New report finds only 129 of 4,069 largest companies listed on the world’s stock exchanges are disclosing the most basic sustainability information

Only 128 of the 4,609 largest companies listed on the world’s stock exchanges disclose the most basic information on how they meet their responsibilities to society, according to a new report.



The study by Canadian investment advisory firm Corporate Knights Capital says 97% of companies are failing to provide data on the full set of “first-generation” sustainability indicators - employee turnover, energy, greenhouse gas emissions (GHGs), injury rate, pay equity, waste and water.



While the number of companies disclosing individual metrics has risen in recent years, the study says it remains “disconcertingly low” and the improvement is starting to tail off.



More than 60% of the world’s largest listed companies currently fail to disclose their GHGs, three quarters are not transparent about their water consumption and 88% do not divulge their employee turnover rate.



The slowing down of disclosure is illustrated by the fact that while the number of large listed companies disclosing their energy use increased by 88% from 2008 to 2012, there was only a 5% rise from 2011 to 2012. A similar reporting slowdown is occurring on the other first-generation indicators.



The reason these figures are so important is because there is a direct correlation between transparency and companies taking substantive action to improve their performance.



Paul Druckman, who heads up the International Integrated Reporting Council, said: “We know that reporting influences behaviour, so corporate reporting reform should encourage behaviour that focuses on longer-term value creation in order to achieve financial stability and sustainability.”



The report, which rates disclosure levels of companies listed on individual stock exchanges, puts Helsinki at the top of the league table, followed by Amsterdam’s Euronext and Johannesburg.



London scores ninth with the New York Stock Exchange and Nasdaq were close to the bottom of the global rankings, in 34th and 39th place respectively. The worst performers were Saudi Arabia, Warsaw, Qatar, Kuwait and Lima, which came bottom in 46th place.

The lack of transparency highlighted in the report prompted the CEO of multinational insurance group Aviva, who co-sponsored the report, to call on securities regulators to take urgent action.



Mark Wilson said: “There is a clear need for a global mandate and a globally co-ordinated approach to corporate sustainability reporting, which is clearly understood and consistently applied.



“A proliferation of national approaches, as well as overlapping and competing voluntary international standards and guidance, has led to difficulties in interpretation and implementation for companies operating in different countries and markets.”



He called on the International Organization of Securities Commissions (IOSCO), the body that brings together the world’s securities regulators, to co-ordinate more effective reporting.



IOSCO sets global disclosure standards and has focused in recent years on financial transparency. But over the coming months it will start looking at the responsibilities of companies around non-financial reporting.



“IOSCO has intervened fruitfully in similar areas in the past,” Wilson said. “An IOSCO intervention on narrative reporting might therefore be the spur to a global solution to this challenge.”



Beyond the action of regulators, the report by Corporate Knights Capital says there is an urgent need to minimise the time gap between companies’ financial and sustainability reporting cycles and calls on stock exchanges to link the pay of their senior executives to the sustainability disclosure practices of their listed companies.



It also says it is vital that the world’s three major sustainability standard-setters – the Carbon Disclosure Project (CDP), the Global Reporting Initiative (GRI), and the Sustainability Accounting Standards Board (SASB) - harmonise their competing reporting methodologies and guidelines.



According to Druckman, while progress has been slow, the report does show there is cause for optimism, given progress being made particularly by stock exchanges in emerging markets.



Companies trading in China, Colombia, Malaysia, Mexico, the Philippines, Thailand and Turkey were found to be quickly closing the disclosure gap between themselves and listed companies trading in developed markets.



Druckman also pointed to the birth of the concept of “stewardship” embedded in investor codes in countries such as South Africa, Malaysia, Japan, Australia and the Netherlands, and highlighted Brazil’s BM&F Bovespa which recently announced that it would be encouraging businesses listed on its platform to produce an integrated or sustainability report on a “report-or-explain” basis.

Within the developed markets, the recent EU Parliament’s directive on non-financial and diversity information will almost certainly lead to an increase in reporting on the seven first-generation indicators. The EU estimates that only 10% of the 6,000 companies that are expected to be affected currently report information that will be required.



“For capitalism to take a new direction, institutions, businesses and investors must think about value creation in a holistic sense when formulating strategy and allocating dwindling resources, particularly as they seek to build long-term value,” Druckman said.



“The businesses leading the way are those that are anticipating and responding to the changing needs of their stakeholder community, society and the external environment.”



The report points out that the paucity of corporate reporting on the first-generation indicators stands in stark contrast to investors’ growing interest in building sustainable investment strategies. Only recently a global investor coalition announced it is seeking to carbon footprint $500bn of institutional investments by next December’s UN Climate Summit in Paris.

The report also warns companies of increasing risks if major businesses fail to become more transparent in their performance: “While companies can face barriers in setting up systems to measure and publicly disclose their performance on the seven first-generation indicators, the opportunity cost of opaqueness is rising.”

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