In recent years, Fortune 500 companies have begun disclosing their environmental, social and governance issues (ESG) strategies to allow institutional investors to assess risk and make decisions, but many are just beginning their sustainability journeys—and gaps still exist within the implementation and reporting of these ESG initiatives. This could lead to reputational issues in the short term for corporate stakeholders, but also to longer-term CSR-oriented image damage among clients and general consumers.
Based on new research from global risk and compliance firm Donnelley Financial Solutions (DFIN), only 27 percent of companies have an ESG materiality assessment process, and less than half (41 percent) produce a corporate responsibility, corporate social responsibility or sustainability report.
Furthermore, about a third of the surveyed businesses (32 percent) said their board of directors has no oversight of ESG matters
Prominent ESG issues include, but are not limited to: climate change and environmental risks and opportunities, human capital management and corporate governance factors, such as board strategy and executive compensation.
“ESG initiatives and reporting have continued to gain importance in the investment decisions of the world’s largest institutional investors over the past decade. The power of ESG is only beginning to be unlocked as companies realize ESG risk equates to financial risk,” said John Truzzolino, director of Business Solutions at DFIN, in a news release.
DFIN has also partnered with the Governance & Accountability Institute, a recognized leader in corporate sustainability, to offer clients an expanded suite of solutions to begin, or advance and enhance their ESG initiatives and reporting.
“Every company is on its own unique sustainability journey.
Together with DFIN, we are helping clients more effectively report decision-useful sustainability data by applying global ESG reporting frameworks. These standards are often used by rating services to measure progress against a wide range of unfolding issues,” said Hank Boerner, chairman and CEO at Governance & Accountability Institute, in the release. “By implementing these solutions, clients can plan today for their long-term strategic goals.”
In DFIN’s new white paper, ESG Risks and Opportunities: Understanding the ESG Landscape, the company identifies and analyzes four critical steps to measure, manage and communicate an ESG risk and long-term business strategy:
- Navigate ESG issues by performing a company-wide ESG materiality assessment
- Build a map to identify available company data, and assign internal subject owners to develop decision-useful disclosures
- Follow the ESG disclosure path by using company-specific KPIs to articulate ESG strategy
- Reach ESG goals by effectively communicating ESG risks and long-term business strategy to shareholders, via appropriate channels
This quantitative survey of 100 senior leaders in sustainability, investor relations legal affairs, corporate social responsibility and strategic planning was conducted on May 2 by DFIN.