An interesting articlepublished today by Paul Leavoy on GreenBiz.com ponders the true benefits of voluntary sustainability reporting. While the author clearly appreciates the motivation behind organization that have developed reporting frameworks (such as the Global Reporting Initiative or the Carbon Disclosure Project), he questions whether such schemas do little more than creating a climate where reporting is king (and what you do, less so).
CSRs, or Corporate Sustainability Reports, purport to make transparent to the public a company’s practices as they pertain to social and environmental issues such as energy, waste, occupational health, diversity, human rights, corruption, and product responsibility. As consumer demand for corporate disclosure and accountability increases, reporting frameworks have sprung up to fill the niche – super databases of company reports where you can do your one-stop shopping for researching and comparing corporate sustainability practices.
However, despite their best intentions, Mr. Leavoy points out a few downsides to CSR reporting frameworks. First of all, CSR reporting in and of itself may have little correlation to good corporate practices – companies can have their reports polished to perfection, filed in the most timely of manners, and still be dumping thousands of tons of CO2 into the air. (But surely companies realize they give off a certain do-gooder vibe just by participating!) Secondly, the reporting schemas are complicated, take a lot of time and company resources (best spent elsewhere?), and have yet to be standardized or centralized. Lastly, while few believe a company would outright lie in a report, the bright green colors and flowery language of a company’s narrative can all obscure the exact facts.
Needless to say, most CSR reporting frameworks have a strong emphasis on environmental disclosure. While certain environmental disclosures are already mandated by federal law, GHG emissions legislation is still in the works. Still, public companies may be subject to certain climate change related disclosures in SEC filings. Earlier this year, the SEC published interpretive guidance on this topic. In particular, disclosure related to climate change may be mandated by Item 503(c) of Regulation S-K, which requires a registrant to provide where appropriate, under the heading “Risk Factors,” a discussion of the most significant factors that make an investment in the registrant speculative or risky.
Risk Factors, utterly fascinating, give a glimpse into a company’s darkest fears: Will compliance with future GHG emissions regulation increase costs for SeaCube Container Leasing Ltd.? Will an increase in frequency of severe weather events adversely affect MS&AD Insurance Group Holdings, Inc.’s cash flow? Will consumers’ demand for alternative energies decrease their demand for China Lithium Technologies Inc.’s batteries? Until more concrete climate change regulation is in place, you can see these kind of climate change disclosures on knowledgemosaic’s Risk Factors search page. Just enter climate change into the text search box.