Corporate Sustainability Disclosure – On the Rise But Does the Disclosure Address What Investors Seeking?
Posted on June 26, 2017 by Hank Boerner – Chair & Chief Strategist
The good news is that more public company managements are involved in, and approving, broader disclosure on sustainability information. There are widely-accepted frameworks in place to help boards and managements better understand the needs and desires of stakeholders — especially providers of capital (asset owners, managers, analysts) seeking meaningful data and accompanying narrative to explain the progress being made (or lack thereof) in ESG performance.
The most widely-embraced among these frameworks include the Global Reporting Initiative’s GRI Standards (previous version known as the GRI G4 — fourth generation); the CDP responses by companies (climate change, water, forestry, supply chain, and more); the RobecoSAM “Corporate Sustainability Assessment” (CSA) survey for consideration for inclusion in the Dow Jones Sustainability Index(es); and the more recent Sustainable Accounting Standards Board (SASB) materiality-focused guidelines for CFOs and CEOs to consider for inclusion in the 10-k and other regulated disclosures (and structured reporting).
So how are companies doing? Michael Cohn, Editor-in-Chief, Accounting Today (.com) presented his views on corporate sustainability reporting in a commentary that is our Top Story for you today. He observes: “Sustainability information is increasingly a part of corporate reporting, but many companies are still relying on boilerplate language in their disclosures.”
His source is the review by SASB staff of the latest 10-k and 20-F corporate filings by the top companies in 79 industries (SASB has released its suggestions for sustainability-related disclosure that is sought by investors for each of the industries). In the survey, SASB found 69 percent of companies are reporting on at least three-fourths of SASB’s suggested industry standard, with almost 40% disclosing on every SASB topic.(Note that companies in their 10-K filings may or may not directly reference the appropriate SASB standard.)
The most common form of disclosure? SASB says…boilerplate language, used more than half the time that a SASB topic was addressed.
So the good news is that public companies are disclosing more about their sustainability efforts, their ESG performance, and the downsides are lack of specificity; lack of meaningful and comparable metrics; boilerplate language.
The most often reported element of “ESG” is the S (social/societal). In the continuing evolvement of more integrated reporting (financial and ESG, with SASB encouraging disclosure via the 10-k), “capital” beyond the financial (capital) was addressed by companies in some way. These included social capital (data security, privacy), human capital (labor relations, health and safety), and environmental (natural).
A key element of SASB suggested reporting on the material aspects is innovation and more details of the business model for investors; this was addressed less frequently, said the SASB staff, in the reporting they analyzed.
Note that we are still anxiously awaiting the Securities & Exchange Commission moves on the Concept Release (for modernizing Reg S-K disclosure); two-thirds of respondents to the SEC invitation addressed sustainability-related concerns with 80% calling for improved sustainability disclosure in corporate filings with SEC.
There’s more details in the Accounting Today commentary (Top Story).
Here at G&A Institute we have a comprehensive research and analysis effort underway that will help corporate managements and boards better understand “what matters” to their peers, and to investors, in terms of sustainability disclosure. We’ll be analyzing over 2000 global GRI sustainability reports looking at the materiality decisions of companies in various sectors around the world on many ESG issues, including an examination of issues tied to the Sustainable Development Goals (SDGs). We’ll have more news on that effort in the weeks ahead.
Top Stories This Week…
Companies struggle to go beyond boilerplate in sustainability disclosures
(Friday – June 16, 2017)
Source: Accounting Today – Sustainability information is increasingly a part of corporate reporting, but many companies are still relying on boilerplate language in their disclosures, according to a recent report.