Does Good Corporate Reporting Make for Good Environmental Performance?

A study just published by U.K. consultancy SustainAbility and others concludes that corporate boards are failing to disclose to financial investors how environmental and social issues pose strategic risks and opportunities for their businesses. The study, Risk & Opportunity: Best Practice in Non-Financial Reporting, found that only three reports of the Top 50 assess the balance sheet implications of key environmental and social risks, "despite this information being increasingly important to analysts, investors, lenders, insurers and re-insurers."

This isn't the first study to describe the chasm between corporate accountability and stakeholder needs in the environmental and social arena. But what's new here is an accompanying analysis by Gil Friend of Natural Logic that asks the critical question, "How do the leading reporters compare with the leading performers?"

Friend loaded the reported data for the eight Technology and Telecommunications companies covered in the SustainAbility report into Business Metabolics, his company's key performance indicators system, to support just that sort of comparison.

Consider greenhouse gas emissions, or GHGs. In the reports, some companies showed improvements (Deutsch Telecom, Sony) while others showed little change (BT, Ricoh). Fine. But what's it all mean?

"Indicators become more informative when placed into context to other relevant factors," says Friend. By way of example, he shows what happens when you normalize the data against the companies' sales:

Friend found that, "If we add context by comparing GHG with sales, the quality of reporting does not necessarily bear out an apparent better performance. Some lower-ranked reporters like Sony (#44) and Philips (#39) seem to be doing exceedingly well, while some of the leading reporters like BT (#4) are at the bottom of the pack."

There's more to the story -- check it out. The moral: what gets measured gets managed . . . but what gets put into perspective gets results.

Comments

[Gil Friend]

Just a clarification: the statement that "Some lower ranked reporters like Sony (#44) and Philips (#39) seem to be doing exceedingly well, while some of the leading reporters like BT (#4) are at the bottom of the pack" refered to a specific performance comparison; it wasn't a general conclusion. We didn't have enough comparable data to make that determination.