Thursday, December 13, 2012

Corporate Sustainability Reporting: To Disclose or Not to Disclose

Although there is more public pressure to disclose information, that does not mean everyone wants to comply. While many companies have committed to greater transparency, others believe greater transparency provides too much information to detractors and competitors.

As explained in a triple Pundit article by Robert Ludke, the Managing Director of Public Strategies, sustainability reporting is the better option.

While there are undeniably risks associated with disclosure, by presenting reports, a company or organization is able to set the terms of the discussion about how these materials are provided to the public.

Transparency that illustrates a companies sustainability journey will be rewarded by its stakeholders. Investors will see a company worthy of their capital, customers will support the brand and public audiences and reputational goodwill can be strategically valuable in both good times and in bad.

Sustainability reporting is not only financially viable it is proven to outperform those who are less sustainable. This is borne out by Harvard University’s Dr. Robert Eccles and his team in a 2011 report entitled, “A Corporate Culture of Sustainability."

Their report demonstrates that the rate of return on high sustainability companies was better than the the rate of return for their low sustainability peers. “Investing $1 in the beginning of 1993 in a value-weighted (equal-weighted) portfolio of sustainable firms would have grown to $22.6 ($14.3) by the end of 2010…In contrast, investing $1 in the beginning of 1993 in a value-weighted (equal-weighted) portfolio of traditional firms would have grown to $15.4 ($11.7) by the end of 2010.”

The public and investors are increasingly demanding greater levels of sustainability. They want to know more about a companies behavior as well as its financial impacts. The choice is simple, the information can be speculated upon by others or it can by presented by the company itself. Clearly the latter option is better than the former.

Disclosure has been shown to benefit a company's reputation and the bottom line, while non-disclosure may prove very risky.

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