Is corporate social responsibility (CSR)/sustainability reporting becoming an expected, almost mandatory activity for large public companies? The momentum seems to be heading in that direction, with a strong push from a vocal and growing segment of the institutional investor community.
For the last decade, even as many large companies embarked on major CSR/sustainability reporting endeavors, the investment community has consistently ranked as one of the least interested stakeholder groups. Until very recently, at least.
Socially responsible investors, stock exchanges, regulators and legislators are now driving a heightened level of interest. It’s still more pronounced in Europe, but it may be coming to an area, and a stock exchange, near you.
Last week, the European Parliament passed a law requiring that all publicly traded companies based in Europe with more than 500 employees must address their “social, environmental and human rights impact, diversity anti-corruption policies” in their annual reports by 2017. According to an article on SustainableBusiness.com and greenbiz.com, that law alone will cause the number of EU-based companies producing sustainability reports to jump from 2,500 to 7,000.
Separately, Ceres, a nonprofit organization that advocates for sustainability leadership in the financial markets, is working to engage global stock exchanges, including those in the U.S., on “a uniform standard for sustainability reporting by all exchange members.” Ceres directs the Investor Network on Climate Risk, which represents more than 100 investors with $12 trillion in assets under management. BlackRock, the world’s largest asset manager, is also participating in the project, whose aim is to make sustainability reporting mandatory for publicly traded companies.
Companies will be strongly encouraged to use standardized frameworks such as the Global Reporting Initiative and the U.N. Guiding Principles on Business and Human Rights.
Given the time frames, there is no reason to panic or procrastinate. Being aware of the drivers and understanding the standards are becoming more critical. Before long, they could be mandatory. Consider the actions of the EU and Ceres as among the strongest indicators to date.