by Lisa Nelson | Sep 17, 2018 | Blog
Unwieldy is the word I would use to describe the current state of sustainability disclosures. While it’s true that transparency is essential for progress, too many metrics make it harder, not easier, to understand a company’s performance. Especially when those companies are expected to disclose items immaterial to their business.
Leading sustainability reporting and disclosure frameworks such as GRI, DJSI, and CDP require an enormous amount of time and effort. These disclosures are taxing on sustainability teams which are often small and under-budgeted.
In addition, the recent growth in sustainable investments (now worth nearly $23 trillion globally[1]) has led investors to request more information about a company’s Environmental, Social, and Governance (ESG) principles.
Don’t get me wrong – I’m thrilled that investors want this information. But how they get it is the issue. Right now there’s no single accepted template or list of ESG metrics for a company to abide by. Instead, investment firms (and institutional investor agencies) tend to have their own lengthy, yet different, requirements. And if you don’t publicly disclose those items, down to the very specific detail, you get dinged.
Needless to say, companies are running out of resources, and channels, to publicly disclose information effectively.
What we need is an overhaul in how we think about ESG and sustainability disclosures. It needs to be efficient; slimmed down to a small set of comparable, industry-specific material metrics. SASB has made a concerted effort to do this and we hope to see this style of disclosure catch on.
Until that happens, companies will need to prioritize. We help our clients narrow down the list by focusing on ones that will give them the most return for their efforts, because there is certainly no ROI for those that aim to meet them all.
[1] https://www.morganstanley.com/assets/pdfs/sustainable-signals-asset-owners-2018-survey.pdf
by Context | Feb 7, 2017 | Blog
In Part 1 of this blog series – Sustainable investing is on the up and up – we discussed how sustainable investing is going mainstream. In November 2016, US SIF reported that one-fifth of all professionally managed assets consider environmental, social, and governance (ESG) factors.
The trend is being driven by a new generation of investors who realize that sustainability has significant benefits for business performance.
Tapping into All that Cash
So how can companies make the most of this growing pool of investors looking at ESG? Put simply, give them what they want, and make it easy for them to get it.
First, measure what matters. Identify the most material issues and make sure you’re measuring progress consistently each year. If you haven’t conducted a materiality analysis, consider it. We don’t recommend this as a check-the-box exercise for your next GRI report. Rather, use it to drill down into what’s driving business performance, and consider how sustainability impacts those objectives in the short and long term.
Second, talk about it – but don’t ramble. For too long, sustainability reporting took on a more is better approach. But if you’re targeting investors, they want decision useful information that is comparable year over year, and between your company and your peers.
Reporting frameworks like the Sustainability Accounting Standards Board (SASB) aim to do just that. While companies still hesitate to integrate SASB metrics into their 10-Ks, they can use SASB as a useful guide for disclosing investor-relevant data.
Also consider a more targeted approach for your investors. Don’t make them sift through case studies and videos looking for your greenhouse gas emissions. Give them a data dashboard or a simple download that puts all the decision useful data in one place. Motorola Solutions did just that with their 2015 Corporate Responsibility Report and Brown-Forman’s data scorecard gives investors what they want as a complement to a more traditional report and website for a broader audience.
Hop on the Train or Be Left in the Dust
This should be encouraging. Investors are taking sustainability seriously. It’s time for business to hop on board. Mainstream companies can tap into the growing pool of ESG investors by sharing decision useful data to demonstrate how their commitments to sustainability are positioning them for growth and resilience in a changing world.
