By Aman Singh
If the proliferation of corporate sustainability reports is any indication, companies are starting to wake up to the realities of a resource-constrained world. That should be great news for groups like the Carbon Disclosure Project (CDP), which are focused on corporate transparency and accountability.
Yet, there seems to be a sense of loss of trust among the group's strongest proponents. I reached out to some sustainability experts and colleagues at CSRwire for thoughts, in advance of the CDP Global Climate Change Forum, which will be live-streamed on Bloomberg.com Sept. 12 at 9 am Eastern time.
A sampling of what I heard:
ARE INVESTORS LISTENING?: A central question of sustainability remains unsolved for many people: What is the connection between performance on environmental, social and governance (ESG) metrics and a company's shareholder value? "Since the CDP is an investor-driven initiative," says Jeffrey Hogue, senior director of Sustainability with McDonald's Corp., "do companies, which have strong financial fundamentals and are leaders in [Carbon Disclosure Leadership Index] or the [Carbon Performance Leadership Index], find increased investment by the 655 institutional investors that endorse the project?"
IMMATERIAL MATERIAL: Carol Sanford, management advisor and author of The Responsible Business, suggests a potential disconnect between sustainability metrics and actionable investor information: "Do the measures we use actually tell us anything that matters? How do we know? Or do we just measure what we can and not what really tells us if we are making a difference?"
U.S. BACKWARDNESS: Raj Thamotheram, author of Investing as if the Long Term Matters, said the progress of the Carbon Disclosure Project has been somewhat paradoxical with regard to climate change politics. "I was an early backer of CDP so it’s wonderful to see what an amazing initiative it’s turned out to be," he wrote in an email. "But as it went from strength to strength, climate change has gone off the political agenda. Nowhere is this retrogressive trend more obvious than in America. Do we really live in parallel universes? Actually, the explanation is obvious. Corporations with vested interests or deeply ideological leaders (the two are often linked) have captured the political debate. They’ve funded the dumbing down of the debate.'"
CARBON WINDOW DRESSING: News Corp.'s headquarters went “carbon neutral” resulting in an AAA rating of the company by MSCI's sustainability rating service. Yet, Rupert Murdoch is ranked No. 1 on Rolling Stone magazine's list of “Politicians and Execs Blocking Progress on Global Warming." Low-carbon buildings show some commitment, but they are less compelling when the Wall Street Journal editorial pages continue to provide cover to peddlers of climate confusion, Thamotheram says.
Are sustainability reporting and rating agencies, such as the Global Reporting Initiative, ISO 26000 and the International Integrated Reporting Council, giving this link the attention it deserves? No, Thamotheram says. How do you measure the corrosive influence of the Journal's science-by- editorial on the U.S. political conversation?
Making connections between corporate ratings and material-but-unquantifiable behavior is not easily defensible or politically convenient. It will require strategic vision, strong leadership, and good governance to manage the inevitable political fallout of calling foul on unsustainable behavior that can't be quantified. CDP was never intended to be a commercial business; it should accept this challenge. "None of the commercial players in this space will dare to do what CDP shies away from," he said.
CHOIR PREACHING: The Carbon Disclosure Project, and many other reporting agencies and groups, is trying to convert the converted, according to Michael Hopkins, author of The Planetary Bargain: Corporate Social Responsibility Matters. "It seems our governments only act when faced with catastrophe," he said. "Unfortunately, reasoned arguments from CDP only convince us who don't need to be convinced... The U.K. Stern report did have an impact but is already just about forgotten." What's that now? You don't remember the Stern report?
Hopkins's question for the forum: "How [can we] get the Republican-dominated Congress to work hard on climate change?" While the question is important, in the current political environment you might be forgiven for thinking it's the set-up to a one-liner overheard at a sustainability conference. "I give! What CAN you do to get..."
CAP-AND-FRAUD?: Francesca Rheannon, senior editor for CSRwire, points out that CDP's hallmark survey is a strong benchmarking tool in the market that provides the material on which the carbon-credits and carbon-offset market is based -- a market that is vulnerable to fraud and manipulation. "How can the CDP and reporting standards organizations," she wrote in an email, "work together to make fraud in carbon credits less likely or possible? And what support do they need from governments and business to do so?"
QUESTIONS, QUESTIONS, QUESTIONS: A veteran sustainability executive at a consumer products company asked me, is the effort companies expend filling out detailed and often repetitive questions of the CDP worth it? And how do you know? Companies know that resource constraints are driving change, but wouldn't a shorter, 10-question assessment focused on risk management, strategy, innovation and results lead to wider disclosure?
DISCLOSURE FATIGUE: Hogue, of McDonald's, also wanted to know whether an "increase in investor recommended disclosure," was compelling the CDP to work on "standardizing and streamlining the process for companies that are inundated with many requests and must prioritize embedding sustainability practices to drive organizational performance."
RISKY BUSINESS: Joe Sibilia, CEO of CSRwire, returns to the simple desire by investors to understand business risks. "Climate change affects the ability of all stakeholders to manage risk. Voluntary disclosure of climate impact by an enterprise provides risk assessment to the financial community. When the financial community is aware of a risk potential, they can 'price' the risk. When they are unaware of a risk potential, they price the risk higher.
"Therefore, the traditional science of risk management and recent research combine to encourage and reward voluntary disclosure of climate change impact by an enterprise. Voluntary disclosure enterprises are rewarded with greater financial value. Given these facts, why would an enterprise choose to avoid disclosing carbon impact? How much do we disclose and what are the key disclosure considerations?"
Singh is the editorial director of CSRwire.
-0- Sep/11/2012 23:16 GMT