Companies participating in the Global Compact comprise more than half of the world's Top 50 sustainability reporters, according to an analysis released on 1 November by SustainAbililty, the United Nations Environment Programme and Standard & Poor's. "The early sustainability reporting pioneers are breaking new records and are being followed by growing numbers of companies from all over the world", said Monique Barbut, Director of UNEP's Division of Technology, Industry and Economics, noting that 47 out of the 50 top reporters are using the Global Reporting Initiative framework, and 26 are participating in the Global Compact. The survey is SustainAbility and UNEP's sixth international review of corporate environmental and sustainability reports. But the 2004 survey is the first in partnership with Standard & Poor's and the first to explore the link between credit ratings and the quality of companies' governance and disclosure of non-financial risks. Over 350 reports were submitted and 50 were selected by an international independent expert committee for a full analysis. The top three overall are Co-operative Financial Services (UK), Novo Nordisk (Denmark) and BP (UK). Over half of the Top 50 reports are new to the survey and overall there has been a significant rise in sustainability reporting quality since 2002.
The report concludes that boards are largely failing to disclose to financial investors how environmental and social issues pose strategic risks and opportunities for their businesses. The report -- entitled Risk & Opportunity: Best Practice in Non-Financial Reporting-- finds that only three reports of the Top 50 assess the balance sheet implications of key environmental and social risks, despite this information being increasingly important to analysts, investors, lenders, insurers and re-insurers.
"Corporate governance is the hottest topic", said SustainAbility Chairman John Elkington. "But recent scandals have meant most boards are focused on financial integrity issues -- to the detriment of the bigger picture of non-financial risks and opportunities. The good news is that the overall quality of non-financial reporting has improved dramatically since our first benchmark survey, in 1994. Now the challenge is to ensure leading companies integrate their financial and non-financial accounting and reporting in ways that help analysts and rating agencies do their job properly."
In related news, the Business and Human Rights Resource Center recently asked a range of experts to recommend a set of "good practice" corporate reports with substantive coverage of human rights issues. The reports were selected for their strong references to some or all of the following: practical implementation; policies and management systems; specific challenges and limitations; commitments and targets for future improvement; monitoring and verification; involvement of external stakeholders; and management of human rights and environmental issues in the supply chain. Of the 22 reports selected, a large number were developed by companies participating in the Global Compact.