Despite environmental, social and governance issues rising to the forefront of Fortune 500 companies’ corporate strategies due to growing interest from institutional investors, gaps still exist within the implementation and reporting of these ESG initiatives, according to new data released by Donnelley Financial Solutions (NYSE: DFIN), a leading global risk and compliance company. In recent years, companies have begun disclosing their ESG strategies to allow institutional investors to assess risk and make decisions, but many are just beginning their sustainability journeys.
Based on a recent survey, only 27% of companies have an ESG materiality assessment process, and less than half (41%) produce a corporate responsibility, corporate social responsibility or sustainability report. Furthermore, roughly one-third of the surveyed businesses (32%) said their board of directors has no oversight of ESG matters. Prominent ESG issues include, but are not limited to: climate change and environmental risks and opportunities, human capital management and corporate governance factors, such as board strategy and executive compensation.
“ESG initiatives and reporting have continued to gain importance in the investment decisions of the world’s largest institutional investors over the past decade. The power of ESG is only beginning to be unlocked as companies realize ESG risk equates to financial risk,” said John Truzzolino, director of Business Solutions at DFIN.
DFIN has also partnered with the Governance & Accountability Institute, Inc., a recognized leader in corporate sustainability, to offer clients an expanded suite of solutions to begin, or advance and enhance their ESG initiatives and reporting.
“Every company is on its own unique sustainability journey. Together with DFIN, we are helping clients more effectively report decision-useful sustainability data by applying global ESG reporting frameworks. These standards are often used by rating services to measure progress against a wide range of unfolding issues,” said Hank Boerner, chairman and CEO, Governance & Accountability Institute, Inc. “By implementing these solutions, clients can plan today for their long-term strategic goals.”
In DFIN’s recent white paper, “ESG Risks and Opportunities: Understanding the ESG Landscape,” the company identifies and analyzes four critical steps to measure, manage and communicate an ESG risk and long-term business strategy:
- Navigate ESG issues by performing a company-wide ESG materiality assessment
- Build a map to identify available company data, and assign internal subject owners to develop decision-useful disclosures
- Follow the ESG disclosure path by using company-specific KPIs to articulate ESG strategy
- Reach ESG goals by effectively communicating ESG risks and long-term business strategy to shareholders, via appropriate channels
This quantitative survey of 100 senior leaders in sustainability, investor relations legal affairs, corporate social responsibility and strategic planning was conducted on May 2 by DFIN.