According to a new study of reporting on Environmental, Social and Governance (ESG) issues by the Governance & Accountability Institute, an increasing number of corporate managers and boards are realizing the many benefits that measuring, managing, and disclosing their strategies and performance on ESG can have for their companies. The analysis of disclosure of S&P 500 companies revealed that while in 2010 19 percent of companies reported, the number of reporting companies jumped to 53 percent in 2011. Similarly, for Fortune 500 companies the numbers more than doubled as well, from 20 to 57 percent.
One key driver of the increased reporting on sustainability strategies, initiatives, programs and performance seems to be that reporting companies are more likely to be included in key sustainability rankings, indices and reputational lists. Naturally, companies disclosing their ESG practices also tend to be evaluated higher by raters focusing on sustainability issues.
In terms of financial performance, the study indicates that companies focusing on their ESG issues tend to perform slightly better over the long term, but cautions that a larger number of companies over a longer period of time will have to be examined to definitively prove this causality.
In either case, the analysts of the report conclude:
The arguments for not reporting are shrinking day after day for companies that have yet begun to report on their sustainability progress (…) non-reporters are now in the minority. We believe this minority will continue to shrink as it has in the past few years. The benefits of sustainability reporting will become increasingly obvious as more time passes and the long term benefits are easier to measure. The lesson for management and boards: If you are not reporting, your competitors and peers almost surely are. The task of “catching up” will only grow larger.