So much hot air
Environmental disasters like BP’s Gulf of Mexico oil spill have thrust green issues onto the front pages
By Ben Griffiths | Published 11:39, 27 June 12
Ahead of the meeting big business was being urged to reveal what their environmental strategies are and how they are performing against those goals.
It comes soon after a survey by KPMG that revealed 95 percent of the world’s biggest 250 companies already report their corporate responsibility activities. That’s up from 14 percent in 2008, according to the report. But parallel research for Bloomberg showed 75 percent of 20,000 businesses it surveyed had no sustainability reporting.
In the past if I’ve ever been asked what my understanding is of a company’s corporate social responsibilities is I’ve been at a loss to give a sensible answer. For financial journalists the profit and loss account is usually the first port of call, along with measures such as total shareholder return - share price performance plus dividends paid - to assess how a company has fared.
But this is an attitude that needs to change. Institutional investors are increasingly concerned about how companies relate to the environment and their workers. The media needs to be too.
Insurance giant Aviva is leading the drive for corporate sustainability reporting (CSR) in the UK. It is part of a group of businesses and investors who believe there are clear benefits from thinking about what consumption of resources such as water and energy will mean longer-term.
The group wants a ‘report of explain’ rule for CSR so that anyone mulling over whether to invest could consider what that company’s activities could mean for the environment.
Aviva’s deputy executive chairman John McFarlane wrote an open letter before the Rio+20 meeting describing such reporting as “one of the most important catalysts for changes that contribute to the long-term health of a business”.
McFarlane urged the world to move from the pioneering approach of a minority of companies to a global benchmark of best practice for all companies.
Nevertheless, the Rio+20 summit has been labelled an abject failure by the environmental lobby. Pressure groups were disappointed that the language used to debate CSR reporting left it up to companies to consider reporting only “where appropriate”.
They believe this leaves CSR reporting in a weaker state than when agreement was last reached in Johannesburg in 2002. But major environmental and ethical disasters such as BP’s Gulf of Mexico oil spill have thrust green issues onto the front pages like never before.
With the City starting to sit up and take notice of the possible fallout - not least the huge destruction in shareholder value that can quickly follow a major environmental catastrophe - regulations, codes or even listing rules should be rapidly introduced to encourage better sustainability reporting within companies’ annual reports and on their websites.
Sadly without the weight of the law behind it, I fear the shift to CSR reporting will remain so much hot air.