A coalition of analysts at 17 socially responsible investment firms representing over $147 billion in assets has banded together to call on publicly traded companies worldwide to start reporting annually on their key social and environmental policies, practices and performance.
Noting that the way companies currently provide such information varies widely, the analysts urged companies to base their reporting on the Sustainability Reporting Guidelines developed by the Global Reporting Initiative.
"There is a need for fuller disclosure of business risks and opportunities facing companies today. This will only work for all the players involved - investors, companies and other stakeholders - if based on a generally accepted framework that establishes common expectations for publicly reported information," said GRI chief executive Ernst Ligteringen.
GRI indicators include measures of economic performance, such as total payroll and community donations; environmental performance, such as greenhouse gas emissions and water use; labor practices, such as worker health and safety and diversity; human rights, such as policies around child labor and indigenous rights; society, such as community impacts, bribery and political contributions; and product responsibility, such as customer health and safety, advertising, and consumer privacy.
The analysts contend that a standardized disclosure process could reduce the burden on companies, which could use a comprehensive report to respond to a wide variety of information requests from investors and other stakeholders.
"Sustainability will be one of the differentiating business issues of the decade," Ligteringen told reporters during a conference call Wednesday. He noted that the GRI, which started in 1997 in the U.S., is currently working to produce the third generation of guidelines for 2006, which will update existing guidelines to strengthen performance measurement and to streamline the reporting process.
Trillium Asset Management senior social research analyst Steve Lippman said that the GRI reporting guidelines serve as a "blueprint for companies for increasing the credibility, comparability and the utility of their reporting."
Asked about the auditability of such reporting, Ligteringen noted that auditing non-financial reporting requires specific expertise, because it addresses the issue of how to value intangibles.
U.S. companies currently basing their reporting on the GRI guidelines include Citigroup, Ford, General Motors, Hewlett-Packard and Starbucks. Intel Corp. has been moving toward full compliance with GRI.
"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," said Dave Stangis, Intel Corp. director of corporate responsibility. "Our shareholders and communities expect it, and it helps us improve our performance."
Stangis noted that the time involved in doing a social accountability report is "extensive," and "does require an investment from many parts of the company." He added, "The cost varies. It can range from ... a couple hundreds of thousands of dollars to a few million. External verification can also add a chunk of cost depending on what kind of firm or service you use. But it can turn into performance improvement."
The joint analyst statement is a project of two working groups of the Social Investment Forum: the International Working Group and the Social Investment Research Analysts Network. Signatories to the joint statement include Boston Common Asset Management LLC, Calvert Group, Christian Brothers Investment Services, Citizens Advisers Inc., Domini Social Investments LLC, Dreyfus Premier Third Century Fund Inc., Dreyfus Socially Responsible Growth Fund Inc., Ethical Funds, Green Century Funds, ISIS Asset Management plc, Mennonite Mutual Aid, Neuberger Berman Socially Responsive Investing, Real Assets, Trillium Asset Management Corp., Pax World Funds, The Pension Boards - UCC / United Church Foundation, Progressive Asset Management, Inc., and Walden Asset Management.
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