Evading the Transparency Tragedy: The Legal Enforcement of Corporate Sustainability Reporting

Although sustainability reporting is a mechanism for improving labor and human rights practices in global supply chains, it has had limited effects to date because of its voluntary nature. Embracing a uniform reporting standard and making companies legally accountable for the veracity and completeness of their disclosures could enhance the efficacy of sustainability reporting. Generally, this Note explores how such a system could be structured. Part II of this note describes the Global Reporting Initiative ( GRI ) as a case study of sustainability reporting and some of its shortcomings. Specifically, Part II will address how the voluntary nature of GRI\u27s Reporting Guidelines is preventing the complete realization of increased transparency and stakeholder trust in organizations. To solve the shortcomings of voluntary reporting guidelines, Part III of this note will introduce the comply-or-explain mechanism, which is a possible mandatory reporting structure. Part III will describe comply-or-explain policies generally, discuss arguments supporting and critiquing them, and analyze GRI\u27s attempt to adapt them for its own reporting standards. Because comply-or-explain alone does not hold companies accountable to the degree of accuracy in their disclosures, Part IV discusses how there must exist an enforcement structure to find companies liable for misrepresentation. More specifically, Part IV also describes the framework of the 1934 Securities Exchange Act and how “materiality” should be interpreted to include non-financial disclosures since a company\u27s social and environmental information is material information to investors