Sustainability and access to capital: If this doesn’t get your CEO’s attention, nothing will

Sustainability and access to capital: If this doesn’t get your CEO’s attention, nothing will

Access to capital is the prime reason to sort out the alphabet soup of sustainability reporting.

The sustainability industry loves its acronyms. And during a strategy and metrics session held at the recent Sustainable Brands conference, I found myself swimming in a whole new flavor of alphabet soup – sustainability reporting. 

The session description read: What brands can expect with respect to the convergence of sustainability metrics standards for purposes of disclosure (e.g. GRI, IIRC, SASB).

What followed was a confusing, acronym-filled hour that had me taking notes like a mad woman. 

I knew that there are over 400 different certifying labels for products, but what I didn’t know was how little standardization exists for sustainability reporting.

But that’s about to change.

Like most of you, I was familiar with GRI, the Global Reporting Initiative, because more than 80 percent of the Global 250 and more than 3,000 companies worldwide use its framework for sustainability reporting.

Mike Wallace spoke on behalf of GRI, noting its recently released G4 updated guidelines. G4 was designed as a “consolidated framework for reporting performance against different codes and norms for sustainability.” 

What’s really changing the game is the SASB – Sustainability Accounting Standards Board. 

Katie Schmitz Eulitt, director of Stakeholder Engagement, spoke on behalf of this “sister” organization to the NASB about the process that has been underway to create a standardized system of sustainability reporting that will become a part of the non-voluntary disclosures required by the SEC (Securities and Exchange Commission) for publicly traded companies. 

Yes, sustainability is going to become a required part of Forms 10-K and 20-F – affecting 13,000 publicly traded companies. These forms have always reported on “material issues,” and sustainability has finally been recognized by the SEC as a seriously material issue.

This means that the stakes are being raised. Information aggregators, like Bloomberg, have already begun to provide GRI information on companies in their investor information terminal, but GRI participation has been voluntary. 

In the near future, all publicly traded companies will have to report on their highest priority ESG (environmental, social and governance) issues. There’s more than just brand reputation at stake. Now we’re talking about access to capital.

SASB industry working groups are designing the sustainability standards sector by sector, e.g., Financial, Tech and Communications, Non-renewables (oil, mining, gas, etc.). Proposed standards are then released for public comment. (The proposed financial standards were just released for comment on May 1).

So, if this doesn’t get your CEO’s attention, nothing will. 

Access to capital is a critical issue for almost every company. Investors large and small will begin to evaluate a company’s sustainability risk alongside all of their other risk factors in making investment decisions.

Poor SASB information could turn analyst “buy” recommendations into “sells” overnight. 

Even privately held firms won’t be immune. The commercial finance industry will very likely follow the SEC’s lead and begin to require disclosures about sustainability risk in their underwriting processes. 

Until now, the highest-priority corporate sustainability activities have, for the most part, been the ones that reduce costs and benefit the bottom line. 

Once those are adopted, most companies wait – watching their competitors and reacting with additional initiatives only when buyers or distributors demand it. 

It’s obviously time to get more proactive.

Skills

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Posted on

July 12, 2013

About the Author

Lee Ann Head

Lee Ann is a former contributor to Shelton Insights.

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