Environmental Leader/Jennifer Hermes: Investors May Increase Emphasis on CSR Reporting

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Investors May Increase Emphasis on CSR Reporting (but Beware of Overstating Your Performance)

June 21, 2017 by Jennifer Hermes

In today’s climate of increased investor interest in the sustainability performance of companies, US organizations have a unique opportunity to send a positive message to investors, one that says sustainability is still a priority. In fact, as corporations like Disney, Apple, Google and General Electric pledge to continue to pursue reductions in greenhouse gas emissions, it may be that investors may actually increase their emphasis on corporate social responsibility (CSR), writes R. Douglas Harmon of Parker Poe Adams & Bernstein (via JD Supra).

If Corporate America continues to react to President Trump’s decision to have the US exit the Paris Accord by stepping up their CSR initiatives, the momentum of sustainability reporting is likely to continue to build, as it has been for years, Harmon believes.

Customers, too, are likely to expect companies to continue their CSR initiatives. “I don’t see any way for this to go backwards,” said Maureen Kline, VP of public affairs and sustainability with Pirelli, an Italian tire company, at the recent Environmental Leader 2017 Conference. “If all the regulations were rolled back, they would still be asking us to become more sustainable. Now it is going down the supply chain and throughout the investor community,” which are led by 401k pension funds and institutional investors, as well as big banks like Goldman Sachs and Morgan Stanley.

“In the 70s, a company’s valuation was based on brick and mortar followed by intangible assets,” said Kline.  “But over time, it has become more about intangible assets: patents, know-how, brands and reputation,” and the cause of sustainability is directly linked to that.

On the other hand, companies need to guard against using CSR reporting as a strict PR piece. As CSR reporting matures, becoming an element of a company’s performance that is closely watched by investors, it is increasingly important that the claims a company makes in its annual CSR reports are accurate and able to be substantiated, Harmon wrote in April. The last few years, he noted, have seen a rise in lawsuits concerning securities or consumer protection violations due to CSR statements.

A week after President Trump announced the US would withdraw from the Paris Accord, more than 1,200 businesses, universities & colleges, investors, governors and mayors officially declared that “We are still in” on the Paris Climate Agreement. The declaration represents $6.2 trillion of the US economy and 120 million Americans.