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19 May. 2010 | Comments (0)

Repeat after me, “Integrated reporting is good business.” Of course, I can’t take credit for this statement. Those are the words of the corporate governance guru Mervyn King of South Africa. Known to wear many hats (a senior counsel and former judge of that country’s Supreme Court and chair of the South African Institute of Directors), King was speaking via digital video recording at a round table on sustainable investing at the Nasdaq market site Friday. One of the points being made by King and others is that now is the time for all good companies to embrace reporting of environmental issues, social concerns and corporate governance responsibilities (ESG) along with financial reporting. “It should be clear that when raising capital, the banks can make a more informed assessment” when integrated reporting is used by companies, King said. He pointed to some large, notable public companies that have become sustainable and are issuing sustainability reports along with their financials. He cited Procter & Gamble (uses wind power for its manufacturing plants), and Coca-Cola (recycles the water it uses), and Google (uses solar power to air condition and heat their plants). While it is not mandatory for public companies to use integrated reporting when making their SEC filings, some have begun to do so. In such European countries as Denmark, Sweden and Norway, ESG reports are mandatory for state-owned enterprises and nearly 1,350 companies worldwide are using the Global Reporting Initiative’s reporting framework guidelines , according to Sean Harrigan, vice chair of the GRI board. “We work with institutional investors,” Harrigan said. “They will play a huge role in ESG reporting. We’re also meeting with the SEC next week [this week]. We’ve had great discussions with the large accounting firms around the world.” In addition, GRI has worked with the Nasdaq market and CRD Analytics (which has created a SmartView platform that is used to build a an ESG rating for companies) to operate the Nasdaq OMX CRD Global Sustainability 50 Index. That is an equity index that serves as a benchmark for stock or companies that are taking a leadership role in sustainability performance reporting while being traded on a major U.S. stock exchange. [See index here.] That real-time index includes such companies as Novartis, Baxter, State Street, Merck and Nokia. The index value is tabulated using the SmartView platform, which uses 200 metrics that has been proven to have a strong correlation with outperformance and improved shareholder value. Mindy Lubber, president of Ceres (Coalition for Environmentally Responsible Economics), was the most outspoken at the round table last week when it comes to the importance of ESG and integrated reporting. “A big challenge is not to look at SRI (social responsible investing) and ESG as buzzwords,” Lubber said. “They are real risks. We should know how to analyze climate risks, carbon footprint offsets, etc.. We need to be talking about integrated reporting in the boardroom.” She pointed out the importance of it being second nature for companies to consider sustainability risks when looking to launch a new product or open a new plant. “We need the right policies in place,” she said. “Sustainability is a real risk and must be integrated into the capital markets as part of the system.” The closest U.S. financial regulators have come to any mandatory sustainability or integrated reporting is the recent SEC climate change disclosure interpretative guidance that merely provided “clarity and enhanced consistency” on disclosure rules that already exist. [See my May 6 blog post.] Over the next month, there will not be a dearth of conversation about sustainability and integrated reporting as such organizations as The Conference Board and Ethical Investment Research Service (EIRIS) hold events. The Conference Board will host a Webcast, The Global Reporting Initiative (GRI) and the Future of Integrated Reporting, on from 11 a.m.-noon on June 7. It will feature Mike Wallace, director of sustainability reporting framework at GRI; Rina Levy, an ESG analyst with Bloomberg; Suzanne Fallender, director of CSR strategy and communications with  Intel and Doug Kangos, a partner with PWC’s National Professional Services practice. The moderator will be Dina Koehler, program director with The Conference Board. [For more information about the Webcast, click here.] EIRIS has planned on-site events for June 10 in Toronto and June 17 in Paris. The June 10 event is a Responsible Investment Round Table Forum and the June 17 meeting is the EIRIS European Climate Change Conference – Investing in a climate of change. [To register for those events, click here (June 10) and here (June 17).]
  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

    Full Bio | More from Gary Larkin

     

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