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Judy Sandford |
Note: In this conversation, we use the terms “CR,” “Sustainability,” and “ESG” interchangeably.
MK: What trends have you seen in CR reporting in the past
few years?
JS: GRI is a great place to understand
how companies compare in general and to understand what issues are most
important to you and your stakeholders. I also like SASB because it provides a
shortcut for companies to identify what investors ae most interested in,
although, of course, you must look at it through the eyes of your company, but
it’s a helpful first-pass filter. CDP is also super important – making measures
on water, forest and climate change very comparable. I like IIRC for its philosophy,
but integration is more difficult for U.S. companies to implement.
MK: Companies aim to reach multiple audiences with their
reports. How can they satisfy such diverse information needs without making their
report unwieldy?
JS: We recommend that companies
develop multiple tools customized by audience. We also suggest what we call the
“reverse mullet” report -- all party in the front, all business in the back. In
other words, all storytelling and narrative in the front, and all data in the
back including your GRI index and technical data.
This allows companies to share highlights and provide the details for people
who want the data.
We also see companies reporting
in a hierarchical fashion. They create a short PDF summary report and then put
the “encyclopedia” of information online for anyone who wants to go deep. A
good example of a company that does this is Merck. The summary report is also
useful as an employee tool and for use at conferences.
MK: CR professionals are often
stymied by their legal teams in disclosing key ESG data or information. Do you
have advice for how to advocate for greater disclosure?
JS: My recommendation is to include the legal team as early as possible in reporting discussions so they can see what information you want to share and get their buy-in early in the process. They are often left out of sustainability reporting committees and of the decision-making process. Having them involved helps politically and practically.
You can also help gain their support for disclosure by sharing benchmarking of reporting from others in your sector. If the majority of companies are disclosing X, you can ask “Why not us?” You can also engage in a discussion on the risk of not sharing the information versus the benefit. Yet, another point of leverage might be that disclosure can help you do better on your MSCI score, which can result in investors being more favorable to your company. This could even translate into a financial benefit.
Finally,
to help bring corporate counsel along on the
sustainability journey it is important to explain the difference between
financial materiality and corporate responsibility materiality.
MK: As you’ve mentioned, investors are increasingly
important readers of CR reports. How do you advise your clients to best
determine what information to include in their reports to meet investor
information needs?
JS: Investors are much more about
the facts, not the story telling. For example, they want to see diversity and balance
in the board. I would suggest consulting the SASB criteria for your sector and to
also look at the information requested by major rankings and ratings, as well
as major institutional investors criteria. Based on this, do a gap analysis of
what you are reporting versus what is being requested of you.
MK: What is your perspective of assurance of reports?
JS:
1. Do benchmarking of reports in
your sector.
2. Get your CEO/chairman behind the
idea of reporting to help rally people and ensure they will give their time.
3. Establish an internal committee
where people are responsible to gather information from each group. The
committee members should also talk to each other and share ideas. After all,
reporting isn’t just about producing a report, it’s also people talking to each
other, learning, identifying risks and opportunities, and continuously improving
the company.
4. Don’t try to report on everything
– focus on the most material (important) topics. And keep to a manageable
number of goals--20 or fewer.
Judy’s Last Word on CR Reporting
· A company whose reporting you admire: For a large company, I think Nike provides several levels of reporting
for different audiences, high transparency and demonstration of innovation. For
a smaller company, United Rentals – they have a clear, concise report
that shows the value to their business of their sustainability efforts.
· A CR report should always: Be focused on what’s most important
to the company and stakeholders.
· A CR report should never: Provide unsubstantiated
information.
· In 15 years, CR reports will: Be mostly online and integrated
with other corporate information.
· I wish that all CR professionals would: Be part of the overall strategy
team and have access to the CEO.
· I wish that all CEOs would: Embrace the benefits of
sustainability reporting.
· I wish that all corporate lawyers would: Ask more questions about the
importance of transparency.
· My favorite thing about working in this field is: Being able to help companies be more profitable and successful, and also
the variety of sectors I get to work in.