28 January 2005

Environment Reporting Still a Grey Area

Global players not giving full picture - MOST global companies still fail to disclose to investors how environmental and social issues pose both strategic risks and opportunities for their businesses, according to an international review of reports on corporate sustainability.

The review was compiled by SustainAbility, an independent business consultancy, the United Nations Environment Programme and ratings agency Standard & Poor's.

The review indicates that well over 50000 multinational companies still fail to report on environmental and social issues.

An analysis revealed that most companies failed to give any real insight into what they were reporting on and why they were doing so.

Few companies linked their nonfinancial reporting with their financial reporting.

The review notes that corporate governance is an area where the quality of coverage has jumped strikingly. But it seemed that companies' boards did not yet grasp the evolving links between corporate governance and the "triple bottom line" agenda that environmentalists and regulators favour.

Triple bottom line reporting requires companies to disclose not only their profits, but also their corporate social responsibility and environmental activities.

The review finds that only three out of 50 global companies surveyed assess their balance sheet's implications of key environmental and social risks, despite this information being increasingly important to analysts, investors lenders, insurers and reinsurers.

More than 350 company reports were submitted for the survey and 50 were selected by an international independent expert committee for a full analysis.

Out the 50 top companies trying to meet the requirements, five South African companies fell within the top 25.

Co-operative Financial Services (UK) was the leading company passing the 70% mark of the benchmark set, with other companies Novo Nordisk, BP, British American Tobacco, British Telecom, BAA, Rabobank, Rio Tinto, and Shell following close behind.

South African companies featuring in the top 25 saw Anglo American leading the pack, ranked 12th, BHP Billiton ranked 16th, and SABMiller 22nd. MTN and Sasol were ranked joint 25th.

Interestingly, the overwhelming majority of SA's Top 50 companies also have investment grade credit ratings.

The review says that while it would be inappropriate to suggest a link, it is striking that enhanced transparency and disclosure via sustainability reporting is clearly linked to companies that display strong levels of credit quality a widely recognised indicator of their operating and financial stability.

The review shows some companies have improved transparency on corporate responsibility.

SustainAbility chairman John Elkington said corporate governance was the hottest topic, but recent scandals had meant most boards were focused on financial integrity issues to the detriment of the bigger picture of nonfinancial risks and opportunities.


Post a Comment

<< Home