S&P 500 Companies Lag Behind on Environmental and Social Transparency, According to Findings from The Conference Board

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Jul 10, 2013, 09:00 ET

NEW YORK, July 10, 2013 /PRNewswire/ -- Fewer than 20 percent of S&P 500 companies disclose their performance across a broad range of environmental and social practices, reports The Conference Board in Sustainability Practices: 2013 Edition. This annual analysis of the sustainability disclosure of business corporations found that, despite the increasing awareness of sustainability reporting standards in the United States, progress continues to be slow. Large U.S. corporations—when compared to a multinational index such as the S&P Global 1200—lag behind on almost every indicator of non-financial transparency, including adoption of the Global Reporting Initiative (GRI) reporting framework and verification of company disclosure by an accredited assurance service provider. As expected, smaller U.S. corporations are even less forthcoming, with only one out of ten companies in the Russell 1000 providing a fairly comprehensive report on these issues.

A collaboration between The Conference Board, Bloomberg L.P., and Global Reporting Initiative (GRI) Focal Point USA, Sustainability Practices: 2013 Edition analyzes a total of 76 environmental, social, and reporting practices including: atmospheric emissions, water consumption, biodiversity policies, labor standards, human rights practices, and charitable and political contributions. For benchmarking purposes, data for S&P Global 1200 companies are compared with the S&P 500 and the Russell 1000, and further analyzed across 10 business sectors, four revenue groups, and four regions, encompassing North America, Latin America, Europe, and Asia-Pacific.

The new report incorporates geographic comparisons and introduces five new practices to the analysis: investments in sustainability; discussion of climate change risks in annual filings; discussion of climate change opportunities in annual filings; social supply chain management; and anti-bribery policies. For instance, according to the study, 61 percent of companies in the European sample reported having an anti-bribery policy, compared to only 22 percent of companies in the North American sample. The study also found that while 84 percent of S&P Global 1200 companies report having a business ethics policy, fewer than half of companies (44 percent) report having a human rights policy.

"While sustainability reporting has grown significantly over the past ten or twenty years, it is clear that we are still in the early stages of nonfinancial reporting," said Thomas Singer, Researcher at The Conference Board and co-author of the study. "It is telling to see that fewer than half of the world's largest companies are reporting on core sustainability practices – such as energy and water consumption. It is important to recognize the growth of sustainability reporting, but we should be aware that there is plenty of room to expand both the breadth and quality of nonfinancial disclosure."

"Our findings confirm the need for educational support and guidance expressed by U.S. corporations, which are still in the process of developing a cohesive internal program on sustainability," said Matteo Tonello, managing director of corporate leadership at The Conference Board. "Poor disclosure is not necessarily indicative of suboptimal practices: instead, many companies continue to struggle with issues such as the complexity of enterprise-wide data collection, a lack of agreement on materiality thresholds, and the confusion on the right reporting framework to use."

With the new edition of the report, The Conference Board also introduces a complementary web-based tool, the Sustainability Practices Dashboard. The dashboard presents data from the report in an interactive online format, allowing users to easily select, view, and export the most relevant benchmarking data.

Among other major findings from the report:

Larger companies, by revenue, were more likely to invest in sustainability disclosure. Global companies in the highest revenue group (over $100 billion) had over two times the overall disclosure rate of companies in the lowest revenue group (under $1 billion). Companies in the highest revenue group were also the most likely to issue sustainability reports that follow GRI guidelines. The significant financial and human resources required to prepare sustainability reports may be a likely factor in this. In addition, larger companies are typically subject to greater data inquiries from stakeholders, thus driving the need to report more information.
North American companies continue to lag their peers in sustainability disclosure. Across the environmental and social practices covered, European companies had the highest average disclosure rate (27 percent), followed by companies in Latin America (24 percent), Asia-Pacific (23 percent), and North America (19 percent). GRI reporting, in particular, continues to be at an early stage in North America, with only 29 percent of North American companies releasing reports following GRI guidelines, compared to 61 percent of companies in Europe.
Report verification has a long way to go, particularly in North America. While almost half of European companies release sustainability reports that are verified by a third party, only 9 percent of North American companies do so. Report verification is becoming an increasingly important practice as a mechanism to ensure reliability of reported data, particularly as sustainability reporting is largely unregulated and continues to be voluntary in most countries.
There are only a handful of environmental and social practices with disclosure rates of over 50 percent. Out of the 47 environmental practices analyzed, the following four practices had disclosure rates of over 50 percent among S&P Global 1200 companies: delegation of responsibility for climate change (74 percent); energy efficiency policy (64 percent); emission-reduction initiatives (63 percent); and waste reduction policy (55 percent). Out of the 26 social practices analyzed, the following four practices had disclosure rates of over 50 percent among S&P Global 1200 companies: business ethics policy (84 percent); health and safety policy (68 percent); equal opportunity policy (61 percent); and employee training policy (61 percent).
Water consumption continues to be under-reported, despite the global imperative of ensuring access to clean water. 39 percent of S&P Global 1200 companies reported their total water consumption, compared to only 12 percent of Russell 1000 companies. In the global sample, out of the 10 sectors analyzed, only the materials and telecommunication services sectors had more than half of companies disclosing total water consumption. Perhaps more telling is that fewer than half of companies in the utilities sector reported on water consumption, despite companies in this sector reporting the highest median water consumption.
Discussion of the business risks associated with climate change rarely makes it into annual report filings, even among sectors most likely to be affected by potential greenhouse gas (GHG) regulation. Only 9 percent of S&P Global 1200 companies included discussion of climate change risks in the MD&A sections of their annual 10-K reports (or equivalent). Despite the utilities and energy sectors reporting the highest GHG emissions, only 14 percent of utility companies and 10 percent of energy companies included discussion of climate change risks in their annual reports.
Corporate policies on human rights are far from universal, especially among North American companies. While 84 percent of S&P Global 1200 companies reported having a business ethics policy, only 44 percent of companies disclosed having a human rights policy. The geographic differences are even more pronounced, as only 23 percent of North American companies reported having a human rights policy, compared to 63 percent of European companies, 57 percent of companies in Latin America, and 51 percent of companies in Asia-Pacific.
While over two-thirds of global companies report the presence of a health & safety policy, disclosure on the actual number of accidents remains very low. Only 15 percent of S&P Global 1200 companies reported the total number of workforce accidents. The geographic analysis reveals an even larger gap: 53 percent of North American companies reported the presence of a health & safety policy, and only 5 percent of companies in this region disclosed the total number of workforce accidents.
While disclosure rates related to minority employees remain at the bottom of the social practices covered, North American companies stand out as the most diverse. Only 6 percent of companies in the S&P Global 1200 index disclosed information on minorities in the general workforce, and an even lower 4 percent offered similar data on minorities in management positions. Companies in North America, however, reported by far the highest median percentage of minorities in the workforce and in management, 16 percent and 14 percent, respectively.
Companies in North America were most active in political contributions, led by the utilities sector. Twelve percent of North American companies disclosed their political contributions, reporting a median spend of $63,967. By contrast, companies in the other three regions on average did not make any political contributions. Globally, the utilities sector was the most politically active in terms of spending, reporting a median of $89,332 in political spending and an average of over $2.7 million. The disclosure rate of political contributions may rise significantly in the next few years as some institutional shareholders and proxy voting advisors have become increasingly vocal on the need for public disclosure of these contributions. In the United States, this disclosure may soon become mandatory, as the United States Security and Exchange Commission (SEC) may consider mandating disclosure of corporate political contributions.

To access Sustainability Practices: 2013 Edition, visit www.conferenceboard.org/sustainabilitypractices.

Source: Sustainability Practices: 2013 Edition, Report # R-1521-13-RR, The Conference Board

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