Sustainability, meet shareholder activism

PricewaterhouseCoopers report suggests case for reporting risk and value related to things like energy efficiency, environmental resource management and water stewardship will get stronger within three short years.
Written by Heather Clancy, Contributor

Here a number to digest: at the turn of the century, just 823 global companies reported about some sort of information related to environmental policy, social responsibility, energy efficiency or some of the other issues that are now crowded under the umbrella of corporate sustainability.

In 2010, there were close to 4,580, and that number will climb rapidly over the next decade, if the trends I've been watching materialize.

I'm not the only one who has noticed: A new report from Pricewaterhouse Coopers (aka PwC) urges enterprise companies to examine carefully how they disclose information about their corporate sustainability initiatives, because the consulting firm figures within next three years environmental and corporate responsibility will factor much more heavily into investment decisions.

The report, called "Creating Value from Corporate Responsiblity," notes that nearly half of the chief executives participating as part PwC's annual CEO survey are planning to change their environmental and corporate policies because they expect them to factor in investment decisions. Interestingly, CEOs of companies who sell business-to-business were slightly more likely to say this than those leading consumer products companies. Personally, I thought it would be the other way around.

A different PwC study, focusing on corporate directors, found that one-third of these individuals believe issues related to resource sustainability and corporate responsibility should get the board's attention. There's a reason: in the past year alone, there have been roughly 80 resolutions filed by activist shareholders seeking a higher level of visibility into these matters and third-party verification that corporate sustainability reports are really what they seem.

Can you smell a future shareholder lawsuit over this sort of thing?

If your company is relying on spreadsheets and an annual data hunt for sustainability metrics, you could find yourself at risk, not just because you might be reporting incomplete or updated data. That's a given. But because your competitors might get a jump on you. The PwC authors write:

"An unprecedented level of business transparency is allowing companies to compete for investor attention by using non-financial indicators that might have implications for business value. Progressive companies are aiming to differentiate themselves through their inclusion in popular sustainability indexes that synthesize vast amounts of information for investors interested in both financial returns and corporate responsibility practices."

Here's another question for you: would you rather be known as passive or progressive on corporate sustainability matters?

That's what I thought.

Here are some of the warning signs, as suggested in the PwC report:

  • Your data is old. Is the lag time on your sustainability data more than a year old. Quite honestly, this habit of reporting things more than 18 months later doesn't really work in the current climate (pun intended). That's because it really doesn't allow your team to manage the data proactively. How about quarterly? Or even monthly? Like you do for other important business metrics.
  • You need to restate the data year after year. Manual processes are prone to error. So, unless the collection process is well documented and includes the same metrics from year to year, what's the point?
  • No one calls you on your numbers. We know you're honest, honestly we do. But people make mistakes or have different interpretations of the same data. According to the Carbon Disclosure Project, nearly one-third of respondents don't provide data verification.
  • Unwillingness to publicize. You should be willing to publicize key metrics and benchmarks from your sustainability reporting in your company's annual report to shareholders. If not, why not?

This post was originally published on Smartplanet.com

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