Alex Cobham ■ Country by country reporting for the Sustainable Development Goals


I had the honour this week of addressing ISAR35, the 35th annual session of the UN’s Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (all presentations are available here; my slides are also below). The focus was on developing a framework to carry the logic of the Sustainable Development Goals (SDGs) into a set of core indicators for reporting by individual companies.

The ISAR experts include accountants and integrated reporting specialists from all over the world as well as country delegations. Excitingly, they are well along the road to establishing meaningful country by country reporting – which would fit perfectly with the logic of our proposal, now going into country pilots, for an indicator for SDG 16.4 on the profit shifting component of illicit financial flows.

What remains for company reporting is to ensure that the scope is sufficient to deliver the relevant accountabilities for SDG progress; and that there is a single, robust, underlying technical standard. And there’s every reason to think this will be achieved…

Tax justice agenda

In the session addressed to ‘Enhancing comparability of sustainability reporting: Selection of core indicators for entity reporting on the contribution towards the attainment of the Sustainable Development Goals’, I spoke to two main points.

First, I argued that tax must be central to any reporting. The four Rs of tax (revenue, redistribution , re-pricing and representation) are crucial to sustainable development, and hence tax is identified as the primary means of implementing the Sustainable Development Goals (the first target in goal 17). Corporate reporting cannot be #SDGwash, but must capture the meaningful contributions to development: above all, that is, T-A-X before CSR (corporate social responsibility).

Second, I argued that ISAR has both a responsibility and an opportunity in respect of country by country reporting. The modern version of this fundamental transparency instrument (the C of our ABC of tax transparency) stems from Richard Murphy’s draft international accounting standard of 2003, as the Tax Justice Network was being established. But the underlying arguments go back to the work of GEISAR, the group of experts which is the forerunner to today’s ISAR, and which first grappled with the idea of global standards to ensure multinational companies could be held appropriately accountable everywhere they operated.

Setting standards

The ISAR core indicators for enterprise reporting on the Sustainable Development Goals would play a valuable role if they identified the set of tax and related variables needed, and also – importantly – the specific standard by which reporting should be performed. This would see ISAR go full circle, in the sense that having started the discussion about possible standards for country by country type reporting in the 1970s, they would then set down the basis for its actual delivery from the Sustainable Development Goals onwards.

In particular, there are two main standards now in play, and ISAR may be able to set the path. The OECD standard was developed at the behest of the G20 and G8 groups of countries some ten years after we worked on the first draft international accounting standard, and slowly began to establish the idea in policy debate. The OECD standard requires private reporting to tax authorities by most large multinational groups, on a closely aligned basis to our original proposals, but suffers from a couple of important flaws. First, the failure to capture intra-group transactions results in important distortions of the country-level picture; and second, the absence of reconciliation with groups’ global consolidated accounts leaves open questions over data quality and coverage. Aggregate data from OECD standard, to be published from next year, will necessarily form the initial basis for the Sustainable Development Goal indicator – but better may follow.

The Global Reporting Initiative (GRI) is a key international player in ‘integrated reporting’, and sets standards which are used by thousands of large firms worldwide and required by many institutions from stock exchanges to the International Council on Mining and Metals. Since last year we have been working with GRI and other partners such as Vodafone to develop a much stronger and technically robust standard for public country by country reporting. After a successful initial pilot phase, the draft standard will shortly go out to a full public consultation – with the aim of being finalised early in 2019.

ISAR would ideally engage fully in that consultation, bringing the great expertise of their staff and membership to bear, and in doing so ensure that the GRI standard will be the framework for enterprise reporting for the Sustainable Development Goals.

Core indicators

The ISAR experts are in fact well ahead. Last week, they released a document laying out guidance for the proposed core indicators:

In the economic area, the following core indicators are suggested:
• Revenue;
• Value added;
• Net value added;
• Taxes and other payments to the Government;
• Green investment;
• Community investment,
• Total expenditures on research and development; and
• Percentage of local procurement.

It is made clear that this reporting, and the wider measures of activity and social and environmental impact, should build on the listing of legal entities in the group, but be delivered on a by country basis.

Integrating integrated reporting

In addition, the keynote address by Richard Howitt – formerly a Member of the European Parliament and now chief executive of the International Integrated Reporting Council (IIRC) – laid out an ambitious view of the opportunities in the sector, including a major new initiative bringing together the four big standard-setters (including GRI), the Corporate Reporting Dialogue (“collaboration is the new competition”). And overall:

At the IIRC, we are proud to partner with UNCTAD, to identify opening benchmarks for business reporting of the SDGs. These are not as a new separate blueprint for reporting, but in line with our philosophy that this new reporting must be integrated, and understood in the context of value‐creation for the company, if it is genuinely going to become mainstream… There is much work to be done. But the SDGs are driving that work, providing a new impetus and creating the new momentum.

My conclusions to all this are quite simple. Business is ready to embrace this. The answer is better reporting, not more reporting.

After exhilarating discussions in Geneva, it feels very much that this ‘better reporting’ will include, finally, a technically robust, fully public country by country reporting framework. For the Sustainable Development Goals, for the four Rs, and for the better.

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