In today’s Times supplement on Sustainable Investments, Cary Krosinsky and Jyoti Banerjee have analysed how company reports often fail to take into account the key issues that are now crucial for future business success.

Here’s an excerpt from the article, which references the research work Fronesys has done on the materiality of sustainabilityissues in corporate reporting:

One important reason why this gap in communications [between the firm and its stakeholders] continues is that sustainability reporting does not have wider currency among investors, as it can be difficult to discern which of the dozens of non-financial issues on which a company reports are actually material to performance.

A report from Fronesys on Materiality Futures found that as of August 2011 less than 5 per cent of the 2,000 or so companies producing sustainability reports actually publish the process by which they decide which issues are most important to their business operations.  Even with these companies, there is a lack of transparency about how this “materiality determination” process works. This Fronesys report found that over 140 different sustainability issues are analysed across the 31 companies in the study. Of these, 50 issues figure prominently for a number of companies, including corporate governance, carbon, water use, human rights and privacy. 

And so it is not surprising that it remains difficult for investors to know which sustainability issues could have an impact on the future value of their investments. Ultimately, these are all either practical risks that any investor should consider or they are unimportant, and working out which is which will be essential to being able to pick the winners and losers going forward.

To read the article in its entirety, check out Page 12 on the Sustainable Investments supplement from Raconteur: http://np.netpublicator.com/netpublication/n39150548.