Risk & Opportunity: best practice in non-financial reporting

This study is SustainAbility and UNEP’s sixth international review of corporate environmental and sustainability reports, which has been undertaken in partnership with Standard & Poor’s. Surveying a sample of 100 reports from around the world, Risk & Opportunity benchmarks an independently selected sample of 50 of the best.

The benchmarking process consisted of the following elements:

• in-depth review of the report and material on websites
• analysis and scoring of reports against 48 individual criteria
• peer review and quality control of the analysis
• updating scores and collating data.

Compared to previous surveys a much greater number of companies now score above 50% in the benchmarking. For the first time we have one company, Co-operative Financial Services, passing the 70% mark on our benchmark, with other companies — Novo Nordisk, BP, British American Tobacco, BT, BAA, Rabobank, Rio Tinto, and Shell — following very close behind.

Generally the report concludes:

• leading companies have made significant improvements in the quality of their non-financial reporting since 2002
• corporate governance is an area where the quality of coverage has jumpedstrikingly. But it seems that boards do not yet grasp the evolving links between corporate governance and the triple bottom line agenda
• with the growing focus on corporate governance, the spotlight is often on compliance and on financial integrity, rather than on the ‘beyond compliance’ agenda — including wider ethical, social and environmental issues
• enhanced transparency and disclosure via sustainability reporting seems to be clearly linked to companies that display strong levels of credit quality, a widely-recognised indicator of operating and financial stability
• even the best reports suggest continuing, fundamental weaknesses in companies’ governance and, most particularly, in their ability to identify, assess and manage priority non-financial issues.