership of companies. This resulted in the directorsbeing entrusted with management power, while still being accountable to the owners ofthe company. The shareholders therefore needed to protect their investments againstabuse of power by the directors, and as a result the agency theory was created and theconcept of corporate governance was born (Pullinger, 1995, p. 7; Reynecke, 1996, p. 34;Rossouw et al., 2003, p. 3). Since then corporate governance practices have evolved frominitial structural arrangements aligning the management of companies with theinterests of its shareholders, to corporate governance concerns being extended tothe interests of other stakeholders, the environment and society at large. This resulted ina shift in emphasis from the predominantly financial focus of the past to a wider

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The authors thank the Associate Editor for observations and insights into earlier versions of thearticle and two anonymous reviewers for helpful comments. The authors are indebted toRozanne Smith for data and research assistance and Marli Connoway for research assistance.The authors extend gratitude to colleagues and practitioners for valuable comments anddiscussions and recommendations during the research process.

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Meditari Accountancy ResearchVol. 19 No. 1/2, 2011

pp. 39-55q Emerald Group Publishing Limited

1022-2529DOI 10.1108/10222521111178628

and more inclusive approach of doing business in the future, moving away from thesingle bottom line (i.e. profits at any cost) to a triple bottom line that embraces theeconomic, environmental and social aspects of a company’s activities (Ackers, 2009;Cliffe Dekker, 2002; Jhaveri, 1998; King, 2006, pp. 20-2; Marx, 2008, pp. 334-6;Mitchell et al., 2008; Naidoo, 2009, pp. 246-50; O’Carroll, 2009). Accordingly, the conceptof corporate citizenship, sustainability and sustainability reporting has emerged.

Sustainability has been described as the primary moral and economic imperative ofthe twenty-first century and one of the most important sources of both opportunities andrisks for businesses. Today’s companies are integral to society, and as such they areexpected to behave, and be seen to behave, as responsible corporate citizens – that is,protecting, enhancing and investing in the wellbeing of the economy, society and thenatural environment in which they do business. Boards should not make decisions basedonly on present needs as they may compromise the ability of future generations to meettheir own needs. Sustainability also makes business sense and is directly related toshareholder and stakeholder value (Accenture, 2010, pp. 2, 10-12; Engelbrecht,2009, pp. 4-5; IoD, 2009a, p. 12; Mammatt, 2008, pp. 1-4; Naidoo, 2009, pp. 249-56;PriceWaterhouseCoopers, 2008, p. 1; Van Altena, 2009, p. 42). Against this background itis evident that there is a need for relevant, accurate, reliable and credible stakeholderreporting by organisations not only on their economic performance, but also on theirsocial, environmental and governance performances and achievements (Dawkins andNgunjiri, 2008, pp. 286-9; De Villiers, 2004, pp. 21, 28, 31; GRI, 2006, pp. 2-3; Mammatt,2010, pp. 3-5; Mammatt et al., 2010, pp. 22-4; Mitchell et al., 2008, pp. 67-70; Naidoo, 2009,p. 248; Tregidga and Milne, 2007, pp. 4-6). Companies that issue sustainability reportsthat are transparent and provide accurate and reliable information to the users thereofwill increase the trust and confidence of their stakeholders and the legitimacy of theiroperations (IoD, 2009a, p. 13; Dawkins and Ngunjiri, 2008, pp. 286-99; Mitchell et al.,2008, pp. 67-9). Such sustainability reporting, however, besides being relevant, should bereliable and credible – hence the need for independent assurance thereof by externalassurance providers (AccountAbility, 2005; Deegan et al., 2006b; Simnett et al., 2009;FFE, 2003; Temkin, 2010; Rea, 2009, pp. 2-3; Mammatt, 2009a, pp. 24-5; O’Dwyer andOwen, 2007, pp. 77-80). Manetti and Becatti (2009, p. 289) argue that there is still acredibility gap in sustainability reports, rendering them almost useless to target users,including shareholders, lenders, customers, employees and local communities. Theycontend that the way to bridge this credibility gap is through legislation governingsustainability reporting (a view supported by Unerman and O’Dwyer, 2007, but notDe Villiers, 2004), or in the absence thereof, assurance being provided on sustainabilityreporting.

The paper found that, although reasonably strong literature support exists forindependent assurance on sustainability reporting, in practice, only a limited number ofcompanies obtain independent assurance on their sustainability reporting. Fewcompanies obtain independent assurance regarding the sustainability informationpublished on their web sites. These findings are significant because they providesupport for the recommendations of King III (effective from 1 March 2010) thatcompanies should provide integrated reporting in terms of both their finances andsustainability, and that sustainability reporting and disclosure should be independentlyassured. The next section presents the objectives, scope and limitation of the study. Thesections that follow describe the theoretical background of the paper, the methodology

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applied and the empirical findings and deductions. Recommendations are made on thebasis of the study and areas identified for future research. Conclusions are drawn in thelast section.

2. Objectives, scope and limitationsThe objective of the paper is threefold: first, to provide a brief overview of thedevelopment of sustainability reporting and the assurance thereof; second, to provideevidence on current assurance practices in sustainability reporting in South Africa; andthird, to provide evidence in support of independent assurance of sustainabilityreporting and the requirement of King III in this regard. This is done through a literaturereview of current corporate governance and sustainability developments and practices,which is supported by empirical evidence obtained from assessing the sustainabilityreporting of companies listed on the Johannesburg Securities Exchange (JSE), SociallyResponsible Investment (SRI).

The study has two specific limitations: first, the assessment is limited tothe companies listed on the SRI Index, and the findings may not necessarily berepresentative of sustainability reporting practices of non-SRI-listed companies,unlisted entities or public sector institutions; and second, content analysis techniques ofannual and sustainability reports may have specific limitations. Holsti (1969, p. 14)offers a broad definition of content analysis as “any technique for making inferences byobjectively and systematically identifying specified characteristics of messages”.Content analysis has limitations, such as the risk of capturing an incomplete picture ofthe company’s business (as noted by Unerman, 2000, p. 667), but it is also widelyrecognised and accepted as a research instrument (Ackers, 2009, p. 3; Barack, 2010,pp. 4-5; Brennan and Solomon, 2008, p. 893; Dawkins and Ngunjiri, 2008, pp. 291-2).Limiting the study to the assessment of sustainability reporting in the annual reports,sustainability reports and company web sites is justified because such reports areconsidered important corporate governance and stakeholder documents produced bycompanies. Indeed, these reports afford companies the opportunity to communicate withtheir investors and their stakeholders at large (Abeysekera, 2007, p. 333; Bartlett andChandler, 1997, p. 245; Boesso and Kumar, 2007, pp. 281-2; Stainbank and Peebles, 2006,p. 69; Wiseman, 1982, p. 53).

3. Theoretical background3.1 Corporate governance, stakeholder concepts and sustainability reportingThe Cadbury Report on Corporate Governance issued in the UK in 1992 defined theconcept of corporate governance as “the system by which companies are directed andcontrolled” (Cadbury Report, 1992, para. 2.5). Corporate greed, fraudulent financialreporting, climate change and a growing awareness of corporate social responsibilityhave placed renewed focus on stakeholders’ interests, sustainability and the company asa corporate citizen (Da Piedade and Thomas, 2006; Ernst & Young, 2008a, pp. 1-2, 2008b,pp. 1-2; Hauver, 2008, p. 26; Mammatt, 2008, pp. 1-6; Visser, 2005, p. 1). These principleshave been carried forward in the latest corporate governance report issued inSouth Africa, namely King III (effective from 1 March 2010), which contends thatgood governance is essentially about effective leadership. The report advocatesthat leaders should rise to the challenges of modern governance and direct theircompany’s strategies and operations towards achieving sustainable economic,


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social and environmental performance. There is also a contentious focus onsustainability, stakeholder inclusiveness and corporate citizenship (IoD, 2009a,pp. 12-13).

The concept of the stakeholder has also been widely researched and defined over theyears. One of the first definitions was that of Freeman (as cited by Breckenridge, 2004,p. 27), who defined stakeholders as “any group or individual who can affect or isaffected by the achievement of the organisation’s objectives”. The GRI (2006, p. 40)defines stakeholders broadly as:

[. . .] those groups or individuals that can reasonably be expected to be significantly affectedby the organisation’s activities, products, and/or services; or whose actions can reasonably beexpected to affect the ability of the organisation to successfully implement its strategies andachieve its objectives.

Mervyn King, who chaired the King Committee, has a totally different definition ofstakeholders, whom he defines as “the licensors of the business of the company”. King(2006, p. 21) goes on to state that:

[. . .] today, the licensor of a business is not only the regulator who grants the company thelicence to operate its business. There are always other licensors – for example, standardsetting or industry bodies; the media; the individual stakeholders linked to the companythrough its business such as its customers, employees, suppliers, pressure groups, publicopinion makers, politicians, etc. Any one of these licensors could impact positively ornegatively on a business and will definitely be needed when the inevitable downturn is beingcorrected.

Stakeholders are interested in both financial and non-financial information on thecompany and its operations, and accordingly will require sustainability reporting that isaccurate, credible and reliable – and that is independently assured (Ackers, 2009, pp. 1-3;Deegan et al., 2006b, pp. 366-8; O’Dwyer and Owen, 2007, pp. 77-80; Simnett et al., 2009,p. 937; Wheeler and Elkington, 2002).

Various definitions, similar in meaning, have over the years been offered for“sustainability” and “sustainability reporting”, with King II introducing the concept ofsustainability (IoD, 2002, p. 91, Sect. 4) and defining it as follows:

This means that each enterprise must balance the need for long-term viability andprosperity – of the enterprise itself and the societies and environment upon which it relies forits ability to generate economic value – with the requirement for short-term competitivenessand financial gain.

King III (IoD, 2009a, p. 126) has refined these concepts and now defines sustainabilityas follows:

[. . .] the sustainability of a company means conducting operations in a manner that meetsexisting needs without compromising the ability of future generations to meet their needs.It means having regard to the impact that the business operations have on the economic life ofthe community in which it operates. Sustainability includes environmental, social andgovernance issues.

The GRI (2006, pp. 37, 40) defines sustainability reporting as “the practice of measuring,disclosing, and being accountable for organisational performance while working towardsthe goal of sustainable development”, and a sustainability report as “a single, consolidateddisclosure that provides a reasonable and balanced presentation of performance over

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a fixed period”. The GRI sustainability reporting guidelines are highly regarded andwidely used as guidance on what sustainability information companies should report on(Hartman and Painter-Morland, 2007; Jones and Solomon, 2010, pp. 20-2; Rea, 2009).King III now requires that sustainability reporting and disclosure be integrated with thecompany’s financial reporting (Principle 9.2) and defines integrated reporting as “theholistic and integrated representation of the company’s performance in terms of both itsfinances and its sustainability” (IoD, 2009a, p. 121). Sustainability reporting is providedthrough the medium of electronic disks, web-based reporting and paper reports(Ernst & Young, 2009, p. 6; GRI, 2006, p. 37; Cuganesan et al., 2007; Mammatt et al., 2010,pp. 22-4; Morhardt, 2009). Over the years, research has indicated that a great degree ofvariability exists in the content of sustainability assurance reports and the criteria appliedin the preparation of these reports (Ackers, 2009; Mammatt, 2010, p. 5; Mock et al., 2007,p. 67; Deegan et al., 2006a, b).

3.2 Assurance of sustainability reportingThe existing literature on sustainability reporting and assurance suggests thatindependent assurance of sustainability reporting is necessary to build credibility andestablish trust between stakeholders, and to increase its value and usefulness (Ackers,2009; Deegan et al., 2006b, pp. 332, 366-8; Jones and Solomon, 2010, pp. 20-1; Mamatt,2009b, p. 8; O’Dwyer and Owen, 2007, pp. 77-80). However, no statutory or regulatoryrequirements for assurance on sustainability reporting currently exist, eitherinternationally or in South Africa ( Jones and Solomon, 2010, pp. 20-1; IoD, 2009a,pp. 11-12; Naidoo, 2009, pp. 246-7; Simnett et al., 2009, p. 937). The only requirements forindependent assurance (or external assurance as referred to by the GRI) of sustainabilityreporting are the recommendations of the GRI G3 reporting guidelines, theAccountAbility AA1000 Assurance Standard (AccountAbility, 2008), and now thecorporate governance requirement of King III, which became effective on 1 March 2010(GRI, 2006, p. 38; IoD, 2009a, pp. 110-11, Principle 9.3).

Independent assurance of sustainability reporting can be provided by variousexternal parties, ranging from audit firms, specialist consultancies, certification bodies,academic institutions to individuals. The existing literature on sustainability assurancesuggests that, at present, most of independent assurance is provided by audit firms(Ackers, 2009, pp. 11-12; Deegan et al., 2006b, pp. 330, 336-8; Mammatt et al., 2010,pp. 23-4; Simnett et al., 2009, p. 942). Of interest are the findings of Kolk and Perego (2010)which reported that, of a panel of 212 Fortune Global 250 companies for the years 1999,2002 and 2005, the demand for assurance on sustainability reporting is higher incountries that are more stakeholder oriented and have weaker governance enforcementregimes. The study further indicated that in these countries such independent assuranceis provided by the large auditing firms. In their assessment of the extent to whichassurance practices enhance transparency and accountability to organisationalstakeholders, O’Dwyer and Owen (2005) raised questions about the independence ofthe assurance exercise, as well as the degree of management control over the assuranceprocess. They further found that accountant assessors tend to adopt a more cautiouslimited approach aimed at providing low assurance, whilst consultant assessors tend tofollow a more evaluative approach and appear to provide a higher level of assurance.

Various reasons are advanced in the literature for providing independent assuranceon sustainability reporting, despite the costly exercise thereof. These all have


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in common the aim of increasing the credibility of the sustainability informationreported by the organisations, and the resultant confidence that stakeholders could placeon such reports (Ackers, 2009, pp. 1-2; Deegan et al., 2006b, p. 332; FFE, 2003; GRI, 2006,p. 17; Simnett et al., 2009, pp. 937-40; Mammatt et al., 2010, p. 22-4; IoD, 2009a, p. 110).Further benefits include that of building a corporate reputation as well as serving as auseful control mechanism over the sustainability information reported in order toenhance its credibility and the confidence users have in it, with the resultant moreappropriate resources allocation decisions by information users (Simnett et al., 2009,pp. 940-1); the improvement of data measurement, recording and internal reporting(FFE, 2003; Deegan et al., 2006b, p. 365); and even that of “praise provided by assuranceproviders in their reports of innovative systems to manage and report on the generationof waste products” (Deegan et al., 2006b, p. 364).

3.3 Standards for the provision of assurance services on sustainability reportsThe following two standards are predominantly applied by assurance providers in theperformance of assurance engagements on sustainability reporting: AssuranceStandards 1000 (AA1000AS) and International Standard on Assurance Engagements3000 (ISAE3000).

According to Ackers (2009), the issuance of ISAE3000 was intended to provideguidance to the audit profession on the principles and procedures for conductingnon-financial assurance engagements. Iansen-Rogers and Oelschlaegel (2005) state thatISAE3000 aligns the assurance process to the reporting organisation’s definition of thescope (or boundary) of the report and the assurance engagement itself (which mayfocus on less than the whole report). The (assurance) practitioner is required to addressmateriality in relation to errors or omissions in the chosen subject matter.

AA1000AS, launched by the Institute of Social and Ethical Accountability(AccountAbility) in 2003, is the only internationally recognised standard specificallydesigned to provide sustainability assurance (AccountAbility, 2008). AA1000ASassurance addresses sustainability report credibility, which is underpinned by theprinciples of completeness, materiality and responsiveness. Since AA1000AS alignsthe assurance process to the material interests of the organisation’s stakeholdersit requires from the outset that the (assurance) practitioner highlights omissions ormisrepresentations in the report as a whole, which could impact on the intended users’behaviour. AA1000AS, unlike ISAE3000, which is intended to address the auditprofession, is directed at anyone providing external verification services (Manetti andBecatti, 2009). The IoD (2009b) also identifies AA1000AS as a vital sustainabledevelopment tool for use by companies.

Given the large degree of uncertainty and debate surrounding whichstandards should be adopted in the provision of sustainability assuranceengagements, Iansen-Rogers and Oelschlaegel (2005, p. 6) maintain that “a reasonableassurance engagement refers to engagements that reduce risk to a low level”, while“a limited assurance engagement refers to engagements that reduce risk to a moderatelevel”. They emphasis that the level of assurance determines the amount and depth ofwork that the (assurance) practitioner will need to undertake. In contrast, AA1000ASallows for varied levels of assurance according to a sliding scale. According to theInternational Federation of Accountants (IFAC), AA1000AS is designed to complementand accommodate other assurance practices such as ISAE3000. The high and moderate

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levels of assurance are intended to be consistent with the reasonable and limitedassurance permitted by the ISAE3000. IFAC (2010) states that choosing the assurancestandard or guidance and the service provider is a key consideration for organisationsand assurance providers. The 2005 KPMG International Survey of CorporateResponsibility Reporting found that the use of AA1000AS and ISAE3000 resulted indifferent types of audit statements (KPMG, 2005, pp. 34-6). AA1000AS tended to resultin a narrative statement highlighting the strengths and weaknesses of report content,as well as the organisation’s underlying management systems and its responsiveness tostakeholder concerns. However, ISAE3000 placed greater emphasis on the limitationsand weaknesses of company reporting. The scope and quality of assurance evolves, asdoes the quality of reporting. From an organisational perspective, the quality of theassurance of sustainability reporting can be influenced by service providerindependence and competency, business understanding and appreciation of userexpectation. Iansen-Rogers and Oelschlaegel (2005, p. 6) conclude that assurance basedon the combined use of AA1000AS and ISAE3000 is likely to deliver enhancedresults because ISAE3000 provides the necessary guidance to help ensure a rigorousassurance approach and procedures that promote systematic and consistentengagement. AA1000AS provides a concept on responsiveness that emphasesdriving future performance. This view is supported by AccountAbility (2005), whichstates that:

[. . .] the two international assurance standards – AA1000AS and ISAE3000 – are not inconflict and are not substitutes, but rather complementary in terms of providing acomprehensive and robust assurance process which should satisfy the needs of bothmanagement and stakeholders.

4. MethodologyThe status and assurance practices of sustainability reporting in South Africa wereempirically tested by means of a content analysis of the sustainability reports of thecompanies selected for review.

4.1 PopulationThe population for the empirical study was selected as the companies listed on the JSE’sSRI Index for 2009. All the companies on the SRI Index produce sustainability reports,and accordingly, the sustainability reporting for all the companies on the index(60 in total) were analysed. The index was launched in May 2004 in response to thegrowing awareness of sustainability globally and in South Africa in particular, and hassince been a driver for increased attention being focused on responsible investment inemerging markets ( JSE, 2009c). The eligible universe for the SRI Index is the FTSE/JSEAll Share Index. All companies in the FTSE/JSE Top 40 Index or the FTSE/JSE Mid CapIndex will automatically be assessed, while other companies can elect to be voluntarilyassessed for possible inclusion in the index. Companies are assessed against criteriaacross the triple bottom line (the environment, society and the economy) as well asgovernance criteria. Assessments take place annually during the second half of the year,with the results announced at the end of November each year ( JSE, 2009a). While theindex constituency is still dominated by the Top 40 companies (55.7 percent for 2008),medium-sized and smaller companies have been increasingly successful ( JSE, 2009b).


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4.2 Content analysis of sustainability reportsThe most recently available sustainability reporting of the companies in thepopulation, as contained in the annual reports, sustainability reports and companyweb sites, was inspected between 14 and 31 August 2009. The sustainability reportingof all the companies in the population was inspected (100 percent coverage). The namesof the companies in the population are listed in the Appendix.

4.3 Research controlThe research consisted of analysing the annual reports of the companies listed onthe SRI. The analysis was performed using a checklist against which the assuranceinformation of sustainability reporting was measured. The results were tabled and theresults confirmed by an independent adjudicator to ensure the quality and accuracy ofthe results obtained.

5. Research findings and interpretationThe objective of this section of the paper is to provide empirical evidence ofsustainability assurance practices in South Africa. Evidence is provided of the factthat, as in overseas countries, as discussed in the literature in Sections 1 and 3,independent external assurance of sustainability reporting in South Africa is limited,and there is also a great deal of variability in the contents of assurance statementswhere they are provided.

5.1 Assurance of sustainability reporting5.1.1 Objective of the analysis. The objective of this aspect of the analysis was toestablish how many of the 60 companies listed on the SRI obtained assurance on theirsustainability reporting. In addition, the practitioner was also examined to ascertainwhether the assurance was obtained from an independent external practitioner or aninternal practitioner, such as the company’s internal audit department.

5.1.2 Findings and deductions. It is disappointing to observe from Table I that thevast majority (65.00 percent) of companies obtained no form of assurance on theirsustainability reporting since only 35.00 percent of companies listed on the SRI obtainedany form of assurance on the information contained in their sustainability reports.However, it is encouraging to observe that the majority of the companies thatdo obtain assurance have independent external assurance (30 percent) as opposed tointernal assurance (5 percent), thus adding to the credibility of their sustainabilityinformation and disclosures. This is supported by the study performed by Rea (2009,p. 16) regarding South African assurance practices, which indicated that 30 percent

Number %

No assurance obtained 39 65.00Independent external assurance obtained consisting of 18 30.00

Audit firms 15 83.33Other independent assurance providers 3 16.66

Assurance provided by internal auditors 3 5.0060 100

Source: Sustainability reporting disclosure (authors’ own analysis)

Table I.Assurance ofsustainability reporting

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of sustainability reports were found to be assured by third parties in 2007. Thesefindings, namely that the majority (83.33 percent) of independent assurance onsustainability information is provided by audit firms, are also further consistent with theliterature as discussed in Sections 1 and 3.

5.2 Standards adopted by assurance practitioners5.2.1 Objective of the analysis. The objective of this aspect of the analysis was toestablish, in relation to the 21 companies listed on the SRI that obtained assurance ontheir sustainability reporting, which standards the assurance practitioner adoptedin the provision of the assurance service.

5.2.2 Findings and deductions. From Table II it is evident that ISAE3000 is thedominant standard used by practitioners for assurance on sustainability information,with fewer practitioners adopting AA1000AS. However, it is encouraging that19.05 percent of reports are issued on the basis of both AA1000AS and ISAE3000.These finding are also in line other studies (such as those of Ackers, 2009; Deegan et al.,2006a, b; Mock et al., 2007), which indicated that variability exists in the content ofsustainability assurance reports and the criteria applied in their preparation.

Those practitioners who did not indicate which standard, if any, was adopted inthe provision of the assurance services on the sustainability reports, represent23.81 percent of the population, which is disappointing.

5.3 Format of sustainability reporting5.3.1 Objective of the analysis. The objective of this aspect of the analysis was toestablish, in relation to the 21 companies that obtained assurance, where the assurancereport was disclosed: in the annual report, in a separate sustainability report or on thecompany’s web site.

5.3.2 Findings and deductions. From Table III it is evident that the majority of thecompanies (61.90 percent) disclose the assurance report in a separately published

Number %

ISAE3000 only 10 47.62AA1000AS only 2 9.52Both ISAE3000 and AA1000AS 4 19.05No standard indicated 5 23.81

21 100


Table II.Standards adopted by

assurance practitioners

Number %

Annual report only 5 23.81Separate sustainability report only 13 61.90Web site only 3 14.29

21 100


Table III.Format of sustainability

reporting


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sustainability report. Where companies did not have separate sustainability reports, theassurance statement was published as part of their annual report. Only three companies,representing 14.29 percent of the population, published the assurance report on theirweb site only. This may be misleading to users of the published financial statements,because it may not be clear to the readers of only the annual and/or sustainability reportswhether assurance was actually obtained on the sustainability reports. Thiscould diminish the credibility of the sustainability information because the user isnot clearly informed about the assurance obtained. As discussed in Section 3.1, therecommendations of King III that sustainability reporting should be integrated withfinancial reporting, is expected to affect the format of sustainability reporting in thefuture.

5.4 Information assured5.4.1 Objective of the analysis. The objective of this aspect of the analysis was toestablish, in relation to the 21 companies that obtained assurance, what informationassurance was obtained on – that is, only the information contained in the annualreports (including any separate sustainability reports) and/or any additionalinformation published on the company’s web site.

5.4.2 Findings and deductions. Only one of the 21 companies (4.76 percent) obtainedassurance on the additional information that was published on its web site regardingsustainability issues (this equates to 1.6 percent of all the companies in the population).It is disappointing that the vast majority of the companies do not enhance thecredibility of the information on these electronic mediums of communication, which isbecoming far more widely utilised. By assuring information relating to sustainabilityissues on their web sites, companies enhance the transparency and credibility ofinformation reported to their stakeholders (Table IV).

5.5 Companies with assurance on sustainability reporting by industry5.5.1 Objective of the analysis. The objective of this aspect of the analysis was tostratify the companies that obtained assurance on their sustainability information byindustry/sector.

5.5.2 Findings and deductions. It is clear from the above analysis that the miningindustry is most prevalent in providing assurance on sustainability reporting becausethis industry represents more than half the companies that have obtained assurance, butrepresents just over a quarter of the total population. However, when an analysisis performed of total mining companies within the population against those withassurance, only 68.75 percent of mining companies obtain assurance. Also, 80 percent ofthe companies in the population that fall within banking industry and 100 percent ofcompanies within the diversified industrial industry obtain assurance. It is therefore

Number %

Annual and/or sustainability report 20 95.24Annual report and web site 1 4.76

21 100

Source: Sustainability reporting disclosure (authors’ own analysis)Table IV.Information assured

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encouraging to note that in the above-mentioned industries, assurance on sustainabilityinformation is obtained, showing a commitment to accurate, credible and reliablesustainability reports (Table V).

The findings support the expectation that, owing to the nature of the mining industryand the resultant impact of its operations on the environment, assurance on itssustainability reporting would be more customary than is the case with other industries.This is supported by the adjudication of the 2009 Excellence in Sustainability Awards(Ernst & Young, 2009, p. 5) in which the top five companies were all in the miningindustry.

6. RecommendationsOn the strength of the results of the study it is recommended that companies obtainindependent assurance on their sustainability reporting and disclosures. The externalassurance providers should also provide an assurance report which the companiesmust include in their sustainability reports. These reports should adequately describethe work performed, conclusions drawn and the assurance that can be derived fromthe company’s sustainability reporting. This will not only ensure adherence to therecommendations of the GRI reporting guidelines and that of King III, but will alsoincrease the credibility and reliability of sustainability reporting, and its value forstakeholders. It is also recommended that independent assurance be obtained on allforms of sustainability reporting, whether in written format, in electronic disc formator on a web site.

7. Conclusion and areas for future researchWith the increased focus on sustainability and increasing demands for corporateaccountability, many companies are now reporting not only their financial results totheir stakeholders, but also on their sustainability performance regarding their social,

Totalpopulation

Number of companieswith assurance

Total population(%)

Companies withinindustry (%)

Banking 5 4 6.66 80.00Construction 4 0 0.00 0.00Diversifiedindustrial 2 2 3.33 100.00Financial services 2 0 0.00 0.00Food and beverage 4 1 1.67 25.00General retail 5 1 1.67 20.00Healthcare 3 1 1.67 33.33Human resources 1 0 0.00 0.00Industrial 6 0 0.00 0.00Insurance 6 1 1.67 16.67Merchant bank 1 0 0.00 0.00Mining 16 11 18.33 68.75Telecommunications 4 0 0.00 0.00Travel and leisure 1 0 0.00 0.00

60 21 35.00


Table V.Companies with

assurance onsustainability reporting

by industry


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environmental and governance issues. As emphasised throughout the paper,such sustainability reporting should be relevant and credible. However, this requiresindependent assurance. The study found that only a limited number of companiesobtained independent assurance on their sustainability reporting and that variabilityalso exists in the content of sustainability assurance reports and the criteria applied inthe preparation of these reports. Very few companies also obtained independentassurance regarding the sustainability information published on their web sites. Thesefindings are significant because they provide support for the recommendations ofKing III (effective from 1 March 2010) that companies should provide integratedreporting in terms of both their finances and sustainability, and that the sustainabilityreporting and disclosures should be independently assured.

The study was performed prior to the implementation of King III, and it isrecommended that an analysis similar to the one undertaken here should be performedonce King III becomes effective. This should be done to assess the impact of King III onthe assurance of sustainability reporting of companies. It is also recommended thatfuture research should focus on sustainability reporting and the assurance thereof atlisted companies not on the SRI Index, unlisted and smaller companies and publicsector entities.

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Appendix. Names of companies in the population whose sustainability reports wereinspected

. ABSA Group Limited

. AdvTech Limited

. African Bank Investments Limited

. African Oxygen Limited

. African Rainbow Minerals

. Allied Electronics Corporation Limited

. Allied Technologies Limited

. Anglo American plc

. Anglo Platinum Limited

. AngloGold Ashanti Limited

. Arcelor Mittal South Africa

. Aveng Limited

. Barloworld Limited

. BHP Billiton plc

. (The) Bidvest Group Limited

. Brait SA

. Discovery Holdings Limited

. Exxaro Resources Limited

. Firstrand Limited

. Foschini

. Gold Fields Limited

. Grindrod Limited

. Group Five Limited

. Harmony Gold Mining Company Limited

. Highveld Steel and Vanadium Corporation Limited

. Hulamin

. Illovo Sugar Limited

. Impala Platinum Holdings Limited

. Investec Limited and Investec plc

. JSE Limited

. Kumba Iron Ore

. Liberty Group Limited

. Liberty International plc

. Lonmin

. Massmart Holdings Limited

. Medi-Clinic Corporation Limited

. Merafe Resources Limited

. Metropolitan Holdings Limited

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. Mondi

. MTN Group Limited

. Murray & Roberts Holdings Limited

. Nampak

. Nedbank Group Limited

. Netcare

. Northam Platinum Limited

. Oceana Group Limited

. Old Mutual plc

. Pick n Pay Holdings Limited

. Pretoria Portland Cement Company Limited

. Remgro Limited

. SAB Miller plc

. Sanlam Limited

. Santam Limited

. Sappi Limited

. Standard Bank Group Limited

. Sun International Limited

. Telkom SA Limited

. Tongaat Hulett

. Truworths International

. Woolworths Holdings Limited

Corresponding authorBen Marx can be contacted at: [email protected]


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