December 23, 2009
CSR Reporting by S&P 100 Companies Shows Improvement in 2009, But Disclosure by Companies in Emerging Markets Needs to Improve
by Robert Kropp
Two recently commissioned reports by the Social Investment Forum chart the progress of corporate
social responsibility reporting, both in the US and emerging markets.
Two reports from the Social Investment Forum
(SIF) provide important updates on the status of corporate social responsibility (CSR)
reporting, both among the S&P 100 companies headquartered in the US, and among the 100 largest
companies in ten emerging markets.
The first, entitled S&P 100 Sustainability
Reporting Comparison, was commissioned by the Sustainable Investment Research Analyst Network (SIRAN), a network
of investment research analysts and a SIF working group.
The SIRAN report, the fifth in an
annual series of reports dating back to 2005, analyzed corporate sustainability reporting of S&P
100 companies according to the standard of the Global Reporting Initiative (GRI) reporting framework.
The GRI developed the world’s most widely used sustainability reporting framework, the standards
for which it updates through a multi-stakeholder process. Participants in the GRI process include
representatives from business, civil society, labor, and professional institutions.
investors whose long-term investment horizons require an understanding of the corporate risks and
opportunities associated with environmental, social, and governance (ESG) factors, the results of
SIRAN’s report are mostly encouraging. In 2008, 93 companies included sustainability information on
their web sites, up from 58 companies in 2004.
Furthermore, 66 S&P 100 companies produced
a formal sustainability report with performance data in 2008, compared to 49 reports produced only
one year earlier. And 55 companies made reference to the GRI in their sustainability reports, more
than double the 24 that did so in 2004.
That significant improvements in corporate
sustainability reporting occurred in the midst of a global economic crisis is especially
encouraging for those who have long insisted that such information is critical to effective
As Peter DeSimone, SIF’s director of programs, said, “The
fact that we saw an increase in companies issuing sustainability reports during one of the world’s
worst economic downturns clearly demonstrates that ESG information is not a luxury but extremely
relevant to companies and their investors. This trend supports the idea that investors look for
solid ESG performance in valuing companies, and that more and more companies accept this
development and are willing to supply information in this area.”
SocialFunds.com, “US companies, although they continue to lag behind their European counterparts,
are becoming more familiar with the GRI, and are becoming more comfortable with putting this kind
of information out there.”
“If you look at the number of shareholder proposals addressing
sustainability reporting over the last five years, the number requesting GRI-type reports have
increased,” DeSimone continued. “And the percentage of shareholders voting for these proposals has
also been on the increase.”
SIRAN assessed the CSR reporting of S&P 100 companies
according to six criteria. Companies are assessed according to whether they have separate CSR
sections on their web sites, produce annual CSR/Sustainability Reports, and provide goals and
benchmarks in their reports.
A company’s commitment to transparency and reporting is
further assessed by whether it references the GRI in its report, and includes a GRI content index
in its report.
Finally, companies are scored by SIRAN by whether they attain the GRI
levels of "In Accordance" or "A." On this final score, the performance by S&P 100 companies were
disappointing, as only six of the 55 companies that made reference to the GRI in their
sustainability reports received an “A” rating from the GRI.
In order to attain such a
rating from the GRI, companies must provide data for all performance indicators, describe the
management approach for each indicator, and includes such organizational information as
identification risk and a statement from the CEO.
The six companies that received an “A”
rating from the GRI for their 2008 reports were American Electric Power, Dow Chemical, Ford,
General Electric, IBM, and Weyerhaeuser.
DeSimone said, “I can’t stress the importance of
companies reporting by a standard. Investor groups are requesting that companies do this, and are
advocating strongly to the SEC and on Capital Hill that such reporting become a mandatory part of a
The second SIF report, produced by the Emerging Markets Disclosure
(EMD) Project of its International Working Group, paints a less
optimistic portrait of CSR reporting by the largest companies in ten major emerging markets. The
report, entitled Corporate
Sustainability Disclosure in Emerging Markets, is the third in a series of baseline studies
produced by the Project.
The report found that while 96% of companies did report on at
least one ESG factor primarily on such governance issues as governance structures, board
committees, and employee wages and benefits according to employment type and gender, environmental
information was reported by only 30.6%.
Furthermore, only 20 companies made reference to
the GRI in their reports, and 14 declared their reporting to be in accordance with the GRI’s
guidelines. Even among the 28 signatories to the United Nations Global Compact, a policy initiative for
businesses that declare themselves to committed to universally accepted principles in the areas of
human rights, labor, the environment, and anti-corruption, only 18 “Produced a Communication on
Progress (COP) and/or a GRI report in compliance with the Compact’s reporting requirements,”
according to DeSimone.
The report’s analysis of the ten emerging markets found that South
African companies exhibited the best overall transparency practices. According to Mike Lombardo of
Calvert Investments and co-chair of the EMDP,
“A factor driving sustainability reporting in South Africa is that the country’s Johannesburg Stock
Exchange (JSE) operates a socially responsible investment (SRI) index, requires the top 40
companies by market capitalization to issue sustainability reports.”
countries included Malaysia and South Korea, followed by Brazil and Indonesia. Like South Africa,
Brazil’s Sao Paulo Stock Exchange has an ESG index, and surveys the country’s largest companies on
sustainability policies and practices.
The lowest disclosure rates were recorded by
companies in India, Indonesia, Israel, and Mexico.
Despite the disappointing results of
its survey, the authors of the report did point out, “Companies in emerging markets only lagged
counterparts in developed nations by a small margin and even outperformed them in a few instances.”
As an example, the report points to the performance of companies in the US S&P 500, only 13% of
which issued sustainability reports using the GRI’s latest G3 Guidelines.
Shareholder Advocate of Boston Common
Asset Management and co-chair of the EMDP, stated, “This report clearly points to a need for
companies in emerging markets to improve their ESG reporting practices, and investors must become a
key driver in encouraging companies to bolster transparency.”
One of the recommendations
of the report, in fact, is that investors sign onto the In
vestor Statement on Sustainability Reporting in Emerging Markets, whose 28 current signatories
represent nearly $1 trillion in assets.
Other recommendations include encouraging
companies to use the GRI’s latest reporting guidelines, the promotion by investors of regulations,
listing requirements, and exchange-sponsored SRI indexes, and regular assessments of corporate