It appears more companies are deciding that sustainability reporting is an important part of corporate governance that can provide many benefits. These are the findings of the Governance & Accountability Institute’s 2012 Corporate ESG/ Sustainability/Responsibility Report, which was released this week.
According to the report, the percentage of S&P 500 companies that reported on their sustainability strategies, initiatives, programs and performance has more than doubled, growing from 19 percent in 2011 to 53 percent in 2012 (reporting among Fortune 500 companies grew from 20 percent in 2011 to 57 percent in 2012). With more than 50 percent of this important group of companies reporting, those that do not report will feel increasing pressure to do so in the future.
Why the sudden interest in disclosing sustainability efforts and performance? Environmental issues and sustainability reporting remain high among the number of shareholder proposals that have been put forward over the last two years, and that trend is expected to continue. Companies are finding it simpler to engage shareholders on this issue than deal with the disruption of shareholder proposals.
In the world of governance advocates, more disclosure is always considered better. Companies build trust with investors and the communities they operate in when they engage in sustainability reporting. According to the report, companies ‘gain access to new markets and new capital by appealing to investors who are attuned to sustainable and responsible investing. By improving their sustainability processes and products they can differentiate their brand, services, and products leading to competitive advantage over their peers. They can significantly reduce costs in many ways, the most directly being the reduction of the use of energy, raw materials and production of waste.’
Furthermore, the report says, ‘These companies are protecting their ‘freedom’ or ‘license’ or right to operate by getting ahead of the societal issues facing their industries, and are enjoying less threat from enforcement of regulation because they are managing the issues themselves without outside interference.’
There is something to be said for getting out front and showing that your company is paying attention to regulations and safety issues. Sustainability reporting can illuminate possible problems, and any steps companies take to mitigate operational risk in foreign countries will reap significant cost benefits in reduced fines and avoided litigation.
So if your company is not yet disclosing its sustainability reporting consider doing it for 2013. As the Governance & Accountability Institute’s report notes, ‘The lesson for management and boards: If you are not reporting, your competitors and peers almost surely are. The task of ‘catching up’ will only grow larger. So now is the time to get started.’
This article originally appeared in Corporate Secretary, the sister publication of IR Magazine.
