Framework Selected 2012 Trends 2 and 3

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Framework Selected 2012 Trends 2 and 3
What individuals and companies are focusing on this year

As part of Framework’s ongoing effort to keep clients abreast of the emerging issues in managing for sustainability, we compiled a list of developments and issues to follow in 2012. While some are client-specific and can’t be shared, several deal with sustainable business practices more generally. So we decided to share our perspective on what individuals and companies will think about, talk about, and work on this year. 

Please click here for Part 1.

Trend 2: Disclosure initiatives continue to proliferate and become more specific, and they increasingly require verification (auditing or assurance)

Stakeholders of all stripes—customers, employees, investors, analysts, regulators/governments, local communities—are demanding more detailed information on more issues related to company operations and their impacts on people, the environment, and society as a whole.  Stakeholders are also demanding that the information be third-party verified or audited (no surprise given the high level of distrust in companies).

a)    There are now more than 100 ratings and rankings systems, including the Dow Jones Sustainability Index, Newsweek “Green Rankings,” Ethisphere “World’s Most Ethical Companies,” and The Corporate Knights “Global 100 Most Sustainable Corporations.”

b)    The Carbon Disclosure Project begat the Water Disclosure Project. . .

c)    . . . and now there is a Plastic Disclosure Project.

d)    Coca-Cola and SABMiller published the first “poverty footprints” in 2011 using Oxfam’s Poverty Footprint methodology.

e)    More than 33 stock exchanges (including in France, Denmark, South Africa, India, Singapore, and Brazil) now require or strongly encourage listed companies to report on their management of environmental and social issues.

The challenge for companies is to develop and communicate a cohesive and contextual narrative about their practices, policies, and performance while also reporting to different standards, ratings, and rankings that have varying foci and disclosure methods.

 

Trend 3: CFOs are getting involved in sustainability efforts—for the good of the data and their own careers

“Most CFOs recognize that sustainability will increasingly be part of their ‘mainstream’ responsibilities, and nearly half are planning capital investments related to those initiatives.” (Deloitte report Sustainable Finance: The Risks and Opportunities That (Some) CFOs Are Overlooking)

Among the drivers pulling/pushing CFOs:

a)    Increasing investor interest in sustainability performance.

  1. Because financial data has become a commodity, analysts are looking for new ways to gain an edge—and managing for sustainability is correlated to good overall management and superior stock performance (see Trend 1).
  2. Bloomberg, SunGard MarketMap terminals, and Reuters now all report sustainability data.
  3. Good risk management. CFOs are increasingly concerned about what ESG data is “out there,” its validity and credibility, and the potential for lawsuits or regulatory actions resulting from inaccurate or incomplete information.

b)    The need for accurate, complete, and verifiable data for reporting and ratings.

  1. CFOs are realizing they can use their expertise in developing key metrics and data-collection systems to help their companies manage ESG performance.

c)    Stock-exchange listing and disclosure guidelines increasingly require or strongly encourage information on how companies are integrating sustainability into their management and operations (see Trend 2).

d)    Integrated reporting is inching closer to becoming a reality.

“ESG data is becoming increasingly important for investors to help ensure long-term performance.”
Robert Jeanbart, executive vice president and global head of market data, SunGard.

Continue to trend 4

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One Response to Framework Selected 2012 Trends 2 and 3

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