A recent research study called 2012 Tomorrow’s Value Research (TVR) by DNV Two Tomorrows found that in their drive for transparency, companies are losing sight of the big sustainability picture.
The study, evaluated the top 25 companies of each of three major regions:
- The Americas
- Europe, Middle East & Africa
It also looked at the super-sector leaders in the Dow Jones Sustainability Index (DJSI).
When they looked at what these companies had done, it was as if each company had simply placed a picture frame around their own sustainability activities and called that the big picture.
Dr. Todd Cort, director of the 2012 TVR, noting a disturbing trend, said the companies were becoming too “introspective” in their reporting.
Large companies around the world are providing greater and greater transparency in the form of metrics, targets and descriptions of their management approaches. This is evident in the continual rise in GRI reporters and in the improved scores year on year in our research. However, it is evident that companies are losing sight of the big picture: are we successfully addressing the global challenges that we all face? Such challenges require collaborative solutions.
It is as if the companies are focusing mainly on their efforts rather looking at those efforts in the context of these big challenges.
The companies in general did not do well, with only 26 of the 93 companies evaluated scoring above 70 percent. Of all sectors, health care scored the lowest, with an average score of only 19 percent. The technology sector scored the highest.
The report also found that many companies, even those demonstrating advanced sustainability practices, “still tend to gloss over some significant negative social and environmental impacts.”
The best companies all had an emphasis on business innovation, “embedding sustainability into systematic innovation, applied company-wide, disseminated to supply chains and throughout product lifecycles, based on internal and external stakeholder feedback.”
Surprisingly, the report found that the most robust management and governance arrangements were demonstrated by the traditional “high-risk” industries, those least associated with sustainability, such as petroleum, mining and heavy manufacturing. Many of these companies have pioneered in several important areas such as developing risk management practices that integrate stakeholder feedback including environmental, social and operational protection. No doubt some of these developments came about in the aftermath of disasters these companies caused, and the scrutiny that came about as a result.
Companies cited for best practices include:
- Citibank – Stakeholder engagement
- Ford – Target setting
- GE – Innovation
- HSBC – Balanced reporting
- Hyundai Engineering – Materials assessment
- Panasonic – Target setting
- Repsol – Sustainability risk management
- Stockland – Stakeholder engagement
- Swiss Re – Sustainability risk management
- Westpac Bank – Integrated sustainability
Standouts by sector include: BMW, Ford (Auto), GE, Xstrata (Diversified industrial), Phillips, Siemens (Consumer), HP, Panasonic (Technology)
Looking forward, the study found that stakeholder engagement basics were now in place, with a trend towards indicators and targets used in the reporting process, with online interactive reports becoming commonplace. But overall, the authors felt that integrated reporting was still in its infancy.
First of all, the monetary value of sustainability issues still pale in comparison with traditional metrics, at least when measured on the same time scale. The second challenge is being able to quantify non-financial data in a meaningful way that goes beyond simple yes/no questions. As the practice of reporting continues to evolve, we should continue to see improvements in both these areas.
RP Siegel, PE, is an inventor, consultant and author. He co-wrote the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water in an exciting and entertaining format. Now available on Kindle.
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