Bernie Madoff. Sir Allen Stanford. Raj Rajaratnam. Jerome Kerviel. Mitchel Guttenberg. Sam Israel III. Unfortunately, the list could go on.
Once you’ve been hit in the wallet (OK, maybe it takes two or three times), you get a bit skittish before handing over your money. You begin to do better due diligence.
CSR reporting and the world’s financial meltdown
And, in the wake of a crippling credit crisis, the worldwide Great Recession and myriad financial scandals, some financial institutions have started to understand that individual investors, pension funds and others want to know about a company’s environmental, social and governance practices, also known as ESG, as part of that due diligence.
“Sustainability reporting is playing a crucial role in the process of rebuilding trust in businesses, financial institutions and governments following the financial meltdown,” says John Elkington, author of the Global Reporting Initiative’s “The Transparent Economy,” which will be released at the 2010 Amsterdam Global Conference on Sustainability and Transparency taking place at the end of May. “As a result, new forms of ‘integrated reporting’ [combining sustainability and financial reporting] are evolving rapidly,” he added.
Increasing interest in CSR
The number of CSR or sustainability reports has risen each year since 1992—coming in at around 3,500 in 2009, according to CorporateRegister.com. European companies are still in the lead in their reporting efforts, although some companies in the U.S. and Asia are starting to climb on board.
And this increase in sustainability reporting has increased interest. More than 250,000 Bloomberg terminals have been installed on the desks of financial mavens around the world. Each now has access to all public ESG data from 2,000 to 3,000 companies. Some even use it as they make their investment decisions.
“We think it’s worth having an additional analytic lens to judge ESG criteria [as a way of] better understanding risk and opportunities of each potential investment,” said Xavier Desmadryl, global head of socially responsible investing research at HSBC Global Asset Management in Paris, according to a Pensions & Investments article. “If we have a broader perspective, we will do a better job. It’s as simple as that.”
Elaine Cohen, co-founder of Beyond Business and author of the CSR Reporting blog says the increase interest is not so much because of the financial health of the world as it is the “result of a stronger core of companies who are committing to annual sustainability reporting.”
Cohen says “the momentum is maintained because of the constant dialogue that is generated about reporting [along with] the ongoing drive to make business more transparent; the use of social media to make reporting more accessible; and the competitive disadvantage companies face if they do not now join the reporting mainstream.”
A senior consultant with Sustainable Business Consulting in Seattle, Wash., tends to agree. Anne DeMelle’s company has seen an interest in inquiries from companies wanting CSR reports. “Within the past six months we’ve seen a significant uptick in interest from clients who have done some work to green their business and are now interested in communicating with and engaging their stakeholders,” says DeMelle.
The take away?
Perhaps CSR reporting wasn’t on the radar of many people before the financial crisis. Perhaps the meltdown exacerbated the interest. Perhaps the cause of the rise in awareness of CSR reporting is not overly important. But for the past several years, about 20 percent of each year’s CSR reports are from company’s reporting for the first time. As Cohen notes, the GRI, along with think-tanks, consultants, some investment house, the Nasdaq social index and more, require reporting. “All contribute to making sustainability reporting a fact of life and a basic requirement of business,” she says.
This can only be good news for transparency and for those interested in sustainable business.
Ed Note: 3p and ISOS group consulting have teamed up to offer a GRI Certified Sustainability Reporting course in Berkeley, CA on July 29-30 this year. Please click here to sign up and get more information.