Unwieldy is the word I would use to describe the current state of sustainability disclosures. While it’s true that transparency is essential for progress, too many metrics make it harder, not easier, to understand a company’s performance. Especially when those companies are expected to disclose items immaterial to their business.
Leading sustainability reporting and disclosure frameworks such as GRI, DJSI, and CDP require an enormous amount of time and effort. These disclosures are taxing on sustainability teams which are often small and under-budgeted.
In addition, the recent growth in sustainable investments (now worth nearly $23 trillion globally[1]) has led investors to request more information about a company’s Environmental, Social, and Governance (ESG) principles.
Don’t get me wrong – I’m thrilled that investors want this information. But how they get it is the issue. Right now there’s no single accepted template or list of ESG metrics for a company to abide by. Instead, investment firms (and institutional investor agencies) tend to have their own lengthy, yet different, requirements. And if you don’t publicly disclose those items, down to the very specific detail, you get dinged.
Needless to say, companies are running out of resources, and channels, to publicly disclose information effectively.
What we need is an overhaul in how we think about ESG and sustainability disclosures. It needs to be efficient; slimmed down to a small set of comparable, industry-specific material metrics. SASB has made a concerted effort to do this and we hope to see this style of disclosure catch on.
Until that happens, companies will need to prioritize. We help our clients narrow down the list by focusing on ones that will give them the most return for their efforts, because there is certainly no ROI for those that aim to meet them all.
[1] https://www.morganstanley.com/assets/pdfs/sustainable-signals-asset-owners-2018-survey.pdf
