Why large cap companies are warming up to sustainability reporting and the GRI framework.
By Hank Boerner
Focusing on the huge market we usually refer to as "Corporate America," the folks who run nonprofit Global Reporting Initiative [GRI] in Amsterdam organized a concentrated effort to encourage more U.S. companies to adopt the GRI G3 framework for their sustainability reporting.
Focal Point USA officially opened for business in New York City early in 2011 with great fanfare -- including a hosted reception and bell-ringing exercise at the New York Stock Exchange. From 2010 to 2011, the number of U.S. sustainability reports including a GRI content index has grown almost 50 percent. In 2011 alone, 345 reports were published, of which 273 used the GRI framework, according to our research. And the number is growing as we continue to find more reports to add to the total.
The effort’s founding sponsors are the Big Four accounting firms (Deloitte, Ernst & Young, KPMG, and PwC US), with Bloomberg, Clorox, Dell and The Mosaic Company playing leadership roles.
Focal Point USA is headed by Mike Wallace, the former technical director of GRI’s head office and a former management consultant from California with deep experience in corporate environmental matters. Marjella Alma, an experienced GRI staffer, joined Wallace from Amsterdam to help expand the missionary effort. Recently the two organized a foray into the Heartland of America -- St. Louis -- to bring like-minded managers together to discuss GRI and sustainability and responsibility reporting.
St. Louis: Making Sustainability Count
The event, which celebrated the first year of Focal Point operation in the U.S., was aptly titled “Making Sustainability Count: Tracking Progress, Driving Opportunity,” and presented in partnership with St. Louis University and its Center for Sustainability at the John Cook School of Business; the St. Louis Regional Chamber & Growth Association; and Corporate Responsibility magazine.
The one-day conference featured panels on key issues related to corporate sustainability strategies, performance and reporting including how CSR reporting adds value, trends and how financial institutions are incorporating sustainability. In attendance -- and speaking -- were corporate sustainability and responsibility management leaders, asset managers and analysts representing a wide range of companies and sectors.
Key Drivers Toward Sustainability
Herman Mulder, chair of the international GRI Board of Directors, who flew in from Europe to welcome the participants, noted the key drivers that are encouraging more American companies to embrace sustainability as a key strategy and begin structured reporting on their ESG performance:
- Managements See the Light: Boards and C-suites see the value of changing the way they do business. They are aligning strategies with the ESG concerns of investors, and voluntarily embracing sustainability and corporate responsibility reporting.
- The Pressure of Change: The pressure is increasing for industries to adopt regulatory frameworks in a growing number of countries where such reporting is being mandated by governments and stock exchanges. "Greater CSR is a paradigm shift," he said, "and virtually everyone is affected by this societal shift."
- Increased Demand for Transparency: The increased demand for greater transparency and disclosure by companies is building up, especially by shareholders and stakeholders.
- Boards Understand Risk: Management and boards of directors are starting to see the importance of sustainability and corporate responsibility in the context of their responsibilities to oversee risk (and the related opportunities that are part of the risk/opportunity equation).
Participants also heard from the investment community about the importance of sustainability reporting, current methods of analysis of corporate ESG factors, the various ways in which asset managers and analysts are parsing ESG information, and the distribution of corporate ESG information (especially via the 300,000+ Bloomberg terminals around the globe).
It's clear that sustainability and responsibility reporting and adoption of the GRI framework for reporting is being widely embraced in the American Heartland, where so many large-cap U.S. companies are headquartered or have significant operations. Freedom to operate was a running theme we heard.
Today, large business enterprises are voluntarily embracing reporting and transparency regarding ESG matters before they are mandated to do so.
Wall Street came to Main Street through this conference to stress the importance of ESG reporting. With increasing numbers of capital market players embracing ESG methods and approaches, is it just a matter of time before voluntary disclosure becomes the norm?