By Tamara O’Brien, TMIL’s roving reporter
If the nation’s – nay, the world’s – corporate movers and shakers weren’t watching this latest Trust me, I’m listed webinar, I’d like to know why. Because two senior investors were giving away the secrets of what makes them view a company’s ESG reporting with an approving eye. And if that’s not worth 45 minutes of company time I don’t know what is. Not to mention the world-saving bit.
Before we got into all that, Claire welcomed the webinar’s ‘loyal and growing’ audience to this new series. Originally sponsored by ICSA to accompany their publication Trust me, I’m listed: why the annual report matters and how to do it well (written by Claire and a phalanx of expert contributors), the webinars took on a momentum of their own. Reluctant to leave the exhilarating arena of live broadcast, Claire and her comms agency Falcon Windsor now ride the webinar chariot under their own colours. (Not sure why this write-up has strayed into Ben Hur territory. I blame the word phalanx.)
Sustainability disclosure: measurable or understandable?
This question, in different guises, was a recurring thread throughout the webinar. Which just shows how important it is. ESG reporting has become a crucible of different philosophies of how to get to the truth.
Is comprehensive, accurate, comparable data what really matters; or is it narrative that explains the challenges, nuances and contradictions of every company’s specific ESG journey?
The simple answer, of course, is both. ESG reports should satisfy regulatory requirements for evidence, while reflecting whatever’s material to your business and important to your stakeholders. But how does that square with the growing call for consistent standards in ESG reporting – often coming most loudly from the investor community?
Claire herself was in no doubt that decisions about materiality – what to put in the report – must lie with company directors. After all, the overriding aim of reporting is to tell the truth about a company. And that’s different from presenting a heap of random facts about it, however beautifully consistent and comparable they may be.
Teresa agreed, adding that investors need both quantitative information and qualitative communication to help them understand a company’s ESG direction and how they’ll progress – in the same way as the business model helps investors assess a company’s future capacity to deliver returns. And with ESG metrics remaining, for the moment, stubbornly un-standardised, the narrative of what a company’s doing is especially important. Companies that get this right tend to be the better-performing ones.
Nadine concurred with this ‘not either but both’ view… but her inner accountant would not be denied. “As much as I like freedom, I need comparable data!” came her impassioned cry, in an asset-management-meets-Braveheart moment. To make investment decisions, she must be able to benchmark companies against their peers. Point made, she too came down in favour of a middle way, in which a reporting framework was open enough to allow companies to communicate their vision.
The saving the world bit
A question about the move of the IFRS (International Financial Reporting Standards) Foundation to create a new Sustainability Standards Board and usher in agreed ESG standards prompted universal approval from the panel. Claire recommended her blog on the recent conference held by the Securities and Exchange Commission (the US regulatory agency). If the SEC gets on board with IFRS proposals, a global-but-principles-based set of standards – bringing concerted global action on climate change – looks distinctly possible.
So worthy old ESG reporting, with its endless debates, committees, detail and acronyms, might just be the thing that saves the planet after all. Who’d have thought?
Investor tips for producing a good company ESG report
Teresa: Eliminate clutter and stick to what’s important. Be honest with investors about how your business is evolving.
Nadine: While your company vision and overall story should be consistent across your AR and ESG reports, your business focus and therefore the angle of your reporting will change every year. Be clear about both.
It’s time for outstanding communication, concluded Claire, quoting from Sir Donald Brydon’s foreword to Trust me, I’m listed. And on that happy note – see you in April for a governance report special.