Today, investors use social and environmental performance KPIs as a proxies for assessing the quality of management and—increasingly—to measure risk. Now, the conversation is no longer about whether a company should report, but rather what they should consider when they do.
So how can companies gain the greatest possible value from their reporting efforts? Where should companies set performance goals? How and what should they measure? What frameworks should they use? How will report readers use the information?
The basics: Sustainability reporting offers benefits to the business
Research has found that companies that operate transparently differentiate themselves from competitors. A 2011 study found that by voluntarily reporting their superior environmental, social and governance (ESG) performance, companies can lower their cost of capital.[i] A 2012 study found that the disclosure of corporate citizenship information leads to more accurate analyst forecasts, while a 2015 study found that available corporate citizenship information is positively associated with positive analyst assessments.
The Boston College Center for Corporate Citizenship’s own surveys of the field have shown us that these benefits are understood by business leaders. According to the 2014 State of Corporate Citizenship study, the majority of executives believe that resources for reporting on social and environmental performance will increase in the near future.
The value proposition for sustainability reporting is clear: By increasing disclosure and communicating firm goals and performance, sustainability reporting supports trust in the brand, improves reputation, mitigates risk, and drives performance and innovation.
The quality and quantity of reporting can also provide important bellwethers of performance. Analysis of recent disclosures by eRevalue shows, for example, that in the months leading up to the revelation that Volkswagen circumvented emissions measurement,...
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