Investors Press S&P 500 Companies for Better Social, Environmental Disclosure

Investors Press S&P 500 Companies for Better Social, Environmental Disclosure

For the first time, major institutional investors have called on S&P 500 companies to follow their European counterparts in using the Global Reporting Initiative (GRI) to improve their public disclosure to shareholders on pressing environmental and social issues.

The announcement comes as GRI unveiled new reporting guidelines, called G3, that elevate climate change as a key disclosure topic for companies to include in public reports.

GRI, launched by Ceres in 1999 and now an independent organization based in Europe, is the most widely used, internationally accepted framework for corporate reporting on social, environmental and economic performance. More than 1000 companies are currently issuing GRI-based sustainability reports, but fewer than 100 of those companies are in the U.S.

Citing this vast reporting gap between U.S. and overseas companies, nine U.S. investors, including the California Public Employees Retirement System (CalPERS) and the New York City Comptroller's Office, are sending letters this week to the S&P 500 companies calling for corporate disclosure using the new GRI reporting guidelines. The combined assets of the CalPERS and New York City retirement funds total more than $300 billion.

"Leading U.S. companies must do more to help investors understand the environmental and social threats they face, whether from climate change risks, resource challenges or workplace conditions," said Mindy S. Lubber, president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges.

"Given that our assets are invested primarily in public companies, a fiduciary's ability to assess a company's long-term sustainability is critical," said New York City Comptroller William C. Thompson, whose office manages $95 billion in assets. "If only for this purpose, companies must disclose the results of their economic, environmental and social performance using a common, universal protocol. The new GRI guidelines provide this much-needed global framework for sustainability reporting. I urge companies that are not now issuing such reports to do so."

GRI is designed to provide investors with complete, transparent and consistent reporting from companies on a broad range of social and environmental issues. The new reporting guidelines were developed over the past two years by dozens of investors, environmental groups, companies and other key stakeholders. Although substantially modified and streamlined from earlier versions, the new G3 guidelines retain the same 11 core principles of previous GRI reporting frameworks: transparency, inclusiveness, auditability, completeness, relevance, sustainability, context, accuracy, neutrality, comparability, clarity and timeliness.

G3 also includes a new economic indicator designed to reveal the degree to which climate risk translates into financial risks for a given company. "As investors," the letter specifically states, "we take seriously the risks arising from what is quickly becoming a carbon-constrained world and we expect to see and evaluate what companies are doing to both manage the risks and to capture the opportunities arising from climate change."

Many signatories of the letter have been pushing for expanded GRI reporting and climate risk disclosure from companies. The New York City Comptroller's Office and other investors, for example, have filed dozens of shareholders resolutions in recent years with electric power, oil and auto companies requesting reports on their potential exposure from new climate regulations and other climate-related risks. More than a dozen companies, including American Electric Power and Ford, have since published these reports.

Several leading U.S. companies praised GRI and the new reporting guidelines.

"As one of the first to pilot the GRI guidelines in 1999, Baxter has learned the important role that the guidelines play in driving transparency, balance, continuous improvement and accountability across sustainability reporting," said Arthur J. Gibson, vice president of environment, health and safety at Baxter International Inc., an Illinois-based healthcare company. "We applaud GRI for championing the next generation of guidelines, which reflect many critical sustainability issues facing corporations and society at large today and into the future."

"The report represents an evolution in business reporting for PPL, focusing on the triple bottom line of sustainable business practices," said Robert Barkanic, director of environmental management at PPL Corp., an electric power company in Allentown, PA. "We're disclosing to investors, business partners, employees and customers of PPL subsidiaries on three continents the commitment to high ethical standards, environmental responsibility and exceptional service that are at the heart of how we do business, and identifying for ourselves where improved performance can achieve the greatest benefit."