Sustainability Reporting Becomes More Important to Investors
Avoiding Survey Fatigue
Source: Green At Work
Addressing the reporting challenges of socially responsible investing.
By Phil Storey
It is an old truism that wise investing depends on good information. While there are well-developed, government-regulated mechanisms for collecting and disseminating accurate and relevant financial information from publicly traded companies, the means for gathering and distributing non-financial information are relatively early in their development. But the demand for non-financial reporting is growing as even mainstream asset managers and institutional investors increasingly appreciate the importance of issues like greenhouse gas emissions and other environmental and social liability potential. Many companies have responded by reporting publicly on sustainability performance, as well as responding to specific information requests from socially responsible investing (SRI) research firms, asset managers and institutional investors.
Highs and Lows
As non-financial reporting has grown, many companies have realized a number of benefits from their reporting efforts. There is the potential for inclusion in sustainability-related financial indexes like the Dow Jones Sustainability Indexes, FTSE4Good and the Domini Social Index, as well as positive relationships with stakeholder groups that appreciate transparency on environmental and social matters. And the process of reporting non-financial information can make companies aware of opportunities for improved performance -- social, environmental and even financial.
"Reporting financial and non-financial results at the same time gives our stakeholders a more accurate picture of our business," explains Debra Dunn, senior vice president, corporate affairs and global citizenship, HP. "And internally, the reporting process has allowed us to align our business and global-citizenship strategies, and set comprehensive goals and metrics." HP recently received the Best Sustainability Report award from Ceres-ACCA North America for its 2004 Global Citizenship Report.
There is consistent growth in requests for transparency. The increase in information requests has been most pronounced in Europe, where attention to social and environmental performance is more acute, and "survey fatigue" has been growing for some time. A study by the London Stock Exchange of a representative sample of British companies found that responding to these questionnaires costs corporations an average of seven person-days per month. The Financial Times last year referred to the phenomenon as "the unexpected cost of corporate virtue."