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Glass Half Full by Meredith Benton From the Fall, 2007 issue of ValuesAt Walden, getting access to sufficient social and environmental data to assess, compare, and benchmark corporate performance and progress is one of our greatest challenges. Although we utilize a number of sources-from governmental databases and trade journals to advocacy organizations and the companies themselves-we are continuously hampered by inadequate public information on environmental and social issues. Two recent reports, the annual report of the Carbon Disclosure Project (CDP) and one from the German research firm WestLB, give us reason to hope that significant improvements in the content of corporate reporting and our access to it are on the horizon.
Walden has participated in the CDP since its inception in May 2002. At that time, 35 institutional investors representing $4.5 trillion in assets signed onto a questionnaire asking the FT 500, the world’s largest companies, to report on their thinking, tracking, and planning around climate change. Since then, the CDP has grown enormously, now boasting 315 institutional investor signatories representing $41 trillion in assets.
We found ourselves in good company at the launch of this year’s CDP findings (September 24in New York City), from keynote speaker President Bill Clinton to our fellow attendees from CalSTERS, Merrill Lynch, AIG, and TIAA-CREF. This year, 77 percent of the FT 500 companies responded to the survey (up from 47 percent in 2002). We learned that 80 percent of responding companies believe climate change presents risks and opportunities for their business and, remarkably, 76 percent are implementing greenhouse gas emissions reduction plans.
Under the mantle of our partnership with the Social Investment Research Analyst Network (SIRAN), a coalition of professional social and environmental research analysts, Walden worked closely with WestLB to structure a research project that would assess and benchmark the current state of sustainability reporting. The report’s goal was to gauge the “completeness, clarity, and comparability” of the sustainability reports being issued by members of the DJ STOXX Global 1,800, leading companies in developed markets in the Americas, Europe, and the Asia-Pacific region. WestLB combed through the 785 sustainability reports of companies in the index currently using the Global Reporting Initiatives, and conducted a comprehensive, in-depth analysis of their content and quality.
The WestLB project uncovered many telling things about the current state of sustainability reporting. It found that the highest rates of reporting are in sectors, such as chemicals, that are most susceptible to environmental concerns and controversies. It also found that the larger a company was, the more likely it was to issue a report. Disappointingly, though not surprisingly, WestLB reported that only one-fifth of U.S.-based companies have reports, in contrast to one-third of European companies. Moreover, and also as we expected, WestLB found that the reports did not yet allow for cross-sectional comparisons nor provide adequate data for benchmarking performance. The WestLB study did find significant girth in the narrative sections of the reports.
WestLB’s research leaves us with a glass half-full. It found the field of sustainability reporting has developed dramatically in just a few short years. However, it also confirmed that the field has a long way to go to live up to its promise of providing investors with comparable and material information. We hope and expect that this report will spark improvements in future corporate sustainability reporting.
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