Investors Dissatisfied with Corporate Sustainability Disclosuresby
Here's the good and the bad about sustainability disclosures, according to a new report by Big Four firm PricewaterhouseCoopers (PwC) LLP.
Companies increasingly provide customers and investors with the sustainability information they demand “ nonfinancial risks that include environmental, social, and governance issues. But the PwC study indicates the information is far from adequate.
According to the report, Sustainability Disclosures:“Is Your Company Meeting Investor Expectations? 82 percent of investors are unhappy with how risks and opportunities are identified and quantified in financial terms, 79 percent are dissatisfied with how easy it is to compare sustainability reports among companies in the same industry, 74 percent aren't happy with explanations about why the sustainability risks matter, and 69 percent dislike how companies identify social and environmental impacts in their supply chain.
The Sustainability Accounting Standards Board (SASB), a San Francisco-based not-for-profit organization, has noted investor concerns and is developing disclosure guidance and metrics on an industry basis, according to the report. That's in conjunction with working groups of more than 2,300 participants, including investors with more than $23 trillion in assets under management.
Thus far, the SASB has issued standards for 57 industries in eight sectors, and it expects to have standards for more than 80 industries in 10 sectors available by 2016.
However, the SASB's provisional accounting standards are voluntary and are designed to disclose material sustainability information and metrics in US Securities and Exchange Commission filings, such as Form 10-Ks.
â€œAs such, companies may use SASB standards as part of their existing disclosure controls and procedures when evaluating known trends and uncertainties, the PwC report states. Alternatively, a company might consider the SASB guidance when providing voluntary disclosure in sustainability reports or other disclosure vehicles.
The standards also can assist companies in identifying ways to develop strategies and the use of environmentally preferred materials, the report states.
PwC recommends the following considerations if a standard affects your company.
- How relevant are the disclosure topics? Will they affect the company immediately or in the future? Is the impact material?
- What's your current disclosure status? Review disclosures for accuracy and usefulness, and whether your current business strategy is affected.
- Besides investors, other stakeholders interested in your disclosures include customers, employees, and suppliers.
- Company risk exposure can increase as stakeholders increasingly use disclosures to make economic decisions.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.