Lively Discussions: The Move Toward Harmonized Corporate ESG / Sustainability Reporting

Lively Discussions: The Move Toward Harmonized Corporate ESG / Sustainability Reporting

G&A's Sustainability Highlights (09.18.2020)
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Wednesday, September 23, 2020 - 10:00am

There are lively discussions going on, centered on improving publicly-traded company disclosure and reporting – and especially ESG reporting…that is, storytelling about the company’s “non-financials” (in accounting-speak). 

The proliferation of ESG / sustainability reporting frameworks, standards, information platforms, industry guidance, stock exchange guidance and much more has been astounding in recent years.

We think of all this as about the organizing of the storytelling about a company’s sustainability journey and what the enterprise has accomplished.  And why the story matters to society…to investors, employees, customers, suppliers…and other stakeholders.

And it has a been a long journey to the state of today’s expanding corporate ESG disclosure.

The start of mandating of periodic financial and business mandated disclosure goes back to the 1930s with passage of landmark federal legislation & adopted implementation (compliance) rules for publicly-traded companies in the United States. Corporate financial disclosure in concept is all about providing shareholders with the information they need to make buy-sell-hold decisions. 

The sturdy foundations of mandated corporate disclosure in the U.S. are the laws passed after the 1929 stock market crash – the 1933 Securities Act and 1934 Exchange Act.  These laws and the bodies of rules deriving from them have been constantly updated over the years, including with Sarbanes Oxley legislation in 2002 and Dodd Frank in 2010. These mandate or guide and otherwise provide the rules-of-the-road for financial disclosure for company managements. 

Disclosure has steadily moved well beyond the numbers – Sarbanes-Oxley updated the 1930’s laws and addressed many aspects of corporate governance, for example.

Voluntary Disclosure & Reporting – ESG Issues & Topics
Over the past 40 years, beyond the financials, corporate voluntary non-financial disclosure has been steadily increasing, as investors first embraced “socially responsible investing” and moved on to sustainable & responsible & impact investing in the 21st Century. 

Asset owner and manager requests for information from publicly-traded companies in portfolio steadily expanded in the depth and breadth of topic and issue areas that institutional investors are focused on – and that companies now address in ESG disclosures. 

Today, investor interest in ESG / sustainability and related topics areas is widespread throughout asset classes – equities, equity-focused products such as ETFs, fixed-income instruments, and now credit risk, options and futures, fixed assets (such as real estate), and more.

With today’s dramatic increase in corporate sustainability & ESG reporting, the maturation of reporting frameworks and standards to help address the internal need for better organizing non-financial data and information and accompanying ESG financial disclosure -- and all of this in trying meeting their investor demands – corporate executives find that while there are more resources available to the company, there is also more confusion in the process. Investors agree.

Complaints:  Lack of Comparability, Confusion, Demand for Change
The result of increasing demand by a widening range of investors for accurate, detailed corporate ESG information and the related proliferation of reporting frameworks and standards has resulted in confusion among investors, stakeholders and companies as to what is important and what is frill. 

Especially as corporate managements embraced various elements of the available frameworks and standards and industry guidance and ESG ratings for their voluntary ESG reporting.

So where do we go from here?  In our selection of Top Stories for you, we bring you news from important players in the ESG reporting process as they attempt to move in the direction of more uniform, comprehensive, meaningful and decision-ready corporate ESG reporting. That investors can rely on. 

The news for you is coming from GRI, SASB, GSSB, IIRC, CDSB, and CDP (among others) – all working to get on the same page.  To benefit corporate reporters – and the users of the reports, especially capital market players.  Because in the end, ESG excellence is all about winning in the competition for access to capital. Accurate, timely, comprehensive comparable ESG information is key!

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.