Analysts At Investment Firms Urge Better Reporting

Last week, a group of analysts at 17 investment firms pushed public companies to "meet a higher standard of reporting" on environmental, social and corporate governance matters.

The firms, which represent more than $147 billion in assets, want companies to base their reporting on the Global Reporting Initiative’s "Sustainability Reporting Guidelines." The GRI is an independent institution that has developed standardized reporting guidelines that measure economic and environmental performance, labor practices, human rights, product responsibility, and other factors.

A number of U.S. companies are already reporting on the GRI guidelines, including Citigroup, Ford, General Motors, Hewlett-Packard, Starbucks, and Intel (see downloadable reports in box at right).

Lippman

Steve Lippman, senior social research analyst with Trillium Asset Management, believes that a growing set of investors “is relying on data on companies’ social and environmental performance to make investment decisions.” The group’s intent, according to Lippman, is to provide ways for companies to increase the “creditability, comparability, and utility of their reporting.”

The GRI guidelines (also available from the box at right) seek to make sustainability reports as standard as GAAP financial reports, thereby ensuring consistency and comparability across companies. According to the Global Reporting Initiative, over 2,000 companies have voluntarily published environmental, social, or sustainability reports, but most lack a common framework and are therefore less useful to investors. GRI is widely considered the most generally accepted framework for sustainability reporting.

To ensure credibility and utility of reporting, the analysts' statement included four "tips" for reporting companies, including:

Metrics And Goals. The group encouraged companies to provide "quantitative performance metrics and goals" to help investors more accurately

measure the company’s progress and to compare it to its peers.

Avoid Just The Positive. Noting that companies lose credibility if they gloss over or avoid controversial issues, the analysts urged companies to "acknowledge controversies, share their perspectives, and discuss how they are seeking to address the issues."

Provide Context, Detail. The analysts noted that data in a vacuum can be useless, and that companies should provide context for information shared. In addition, companies should provide details related to outsourcing and globalization, encouraging companies to follow the example of leadership companies "that are increasingly collecting and reporting key performance data related to their supply

chain."

Incorporate Stakeholder Engagement. The group noted that, in its experience, "companies produce far better reports and gain far more value from the

reporting process when they consult with key stakeholders in planning the framework for an upcoming report or getting feedback once they release their

report."

Intel was highlighted by the group as a positive example, since the company has provided expanded reporting to socially responsible analysts since 1994. According to the $30 billion semiconductor company’s director of corporate responsibility, Dave Stangis, “Our stakeholders look to us to disclose key environmental and social data so they can compare and judge our performance. It makes clear business sense for Intel to meet that need.”

The joint analyst statement was developed by two working groups of the Social Investment Forum, and included a variety of signatories including Calvert Group, Neuberger Berman Socially Responsive Investing, The Pension Boards, and Walden Asset Management, which is a division of Boston Trust & Investment Management.

The actual statement and related resources can be downloaded from the box at right.