Will sustainability reporting ever grow up?

A new report from Ernst & Young, released today, paints a less-than-rosy picture of the state of corporate sustainability reporting. It's not that companies aren't doing it, or doing it well. It's just that they're doing it with blunt instruments.

The free report (download – PDF) looks at six corporate sustainability trends, with a strong focus on accountability, no surprise given that the publisher is a Big Four accounting firm. The findings of the study were based primarily on a survey conducted late last year by GreenBiz Group of our roughly 3,000-member GreenBiz Intelligence Panel, consisting of executives and thought leaders in corporate environmental strategy and performance. The report analyzed the results from 272 respondents from 24 sectors who are employed by companies with annual revenue greater than $1 billion, mostly U.S.-based.

On March 19 at 1 pm Eastern Time, Ernst & Young will present a free 90-minute webcast focusing on the results of the survey, featuring a panel of experts. Register here.

One of the results I found most surprising, and distressing, had to do with how companies are compiling their sustainability reports. The good news is that  the number of corporate sustainability reports (called by a variety of names by different companies) continues to grow each year. Our 2012 State of Green Business report showed that during 2011, the number of S&P 500 companies has crept upwards every year; now 48% of S&P companies publish reports and, according to CorporateRegister.com, more than 5,500 such reports are published worldwide.

The bad news, as the Ernst & Young report shows, is that the growth of reporting is limited, if not undermined, by the tools companies are using to produce them. “Based on our survey responses, those tools remain rudimentary, even primitive, compared with those used for reporting on financial measures." When asked to name the tools used to compile their sustainability reports, companies cited spreadsheets, centralized databases, emails and phone calls as the principal tools, with about one in four (24%) using packaged software.

Respondents also reported being challenged to find the right data, assess its credibility, and determine which data were material for reporting purposes -- all suggesting that the state-of-the-art of reporting systems remains nascent.

This isn’t encouraging, particularly when one considers another of the report’s six findings: that the role of the chief financial officer in sustainability is on the rise.

In our survey, one in six (13%) respondents said their CFO was “very involved” with sustainability, while 52% said the CFO was “somewhat” involved. That 65% are now engaged in sustainability is a sea change, though not surprising. Respondents cited cost reductions (74%) and managing risks (61%) as two of the three key drivers of their company’s sustainability agenda — both of which are of keen interest to CFOs. (The third top driver for CFO engagement was monitoring shareholder resolutions.)