Toronto-based research company Corporate Knights says its latest report showing a flatlining of corporate sustainability data and disclosure is surprising and “counterintuitive” given investors’ growing interest in sustainability data and a host of significant data-disclosure initiatives.
However, the new report entitled “Measuring Sustainability Disclosure: Ranking the World’s Stock Exchanges 2019”, notes that certain factors could be influencing the lack of sustainability data disclosure, such as the economy’s move towards a more tech-heavy market, as well as the increased scrutiny and accountability around sustainability data, including litigation risks, which may have caused some companies to pull back on transparency over the past economic cycle.
A total of 6,261 publicly listed companies were analyzed and 49 stock exchanges were included in this year’s ranking. The report found that environmental, social, and governance (ESG) disclosure rates for the seven key sustainability metrics have not increased significantly at a global scale — a phenomenon that started as early as 2013 when annual disclosure growth rates dropped to the low single-digits. The seven key metrics are: energy; greenhouse gas emissions; water use; waste generation; payroll; injury rate; and employee turnover.
“The reporting gap constitutes a glaring governance failure that requires urgent redress, especially given the surging investor interest in sustainability performance metrics,” announced Toby Heaps, Corporate Knights CEO. “In the short-term, exchanges and regulators should set a mandatory requirement for climate disclosure (building on the recommendations in the Financial Stability Report of the Task Force on Climate-related Financial Disclosures) on a ‘comply or explain’ basis, which can help maintain clear expectations while allowing companies the flexibility they need,” added Heaps.
Among the companies analyzed, disclosure rates of water use information, for example, ranged from 19% to 39% across 11 sectors (the utilities sector at the high end, and non-essential consumer products at the low end). Greenhouse gas reporting ranged from 33% to 53% among the very same two sectors.
Of the companies observed, 59% of companies did not disclose GHG emissions in 2017.
Other sectors analyzed include consumer staples, energy, financials, health care, industrial, IT, materials, and real estate.
The report warns that the near zero growth in sustainability disclosure identified in the report suggests that new approaches are needed to spur sustainability reporting, especially among those companies that have never published any quantitative sustainability performance data.
Addressing the report in a statement, Maurice Tulloch, Chief Executive at the insurance company Aviva, which commissioned the report, said: “The entire economy needs to change quickly for there to be any hope of achieving the ambitions set by the Paris Agreement. In part this depends on everyone having access to the right information about how individual companies are contributing. Global stock exchanges are central to this.”
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