As corporate sustainability reporting continues to evolve, new analyses highlight what companies are — and aren’t — reporting to stakeholders.
Despite increasing pressure on companies to reduce their carbon footprints as governments across the world commit to combat climate change, four out of 10 (41 percent) of the largest US companies do not publish plans to reduce their carbon emissions, according to the KPMG Survey Of Corporate Responsibility Reporting 2015.
KPMG also found of the US companies that do include carbon reduction targets in their CSR or annual reports, less than one-third explain why those targets were selected. Additionally, only 43 percent of the US companies that report on carbon explain in their reporting how their businesses benefit from reducing carbon emissions.
‘Missing Opportunities’
Globally, the number of firms publishing carbon emissions reduction plans is higher. KPMG says 53 percent of the world’s largest 250 companies (G250) include carbon reduction targets in their key company reports.
If climate is a material issue, this information should be detailed in CSR and annual financial reports, says Katherine Blue, a principal with KPMG’s Risk Consulting practice who serves as the US Sustainability Services Network leader.
“Stakeholders should be able to access good quality and comparable data on a company’s carbon performance,” Blue told Environmental Leader. “It allows stakeholders to understand key business issues, risk and opportunities associated with climate, carbon and energy, alongside other financial issues.”
Blue also says companies are missing opportunities by not reporting on their carbon reduction plans. “If you’re gathering that data, reviewing and analyzing that data, that leads to opportunities to work more closely with your suppliers to gain business efficiency benefits and fuel innovation.”
‘Third-Generation Sustainability Goals’
Analysis from PwC finds companies’ sustainability goals are evolving. PwC found that 75 percent of S&P 500 companies published sustainability reports in 2014. Instead of just focusing on critical resources like energy and water, companies are setting science-based goals that connect sustainable practices to overall business strategy.
In a blog post, Clinton Moloney, managing director of sustainable business solutions at PwC, write that these “third-generation sustainability goals” can help drive business growth.
“Enacting third generation sustainability goals are by their nature designed to support a company’s broader business strategy and in the process, make higher quality business decisions,” Moloney writes.
Now, he says, companies need to become more sophisticated about how they report on these third-generation sustainability goals.
Focus on Material Issues
“When it comes to reporting on these goals, we need to focus on how material are these goals to the business value,” Moloney told Environmental Leader. “If I’m an investor do I really want to trawl through a 120-page glossy summary of anecdotes or a report that outlines the business value at stake?”
To improve annual reports, companies should move away from anecdotal, “feel-good stories,” Moloney says and instead focus on material issues that connect to business value. Such targets require metrics that are measurable — and auditable.
“There’s a growing trend where companies are realizing we don’t need to report on every goal but we need to report on these goals because they are the most material to our business performance,” Moloney says. “The very best CSR reports really make that case between values and business.”
“He says he expects to see more companies setting carbon neutral or even carbon positive goals. Unilever recently pledged to become “carbon positive” in its operations by 2030.”
“More companies are at least assessing what it would take for them to keep to 2 degrees C,” he says, adding that he expects to see increased investments over the next five years “in data and systems and processes to really effectively communicate ESG issues, especially those things that are material. I’m personally excited to see so many companies stepping up.”
7 Tips for Better Reporting
KPMG’s report gives seven recommendations to companies to improve their carbon reporting:
- Identify and report on all carbon emissions, including Scope 3 emissions.
- Define new processes to develop broader reporting that includes input from third parties such as suppliers.
- Make sure the data collected aligns with the scope of carbon reduction targets set.
- Set long-term carbon reduction targets before the current targets expire.
- Monitor carbon performance down to the business unit level.
- Make bold carbon targets — but make them realistic.
- Use narratives (in addition to target and performance metrics) to describe carbon reduction strategy and initiatives.
The Global Reporting Initiative’s Asthildur Hjaltadottir, director services, says the KPMG survey findings reinforce a strategic priority of the Global Sustainability Standards Board (GSSB), which is responsible for the development and approval of GRI reporting standards: “the need for a common global language through which environmental, social and economic impacts of organizations can be communicated and understood.”
Common Reporting Language
Last month the GSSB approved plans to transition the GRI G4 Guidelines to GRI Sustainability Reporting Standards (GRI Standards).
“The timely transition to reporting standards provides this common language, with thousands of organizations across the world already using the GRI G4 Guidelines, which will form the basis of GRI Standards,”Hjaltadottir says. “This move is designed to enhance the comparability, usability and quality of sustainability information.”
He says as companies continue to focus their report on their most material impacts — and as stakeholders including investors and regulators continue to demand more transparency on carbon performance — more companies will being reporting their emissions reduction plans.
Plus this makes businesses more resilient by painting a more accurate picture of their non-financial risks and builds trust with stakeholders and the public.
“The 2015 Edelman Trust Barometer indicates that public trust in business has evaporated.” Hjaltadottir says. “The sustainability reporting process and the disclosure of this information is a means by which companies can be more transparent, make better decisions based on this information and ultimately build trust.”
Photo Credit: industrial plant emissions via Shutterstock