by Hank Boerner – Chair & Chief Strategist – G&A Institute
March 2, 2021
Corporate sustainability / ESG reporting — What to disclose? How to frame the disclosures (context matters!)? What frameworks or standards to use? Questions, questions, and more questions for corporate managers to consider as ESG disclosures steadily expand.
We are tuning in now to many more lively discussions going on about corporate ESG / sustainability et al public disclosures and structured reporting practices — and the growing complexity of all this disclosure effort, resulting often in disclosure fatigue for corporate practitioners!
Corporate managers ponder the important question: which of the growing number of ESG frameworks or standards to use for disclosures? (The World Economic Forum (WEF) describes some 600 ESG guidelines, 600 reporting frameworks and 360 accounting standards that companies could use for reporting. These do vary in scope, quantity, and quality of metrics.)
In deciding the what and how for their reporting, public companies consider then the specifics of relevant metrics and the all-important accompanying narrative to be shared to meet users’ rising information needs…in this era of emergent “stakeholder capitalism”.
Of course, there is the question for most companies of which or what existing or anticipated public sector reporting mandates will have to be met in various geographies, for various sectors and industries, for which stakeholders.
We here questions such as — how to get ahead of anticipated mandates in the United States if the Securities & Exchange Commission (SEC) does move ahead with adoption of new rules or at least strong guidance for corporate (and investor) sustainability reporting.
The European Union is today ahead in this area, but we can reasonably expect the USA to make important moves in the “Biden Climate Administration” era. (The accounting standards boards are important players here as well as regulatory agencies in the sovereign states.)
Company boards, executive committees, professional staff, sustainability team managers wrestle with this complex environmental (for ESG disclosure) as their enterprises develop strategies, organize data flows, set in place data measurement protocols, and assemble the ESG-related content for public disclosure. (And, for expanded “private sharing” with ESG ratings agencies, credit risk agencies, benchmark/index managers, to meet customer ESG data requests, and more).
The list of issues and topics of “what” to disclose is constantly expanding, especially as institutional investors (asset owners and their managers) develop their “asks” of companies.
Climate change topics disclosure is at the top of most investor lists for 2021. Human Capital Management issues have been steadily rising in importance as the COVID-19 pandemic (and spread of variants) affects many business enterprises around the globe.
In the USA, SEC has new guidance for corporate HCM disclosures. Political unrest is an issue for companies. Anti-corruption measures are being closely examined.
Diversity & Inclusion (including in the board room and C-suite) is growing in importance to investors.
Also, physical risk to corporate assets in the era of superstorms and changing weather patterns – what are companies examining and then reporting on? Exec compensation with metrics tied to performance in ESG issues is an area of growing interest.
We are monitoring and/or involved in multiple discussions and organized initiatives in the quest to develop more global, uniform, comparable, reliable, timely, complete, and assured corporate sustainability metrics, and accompanying narrative. And, to provide the all-important context (of reported data) – what does the data mean? It’s a complicated journey for all involved!
This week we devote the content of this week’s Highlights newsletter to various elements of the public discussions about the many aspects of the journey.
Here at G&A Institute, our team’s recommended best practice: use multiple frameworks & standards that are relevant to the business and meet user needs; these are typically then disclosed in hybridized report where multiple standards are harmonized and customized for the relevant industries and sectors of the specific company’s operations and reflect the progress (or even lack of) of the enterprise toward leadership in sustainability matters.
This approach helps to reduce disclosure fatigue for internal corporate teams challenged to choose “which” framework or standard and the gathering of data and other content for this year’s and next year’s ESG disclosures.
We shared our thoughts in a special issue of NIRI IR Update, published by the National Investor Relations Institute, the important organization for corporate investor relations officers:
Here are our top selections in the content silos for this week that reflect the complexity of even the public debates about corporate ESG disclosure and where we are in early-2021.
The ever-evolving world of ESG investing from a few different points of view. What are the providers of capital examining today for their portfolio or investable product decision-making? Here are some shared perspectives:
- ESG scores: an outdated concept (Source: Responsible Investor)
- Investors love data. So why not dig into sustainability metrics? (Source: Sifted)
- Q&A: Schroders Talks ESG Investing Strategies (Source: US News)