Standards for sustainability have moved from this being an initiative of voluntary bodies like the Global Reporting Initiative and the Sustainability Accounting Standards Board to standards being developed by governments, such as the EU’s Corporate Sustainability Reporting Directive, and private sector initiatives whose standards have received government support, such as the IFRS Foundation’s International Sustainability Standards Board. Within the standard setting process a heated debate exists about whether these standards should be based simply on financial materiality (e.g., what matters to shareholders), so-called “single materiality,” or also impact materiality (e.g., the positive and negative externalities the company is creating in the world), so-called “double materiality.”

This debate is an important one, but we think too much emphasis is being place on the extent to which companies reporting on their sustainability performance according to a set of standards can make the world a better place. Reporting transparency is simply the first step in a seven-step hierarchy of ways in which corporate behavior can be influenced. At the top of this hierarchy is corporate form as codified in company law, although changes in corporate behavior are still influenced by the intervening steps.