Two recent reports from Corporate Knights Capital and Trucost paint different pictures of the uptake of sustainability metrics by business.  But what’s the real trend, and what’s the value to companies that bother?

Measuring Sustainability Disclosure is the latest study from Corporate Knights Capital (CKC).  Amongst its rather gloomy claims is that only three percent of the world’s largest listed companies report on seven basic sustainability metrics: employee turnover, energy, greenhouse gas emissions (GHGs), injury rate, payroll, waste and water. Individual scores for some of these indicators are higher: 39% of companies disclose on GHGs and 24% on water, and 12% report on employee turnover. But it’s the trends that really bother CKC: as the report puts it, ‘the number of large listed companies that disclosed their energy use increased by 88% from 2008 to 2012 but only by 5% from 2011 to 2012’. And there’s a similar reporting slowdown for the other basic indicators.

Published a few days later, Trucost’s new research update offers a rather more upbeat assessment. ‘Most S&P 500 companies now report the greenhouse gas (GHG) emissions from both their operations and supply chains’ they claim. The update’s main focus is on supply chain and they point to growing numbers of US companies disclosing Scope 3 emissions on everything from fuel and energy related activities to business travel. Sustainability disclosure, it would seem, is on the up.

Risks and opportunities

So should we go along with Trucost’s optimism or CKC’s gloom? CKC point out the risks of non-disclosure.  They claim investors and other stakeholders want this kind of information, and that less disclosure means ‘less performance data to work with, less insight into what constitutes best practice, less measurement and analysis, less comparison and less benchmarking.’ In turn this threatens value at individual companies - as GRI’s Ernst Ligteringen points out in his introduction: ‘In the future, a company that chooses not to report will be sending a message loud and clear to markets. Its name will sit in the n/a category on electronic trading platforms. Not applicable. Not accountable. Subtext? Not a business to invest in.'

Some stakeholders agree: as Jo Confino of Guardian Sustainable Business puts it: ‘companies measuring and reporting on their social, environmental and governance performance is only the first baby step on the path to doing something about it, so if we can't get that right, what hope to do we really have?’ CKC’s view is that if the trend towards total transparency has stalled, progress now needs to be encouraged. Some governments seem to agree, with CSR reporting now a requirement in several countries and set for introduction for large companies in the EU by 2017, though not to a consistent standard or set of measures.

Trucost’s framing, by contrast, is about ease and opportunity – their message is that lots of companies are now doing this kind of valuation, they are benefitting, others will join them and so can you.

Where’s the value?

What these two rather different perspectives share is the view that more companies should disclose their sustainability performance more systematically. Are they right? From a business perspective, the simplifying question is always ‘where’s the value?’, and another conclusion you might reach from these two reports is that the returns from such measurement and transparency are clear to some companies but not others. There may be reputational value in reporting on a standard set of measures simply because enough stakeholders say they are important, and that’s increasingly probable given the industry now devoted to ensuring that stakeholders care. (That industry of course includes Trucost, CKC, GRI, Anthesis, and the many companies that have invested in disclosure). But for many companies there’s still some way to go before such stakeholder pressure is a consistent commercial driver. There is also some harder benefit to be gained from measuring and managing impacts - costs to be saved and opportunities seized. But the value in disclosing and comparing your waste arisings, water use or creation of social impact with those of other companies is not always so obvious.

Reporting what really matters

So if investor pressure is still weak, and you are already tackling the commercially significant drivers of risk and cost without feeling the need to report your efforts, where is the value in disclosure? The key lies in the feedback loop that connects corporate purpose, strategies, stakeholders and performance. Once you decide that your business exists to do something more than just create shareholder value, then stakeholders and what they care about matter, and telling them how you are progressing is the way you prove it.

What you want to achieve should then define the metrics and methods you’ll need to track the effect of the actions you take achieve it. With a clear focus, these metrics – both standard and bespoke - can give you useful management information, and also a much better story to tell about issues that are dear to the heart of your staff, your customers and the citizens your company serves. Without it, you just have a bunch of numbers.