Finance & Investment
Experts Look Beyond Reporting Trends on 'The Changing ESG Landscape'

Smart brands are going a step beyond environmental, social and governance (ESG) reporting to assess the material costs and benefits of their sustainability investments, according to "The Changing ESG Landscape," a quarterly analyst program hosted by MetaVu and CRD Analytics.

Reporting provides a roadmap for materiality assessments of operations and enables investments to manage risk and pursue opportunities that affect both bottom- and top-line financial performance, said MetaVu President and program host, Mark Serwinowski.

“When you position sustainability as an investment strategy, it provides a framework to view the environmental and social impact of your products and services throughout the value chain and supply chain. The resulting analysis empowers executives to make informed decisions and create long-term plans to marshal talent and resources on a clear path for innovation,” Serwinoski added.

While materiality assessments of this depth are not yet common practice in the U.S., more than half of the companies listed on the S&P 500 now report on their ESG or sustainability performance, according to a new report by the Governance & Accountability Institute (G&A). This was one of several headlines from the last quarter given context by Serwinowski and co-host Michael Muyot of CRD Analytics in the Q4 2012 edition of the program.

Other topics included the working copy of the Global Reporting Initiative’s fourth-generation guidelines released late this fall. The guidelines are slated for approval at GRI’s May conference in Amsterdam and a spring revision will include new and amended definitions and disclosures on supply chain, the hosts said.

The launch in October of the Sustainability Accountability Standards Board (SASB) was another highlight from the quarter, promising to help companies assess their own sustainability efforts. SASB is meant to fill a void in corporate reporting by quantifying the value of corporate non-financial information, according to founders.

Sustainability accounting standards will allow companies to better communicate their ESG performance on the issues most material to their sector and strategy; develop a better understanding of the relationship between financial and nonfinancial performance; better manage ESG risks and opportunities; and save time and expense on ESG reporting, Serwinowski said.

“In order for corporations to behave both more responsibly and intelligently they must understand what their priorities are, what their influencers — like customers, employees and investors — really want from them and how best to communicate their successes and failures to each stakeholder group,” Serwinowski explained in an email before the show was taped. “Smart company executives are leveraging the materiality assessments by engaging a large and diverse group of stakeholders, analyzing those results and using them to vet the information they include in their printed and online sustainability report.”

Also among the reporting developments of note in the last quarter, a group of five stock exchanges representing 4,600 public companies — NASDAQ, Brazil, Johannesburg, Istanbul and the Egyptian exchange — made commitments at Rio +20 to make long-term investments in sustainability in their markets and to make ESG reporting more standard among listed companies.

“We clearly see global stock exchanges playing a bigger role in both voluntary and mandatory environmental social and governance reporting and disclosure,” said Muyot.

The London exchange will require mandatory carbon reporting in 2013 for its 1600 companies. In their annual reports, the companies must report on CO2, methane, hydrofluorocarbons (HFCs), nitrous oxides and perfluorocarbons (PFCs) and sulphur hexafluoride.

Hong Kong just made ESG reporting a best practice for listed companies beginning at the end of last year.

Sandy Nessing, Director of Sustainability for American Electric Power was the guest on this edition of "The Changing ESG Landscape," which concluded with a Q&A session via Twitter and email. Archived video is available online.