14 Dec. 2018 | Comments (0)
The Conference Board just released its annual study on the state of corporate sustainability disclosure. The annual publication, Sustainability Practices, details trends in public company sustainability reporting, uncovers some of the gaps in nonfinancial disclosure, identifies areas where progress has been made, and highlights key issues that organizations should keep on their radars. The findings from the report are based on an analysis of data on sustainability disclosure and performance of companies in 23 countries, spanning Asia-Pacific, Europe, and North America. In all, data on more than 90 environmental and social practices for over 5,000 companies are analyzed to reveal how companies are responding to the increased pressure to disclose their nonfinancial impacts. Examples of some of the practices covered in the report include atmospheric emissions, water consumption, board diversity, gender pay equity, and charitable contributions.
The report reveals that, driven by mandatory reporting requirements, companies in Japan have the highest overall sustainability disclosure rate. Mandatory environmental reporting requirements have been a clear driver of disclosure in Japan. Since 2006, for example, certain companies in Japan have been required to disclose greenhouse gas (GHG) emissions. The next three countries with the highest overall disclosure rates are the United Kingdom, United States, and Taiwan. On the opposite end of the spectrum, transparency regarding sustainability practices is lowest among companies in Malaysia, Indonesia, Poland, and Pakistan.
However, sustainability disclosure alone does not necessarily translate into performance improvements. For example, 99 percent of sample companies in Japan report the percentage of women on boards, yet women account for only 3 percent of directors. Likewise, 70 percent of companies in Taiwan report board diversity figures, yet women account for a meager 7 percent of directors. In contrast, just under half of sample companies in France report the share of women on their boards, with women holding a median of 40 percent of board seats.
Similarly, companies in China and Japan have the highest disclosure rates for charitable contributions of all companies in the global sample. Over half of Chinese companies in the sample report the sum of their charitable contributions, as do 45 percent of companies in Japan. However, the median charitable contributions of companies in China and Japan, as a share of pre-tax profit, are the lowest of any other country in the region and across the global sample. See the chart below for details on the disclosure of charitable contributions by companies in Asia-Pacific.
These findings from the annual study raise the fundamental question of why companies report and whether reporting regulations are incentivizing compliance over substance. A clear implication for regulators is to ensure reporting requirements include due diligence mechanisms to achieve not only greater disclosure but also performance improvements. Companies, meanwhile, will be increasingly urged by stakeholders to demonstrate that disclosure is being followed by actual improvements in sustainability performance.
Members of The Conference Board can download the report here. The report is complemented by a comprehensive database and online benchmarking tool, the Sustainability Practices Dashboard. The Dashboard allows users to generate customized charts by segmenting data by sector, revenue group, region, and country.