Washington, D.C., May 9, 2011 - Companies need a strategy for responding to the growing number of external requests for environmental, social and governance (ESG) data, and experts say dialogue should be part of that strategy.
Speaking at NAEM’s ‘Measuring Corporate Sustainability’ conference last week, Jim Cline, Director of Environmental Affairs and Sustainability for Cardinal Health, said a strong strategy begins as a collaboration between internal stakeholders. He said environmental, health and safety (EHS), investor relations and corporate communications should all be involved.
"When faced with the onslaught of questionnaires, EHS leaders should initiate a conversation about the potential benefits of external reporting,” he said. "If you’re going down this path, it’s essential that everybody understands the strategy and agrees with the strategy.”
Once a company understands which ratings and rankings meet the objectives of its strategy, it can begin engaging external entities as stakeholders, Cline said.
For Johnson & Johnson Inc., direct engagement with ESG firms helps the company more accurately communicate its sustainability progress, according to Tish Lascelle, Senior Director of EHS.
"We want people to understand us,” she said at the event in Fort Lauderdale, Fla. "These firms are telling our story for us. We want to give them the best possible chance at telling our story.”
Lascelle said building relationships with researchers also helps the company correct misinformation and address shortcomings in the survey design.
"The best we can do is to have conversations with the firms themselves so they can understand who we are and what we’re really about,” she said. "I think it’s always good to have the conversation, whether or not it changes anything. Sometimes it does, sometime it doesn’t, but the conversation is never a mistake.”
More dialogue also could help improve the value of the analysis, according to Mark Bateman, Director of Research at IW Financial. He said ESG firms want companies to tell them which metrics actually relate to business performance.
"Here’s where I throw the challenge out to you,” he told the crowd, which included more than 50 corporate EHS and sustainability leaders. "Where are you actually adding value? And if you have a good story to tell, my further challenge is, make that story public on the direct linkage between financial performance and ESG information.”
With more insight into what companies deem material, Bateman said researchers would be able to begin measuring performance and impact, rather than simply focusing on disclosure.
While industry leaders may be poised for more active engagement, NAEM Executive Director Carol Singer Neuvelt said it’s important to remember that the most companies are still in the beginning stages of understanding these issues. Nevertheless, she said public disclosure is becoming a ubiquitous expectation.
"In the future, public disclosure will not be limited to leadership companies,” she said. "No matter where you are in the process, it’s important for you to start discussing these issues internally and begin sharing information about your sustainability progress.”
NAEM’s ‘Measuring Corporate Sustainability’ conference drew more than 100 business leaders, ESG researchers and nongovernmental organizations for a day-long conversation about the challenges of the current ESG reporting system. For more information about the event, please visit, http://metrics2011.naem.org/ .