Post date: Wednesday, 2nd May 2012

Stock exchanges urge greater corporate sustainability reporting

 
 landowners in Thailand confronting corporate greed

Peasant landowners in Thailand defending their land against corporate greed: how can Capitalism be made more sustainable?

In six weeks time, representatives of the world's leading stock exchanges will be meeting to discuss how they can become more sustainable and transparent, in advance of the Rio +20 summit in Brazil.

This meeting, which may seem surprising to some, takes place from 15 -18 June 2012, and will explore how they can work together with investors, regulators and companies to enhance corporate transparency and performance on environmental, social and corporate governance issues, and encourage responsible, long-term investment while creating sustainable financial markets.

It is just one part of preparations which are taking place in an atmosphere ranging from apathy to frantic horse-trading, to set the agenda for Rio+20 during 20-22 June.

Ambassadors in New York are this week negotiating “The Future We Want,” the 70-page roadmap document that will guide sustainable development over the coming decade, boiling it down from hundreds of pages of proposals that exist at the moment.

Antonio Vigilante, director of the UN Development Programme’s Brussels office, has said that the cost of failure at Rio would have devastating consequences for the world’s poor.

"Rio is not an environment conference, it’s not a conference to save nature. It’s a conference to save to save human beings. It’s a conference that has to combine the two most pressing challenges of our times – equity and sustainability – and the one cannot be sacrificed for the other," Vigilante said.

The challenges of time scale and vested interests

How is it possible to reconcile the different objectives of the world's poor, politicians, investors and corporations? That is the challenge facing negotiators.

Commercial companies need to plan decades into the future to ensure their survival, in contrast to politicians who typically think short-term.

While this has its upsides, grassroots organisations are suspicious that corporations are only looking out for their own profit and not the health of ecosystems or the general population.

Investors and insurance companies, on the other hand, operate somewhere in between the general public and corporations whilst also thinking long-term.

From the grassroots perspective, the 'Compendium of Commitments' is a registry of pledges by governments, civil society and the private sector being compiled by grassroots organisations around the world to put pressure on decision-makers to fulfill globally-agreed goals.

Good luck to them. They are going to need all the friends they can get. But they might be able to get friends in some rather unexpected places...

Are stock exchanges into sustainability?

Stock exchanges, surprisingly, think they are, and that they should become more so.

Three quarters of respondents to a survey published last month and commissioned by Aviva Investors, which represents a coalition of investors worth $2 trillion, agreed that they have a duty to encourage greater corporate responsibility on sustainability issues.

They claim to be seeking to include provisions of guidance or encouragement of sustainability disclosure by issuers, introducing sustainability indices and improving voluntary disclosure requirements to a stricter “comply or explain" basis in some markets.

More than half of the survey respondents said they had already provided guidance to issuers on global sustainability reporting.

Moreover, 86% indicated that they had either already all planning to launch sustainability indices of their own.

It is institutional investors like pension companies who are primarily leading these calls.

But Steve Waygood, chief responsible investment officer at Aviva Investors, said: "Currently 75% of companies do not report on sustainability issues at all."

Observers at the discussions in New York, which wind up on Friday, have reported that attempts are being made to water down requirements that would force companies to do so.

Waygood said he hoped this would not happen. "Without [a solid Rio+20] convention, at the current rate it will be decades before sustainability reporting is common practice across global markets," he said.

Investment and pension funds are insisting that they would like to know as much as possible about these aspects of a company before choosing to invest in it.

The carrot they are offering in exchange is trillions of dollars of their assets, which could be available to finance more clean energy and ecosystem supporting initiatives that can also help the world's poor.

Stock exchanges' increasing reliance on trading volumes as a primary source of revenue might seem to work against the aims of long-term initiatives focused on sustainability.

Yet, they contend that strong sustainability requirements for listed companies makes good business sense; only 14% disagreed with this statement.

However, they agreed that they do need regulation and policymakers to cement mainstream sustainable capital markets, such as mechanisms to hold companies accountable, or the introduction of guiding principles and roadmaps to enhance disclosure.

And their name for this project? The Sustainable Stock Exchanges Initiative. Perhaps it's not as much of an oxymoron as it sounds.

Global sustainable business leaders

Their Sustainable Stock Exchanges 2012 conference will take place a few days before the United Nations Conference on Sustainable Development (or “Rio+20”), as part of the UN Global Compact's Rio+20 Corporate Sustainability Forum (CSF), which itself will feature an Economics and Finance of Sustainable Development track.

It will feature case studies from leaders in the field such as members of Global Compact LEAD, a partnership of about 50 chosen companies who have been challenged to implement the UN's Blueprint for Corporate Sustainability Leadership, and become trailblazers of a new, more sustainable, global capitalism.

Participants include many top companies from a wide range of sectors such as BMW, Accenture, Heineken, Aviva, Siemens, Fuji Xerox, PricewaterhouseCoopers, Symantec, Coca-Cola, Unilever and Vestas Wind Systems.

It is currently in its pilot phase, during which the Blueprint's 10 Principles of sustainability, which cover the areas of human rights, labour, the environment and anti-corruption, are to be embedded in each participant's core working and management practices as well as their value chain.

Other companies are also doing their bit.

At the end of March, a workshop in Beijing called New Geographies of Corporate Sustainability saw over 60 corporate sustainability professionals based in China, representing both LEAD companies and China Network participants from diverse sectors, bring Chinese perspectives on corporate sustainability to the discussion process.

Over in Europe, Unilever food and consumer products company's vice president of European external affairs, Dick Toet, says that meeting the challenges facing the planet requires corporate initiatives, and this is why his company has revamped its business model to focus on sustainable production and growth.

"We believe Rio+20 is a great opportunity to establish public-private partnerships," he said, adding: "We want it to deliver a public-policy framework for a green economy".

Meanwhile, the horse-trading continues in New York and can only get fiercer as the deadline approaches for producing a final agreement, a blueprint for the sustainability of this planet and all of its inhabitants.

Story: David Thorpe, News Editor

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