2011 was the first year ever that a majority of companies in the S&P 500 publicly disclosed their sustainability performance, according to new research from Governance & Accountability Institute (G&A Institute). Moreover, companies that issued sustainability reports enjoyed higher financial returns than their non-reporting competitors.
In the analysis (somewhat gauchely titled “2012 Corporate/ESG/Sustainability/Responsibility Reporting – Does It Matter?”), G&A Institute states that 53 percent of the 500 companies indexed by Standard and Poor’s issued sustainability reports in 2011, a drastic increase from 2010, when only around 19 percent of the companies reported.
“The lesson for corporate management and boards: If you are not reporting, your competitors and peers almost surely are,” observed Louis D. Coppola, a partner and senior vice president at G&A Institute. “The task of ‘catching up’ will only grow larger. And, those companies reporting for a longer period of time have a definable lead on their peers.”
The analysis also found that companies issuing sustainability reports attracted more investment dollars and offered shareholders better returns than competitors that failed to report.
“Companies that are responsible with their financial, human and natural resources, the communities they serve and the people they impact can begin to recognize multiple benefits and efficiencies that can elevate their position in the marketplace and their position relative to their competitors and peers,” states the analysis.
Investors are beginning to perceive a positive correlation between sustainability and financial performance, and the demand for sustainability data among financial professionals has never been greater. Bloomberg, for example, now provides sustainability data on all 310,000 of its terminals, and Google Finance lists a company’s Carbon Disclosure Rating alongside traditional financial indicators like profits and revenue.
G&A Institute Chairman Hank Boerner forecasted that the reporting trend will become more pronounced in coming years. “We believe this minority universe will continue to shrink as it has in the past few years as more large-cap companies embrace sustainability reporting,” said Boerner.
“The benefits of sustainability reporting are becoming increasingly obvious over time,” he added, “and the long-term benefits of adopting sustainability strategies and reporting on performance become easier to measure and quantify.”
In a similar analysis of S&P 500 companies, GreenBiz Group also found that a record number of companies issued sustainability reports in 2011, although the two analyses came up with slightly different figures. The analysis from GreenBiz, entitled “State of Green Business Report 2012,” found that S&P 500 companies issuing sustainability reports in 2011 just barely remained in the minority, with a total of 48 percent reporting.
The discrepancy likely derives from the sources from which the data was culled. G&A Insitute is the exclusive Data Partner for the Global Reporting Initiative (GRI) in the United States, the UK and Ireland, and consequently used data collected through its activity with GRI. The institute also hired two M.B.A. candidates to run through the entire list of S&P 500 companies by hand to identify additional reports.
“This research was manually conducted in-house here at the Governance & Accountability Institute,” Coppola told TriplePundit in an email, pointing out that the Institute did not rely on data from a third party source. GreenBiz, on the other hand, used data from CorporateRegister.com, one of the leading databases of sustainability reports.
Both the GreenBiz and the G&A Institute analyses also looked at the percentage of companies issuing sustainability reports according to GRI disclosure guidelines.
G&A Institute found that 167 companies, or slightly more than one third of the S&P 500, issued GRI sustainability reports, meaning the report contains a GRI Content Index and states that it uses the GRI framework. An additional 13 companies took ideas and concepts from the GRI Framework but did not contain a GRI Content Index. GreenBiz, with a slightly more conservative finding, claimed that 104 companies issued GRI reports in 2011.
Regardless of which figure is more accurate, both analyses suggest a dramatic increase in companies reporting according to the GRI framework, suggesting that GRI’s efforts to standardize and codify sustainability reporting are gaining traction among U.S. companies that have traditionally embraced GRI less than their European counterparts.
Sustainability reporting also appears to be gaining significant traction among Fortune 500 companies, not all of which are publicly traded. This suggests that in addition to providing data to investors, companies issue sustainability reports in order to attract talent, increase brand value and market to customers.