Why are companies doing sustainability reporting?
hace 8 year
By: Luis Miguel Prado, Libélula
93% of the world's 250 largest companies do their sustainability reporting (KPMG, 2017). What is motivating companies to take this path?
The Global Reporting Initiative (GRI) is the most widely used tool worldwide to generate sustainability reports. It has a base of more than 47 thousand reports, almost 60 of which are from Peruvian companies. During his visit to Lima on April 20, Eszter Vitorino, Head of Capital Markets Engagement at GRI, helped us to understand this new trend.
According to a survey by the World Economic Forum, climate change, large-scale migration, food shortages and biodiversity loss are the risks that most concern companies, all related to social and environmental issues. At the same time, investors are increasingly concerned about the social and environmental impact of the companies in their portfolios. With a practical example Eszter showed how a physical climate risk can impact corporations and this in turn impacts credit and banking institutions, which ultimately impacts investors.
"My work is focused toward characterizing investor interests and connecting them to what companies are reporting" - Eszter Vitorino, Head of Capital Markets Engagement, GRI
According to a Bloomberg study on investments, funds that included companies that manage social, environmental and governance issues performed better during 2017. Sustainability reports seek to report on the economic, social and environmental impacts of companies. It is precisely this level of management and transparency that is increasingly attractive to investors, who seek to minimize risk in their investments.
On the other hand, the 65% of the social and environmental impact of companies is linked to the performance of their suppliers. Therefore, large companies, in their interest to improve their market value, are pressuring their suppliers to also report as a measure to reduce their impacts.
The three trends
According to Daniel Vargas Fernández, GRI Country Program Manager in Peru, the following is expected in the future three trends in sustainability reporting:
- They will cease to be voluntary and become more normative.
- Financial information will begin to be combined with non-financial information, as investors are identifying risks in social and environmental issues.
- There will be more focus on impacts and less focus on statistics.
Good economic management is no longer enough for companies to be attractive in the marketplace. Measuring, managing and communicating their social and environmental risks will be increasingly important for companies, not only to be competitive in the future, but also to guarantee stability in the markets. In Peru, the Superintendency of the Securities Market has already made it a requirement.
This article was prepared based on the main conclusions of the "Information that generates value" conference, which is part of the series of events road to nexos+1 2018. Learn more here: https://nexosmasuno.pe/.
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