Corporate disclosure of non-financial metrics has come a long way since the first environmental reports of the 1980s. Data from the Global Reporting Initiative (GRI), which oversees the most widely recognized framework for non-financial reporting, show that in 2012 there were almost 2,500 GRI reports – about three times the number of reports released only five years earlier. Companies are now tracking and reporting on a greater variety of non-financial data metrics, a growth driven by a number of factors including the rise of corporate sustainability strategies as well as increased data requests from stakeholders. The wider availability of company non-financial data creates a number of interesting opportunities for analysis, allowing companies to benchmark their performance on non-financial metrics against their peers and identify trends and implications related to sustainability disclosure.
This week The Conference Board released its second edition of Sustainability Practices, a report benchmarking corporate disclosure and performance across 76 environmental, social, and reporting metrics. Sustainability data for S&P Global 1200 companies are compared with the S&P 500 and Russell 1000, and further analyzed across 10 business sectors, four revenue groups, and four regions. The breadth of data makes it is easy to get lost in numbers and charts, but behind the numbers lie some interesting implications. For instance, let’s take a look at the following three areas:
Climate change risk. The group of companies most likely to be affected by climate change or climate change regulation are failing to identify this as a business risk. Of the ten sectors analyzed in the report, it should come to no surprise that the utilities and energy sectors had the highest median greenhouse gas emissions. As such, these sectors are at the forefront of climate change impact and regulation, and it seems difficult – perhaps even irresponsible – to ignore that climate change could pose a material risk to companies operating in these sectors. The reality, however, is that very few utility and energy companies actually discuss climate change as a business risk in their annual filings. Only 10 out of the 71 utility companies in the S&P Global 1200 included discussion of climate change risks in the MD&A sections of their 10-K (or equivalent) filings. Similarly, only 9 out of the 92 energy companies in the S&P Global 1200 included this type of discussion.
For a good example of this type of disclosure, take a look at page 14 of Hess’s 2012 10-K filing.