Thursday, March 12, 2009

Corporate sustainability reporting: the executive disconnect

Canada’s senior executives seem to be getting the message that sustainability issues are important to their businesses. But there’s a major gap between understanding and action, according to a survey released this week.

The study, conducted by PricewaterhouseCoopers LLP (PwC) and the Canadian Financial Executives Research Foundation, reveals that 90% of Canada’s senior financial executives believe their companies should be reporting on environmental and social impacts. However, only half said they have sustainability reporting systems in place, even though most also believe the average investor does not have enough information about the environmental and social performance of Canadian companies.

The survey suggests that most executives understood which sustainability issues were most relevant to achieving their business goals and felt it was important to communicate sustainability performance to senior managers and their boards of directors. But again, more than half admitted they did not have systems and processes in place to measure sustainability performance.

“Several forces may be working together to explain the disconnect,” says PcW partner Mike Harris. “First, a general framework does not exist for measuring and reporting, making comparisons between industries a challenge. Second, many companies have not developed robust data collection systems to make the reporting process efficient and reliable. Third, most finance executives continue to only focus on the mandatory financial disclosures and finally, the cost/benefit of optional sustainability reporting does not provide support for the types of systems and process required to effectively implement it.”

“Until sustainability reporting is mandatory, this is likely to remain the norm,” Harris concluded.

The survey found that larger companies were more likely to link the application of corporate sustainability practices to business goals. And public companies were more like to comply with external reporting standards such as the Global Reporting Initiative and the Greenhouse Gas Protocol.

Companies were also concerned about compiling data in a cost-effective manner that would accommodate a broad spectrum of stakeholders, such as employees, shareholders, customers, institutional investors, regulators and environmental activist groups. The costs associated with sustainability reporting were of particular concern to small- to medium-sized businesses.

The survey results indicate that the vast majority of financial executives believe that regulatory requirements pertaining to sustainability disclosure and reporting will increase in the years to come; nearly three-quarters said they believed that legislation relating to disclosure and reporting of sustainability performance will become more stringent over the next five years.

Nearly 350 senior executives from across Canada participated in the survey.

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