Keeping focused on the long term agenda - mainstreaming of sustainability reporting
I have just returned from an International Corporate Governance Network conference in Korea. The meeting was most enlightening and as you might suspect was dominated by the credit crunch and what we should learn from the activities of the past few years. Put simply the conference highlighted that we need to understand the unintended consequences of the US's policy objective of supporting economic growth through debt and low interest rates. These actions have impacted our calibration of risk and at the margin have encouraged the wrong type of business behaviour. The discussions also highlighted a fundamental corporate governance failure in so far as financial products were not understood by the financial institutions trading them, the regulators regulating them or the credit rating agencies who provided the stamp of authenticity.
But the horse has bolted and as we close the stable door the harsh reality of what has occurred is beginning to be revealed. The findings of the Hay Group and the Centre for Economic and Business Research suggests that the economic slowdown brought on by the credit crisis is likely to depress company performance up to 2010. The group indicated that business leaders see tough times ahead with corporate profits dipping by about 1.3% in the current year and the likelihood that one in 85 UK workers will loose their job (equivalent to 350,000 jobs in total).
But as we speculate on the future, we should not lose sight of the longer term and many would argue more fundamental challenges facing the world. It was therefore gratifying to hear Richard Lambert the director-general of the CBI warning politicians that the economic slow down is no reason for them to get distracted from the urgent action needed to tackle climate change and to secure the country's future energy supply.
At a more granular level it is encouraging to see that some companies have not lost sight of the sustainability agenda at a time when the instincts of short term survival are more prevalent. I would direct you to two recent examples of reporting from Aviva and BT who have both reported their emissions, waste and resource usage using the framework developed by the Accounting For Sustainability (A4S) project. In the case of Aviva, the template can be found on pages 72 and 73 of their annual report, and includes the mix of financial, non financial and narrative information in a single statement as recommended in the A4S report. Importantly they have reported information on their indirect impacts, targets and benchmarks. BT in contrast has produced a modified version of the framework on pages 20 and 21 of their sustainability report. I would recommend reading the whole report as it does a great job of explaining the importance of the sustainability agenda to BT, the strategy, drivers of values, risks etc.
Do let me know what you think of these examples, either by commenting on the blog or by emailing me direct.
David






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