Ninety percent of the 250 largest companies in the world are reporting sustainability performance, but greenwashing is “a very serious issue,” says the new chief executive of the Global Reporting Initiative (GRI), Tim Mohin. In the early days of sustainability reporting, greenwashing could result in bad PR and a loss of consumer confidence. But that is no longer the worst that can happen.
With the trend of issuing sustainability reports growing around the world, “people start to rely on the information to make decisions,” Mohin says (via Eco-Business). “If the data is not reliable, then the wrong decisions can be made.”
Incorrect Data Leads to Trouble
Despite today’s political climate, with President Trump deciding to have the US exit the Paris Accord, investors may actually be increasing their emphasis on corporate social responsibility (CSR). Now, more than ever, it is important for companies to avoid overstating their sustainability performance. “I really want to make this point very clear that it’s not about the report, it’s about the results that we get from that disclosure,” says Mohin. “Sustainability reporting is actually a transaction. Somebody creates the information, and someone uses it to create change.”
Results from a study released last week seems to confirm that institutional investors are keenly interested in ESG performance. The study, Is Your ESG Report Getting Noticed from Burson-Marsteller, indicates that 77% of institutional investors believe building ESG initiatives into a company’s business model is a smart business decision. However, says Jane Madden, managing director of US corporate responsibility at Burson-Marsteller, companies need to back up their ESG performance claims with data and transparency.
The last few years, noted R. Douglas Harmon of Parker Poe Adams & Bernstein last week, have seen a rise in lawsuits concerning securities or consumer protection violations due to CSR statements.
How Do Investors Want to See Sustainability Data?
The Burson-Marsteller report shows that:
- Roughly 60% of investors say ESG reports should provide comprehensive and detailed information, while 37% prefer they be short, concise and to-the-point.
- Nearly two-thirds of investors say it is very important for digital ESG reports to be easily shareable, downloadable and printable. Another half say it is very important that they also be mobile friendly.
- Investors also want sustainability information to include how sustainability performance is tied to business impacts.
GRI Standards Seem to Be Rising to the Top
According to Mohin, 74% of companies that are reporting sustainability performance are using GRI standards. The increase in the pace of GRI reporting adoption – Asia, for example, has seen a doubling of GRI reporting in the last five years – can be attributed in part to the fact that the GRI now issues actual standards, rather than just guidance.
While GRI standards cover 33 sustainability topics, GRI says organizations should not attempt to report on all of those topics. “Each company needs to decide which topics are most relevant for the business and its stakeholders and then choose only the most important issues,” Mohin says.