Wallace helped launch Focal Point USA in October 2010 and now works with various institutions that have committed to the application and development of the Global Reporting Initiative’s Sustainability Reporting Framework. Here he talks to deputy editor Aarti Maharaj about sustainability performance.
1. Why is there a sudden interest in sustainability performance among board members and governance professionals?
The change has taken place over the last three or four years due to the momentum created by initiatives such as the Carbon Disclosure Project (CDP), an independent notfor-profit organisation that holds the world’s largest collection of corporate climate change data, and the United Nations Principles for Responsible Investment (UN PRI), which engages financial institutions on how these non-financial factors should be interpreted for lending, insuring and investing purposes.
These two initiatives have gathered the largest number of international investors on common issues that relate to transparency of sustainability performance.This interest in sustainability performance has created an entirely new boutique industry that provides specialised research in corporate sustainability performance. Given that there is no requirement for companies to report on these issues, especially in the US, the market is generally dominated by qualitative statements about corporate policies and forward-looking strategies.
Companies fail to realise that there is actually a tremendous amount of quantified and/or performance-related disclosure on environmental, social and governance (ESG) performance coming from thousands of companies from all across the world. Given the amount of quantitative data that is out there, on factors such as energy consumption, water consumption, waste removal, executive compensation, philanthropic contributions, unionized employees and board diversity, it’s incredibly easy for any interested professional, including asset managers and even corporate secretaries, to see the basic disclosure trends in any industry.
2. What should corporate secretaries know about sustainability performance?
It is important for corporate secretaries and the board to understand where they sit among their peers and competitors on these areas of non-financial reporting. While companies are being analysed individually on their performance, stakeholders are also looking at this performance across entire industries.Given that this type of reporting is happening in other parts of the world at greater rates (and sometimes due to regulatory or stock exchange requirements), it is becoming increasingly easy for shareholders to quickly see what sustainability performance information is being reported by companies across the globe. The corporate secretary should realise that his or her organisation is to some extent already presenting a sustainability story to a range of interested stakeholders, and that this is happening through a variety of departments such as human resources, public relations, government affairs and investor relations. Keep in mind that many companies are already spending money on their sustainability story without coordinating and managing this effort. In essence, managing and reporting on sustainability performance is a unique area that can be quickly turned into an asset if the right person takes charge and connects the dots. In many leadership companies this effort is being coordinated through a newly developed role, the corporate social responsibility officer.
3. What role can the corporate secretary play in handlingsustainability survey requests?
Since the CDP and UN PRI have created a new level of awareness on these issues, a wide array of questions has been coming in through the investor relations office, on subjects ranging from carbon emissions to human rights violations. The corporate secretary, the board and investor relations officers need to work together to understand who is behind those questions.
They need to figure out how to best prioritise their responses and effectively address these queries in a consistent and credible manner.
4. How should corporate secretaries utilise the Global Reporting Initiative as a resource?
The Global Reporting Initiative (GRI) is the most widely used sustainability reporting framework in the world – it is to sustainability
reporting what GAAP is to financial reporting. Corporate secretaries and their colleagues should look to the GRI as a resource, or a roadmap to reporting. The guidelines have been continuously improved over the past 15 years through a consensus-based approach. Corporations, issue specialists, investors and non-governmental organisations from all over the world have helped to create this exceptional resource on what defines a sustainability report. By reviewing the publicly available GRI Reports List, companies can quickly observe what is being reported by others in their own sector, or what larger customers are reporting. This type of benchmarking lets companies understand what is being done in their sector, as well as by large, influential stakeholders like customers, financial institutions, government agencies and even stock exchanges. For corporate secretaries, it is crucial to understand that these developments in sustainability reporting are occurring all around them, and that it is only a matter of time before some external stakeholder asks to see some form of GRI related information.
5. What tips can you offer to corporate secretaries who are interested in learning more about sustainabilityperformance?
Corporate secretaries need to realise that there is a lot of support out there to help them get their questions answered. Various departments within a company are already responding to regulatory requirements on very similar issues such as board diversity, worker safety and compensation. There is a growing interest in these issues that is also creating an increasing number of cross-functional connections within companies, and this in turn is creating a new role: the chief responsibility officer, or director of sustainability, or corporate social responsibility officer. Corporate secretaries should collaborate and work together with the company’s sustainability professionals, especially as this field evolves and shareholders, financial experts and accountants begin to intersect on these issues.
Corporate secretaries can also benefit from the GRI Sustainability Reporting Guidelines and Sector Supplements. Corporate secretaries can quickly and easily benchmark their efforts using the Bloomberg Terminal, a global financial information network. The Bloomberg Terminal is a groundbreaking data service that provides new levels of transparency to investors. By late 2009, clients using Bloomberg’s 250,000 data terminals had access to all publicly available ESG data from 2,000- 3,000 companies. Bloomberg now embeds ESG research, which automatically matches its results with those of the GRI. This is the type of information investors want to see, and for which financial information providers and corporate social responsibility reports are fueling demand. Corporate secretaries should actively review the GRI Reports List, which is updated weekly and tracks reports since the beginning of the list in 1999. Corporate secretaries and any interested parties can easily download this list to see the latest reports by sector and country and by level of transparency. I suggest that this should be done on a quarterly basis, because it’s not only about your competitors, but your largest competitors – and suppliers report on sustainability issues as well.
Corporate secretaries must be aware of what’s going on around them when it comes to sustainability. This is one starting point, but there is a wide range of educational resources available through the GRI’s Organizational Stakeholder Program. Increasingly, corporate professionals and corporate secretaries can also find some support on sustainability issues and how to address them via professional groups like the National Investor Relations Institute, National Association of Corporate Directors, Society of Corporate Secretaries and Governance Professionals, and Association of Corporate Counsel.
[Article by Aarti Maharaj, Corporate Secretary]
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