Owning the ESG story
One of the toughest emerging challenges faced by governance and IR teams is deciding how to meet the growing investor demand for ESG-related information. Among other things, they need to determine what information to report, how they should present it, which metrics and standards to follow and which platforms work best for delivering the information.
As an indicator of these developments, the Sustainability Accounting Standards Board stated in December 2019 that 120 companies are now using its 77 industry-specific reporting standards, but many more are yet to take that step. Similarly, a recent EY study finds that some major US companies are beginning to add information about human capital management to their proxy statements, but that those disclosures are often lacking in important details.
The nature of ESG issues mean that, increasingly, a broader range of teams within companies need to co-operate on reporting that information. For example, although legal takes the lead on reporting through the proxy statement, Simanek says HPE’s sustainability group takes the lead on ESG disclosures not included in the proxy statement. But that remains a collaborative process that also involves working with others such as the enterprise risk-management group.
The SEC’s current plans to update corporate reporting by amending Regulation S-K would, if approved, include human capital management as a topic for disclosure. Such a change would underline the need to involve human resources in ESG-related reporting.
At Regions, Mehlman explains that she takes the lead on ESG reporting but that she consults with IR before moving ahead with changes. For example, her team is talking about working on a Task Force on Climate-related Financial Disclosures (TCFD) report, but she says IR’s input will be key to a final decision. In addition to a potential TCFD report, the company is planning to create a consolidated online platform where all relevant ESG information will be housed and available to all stakeholders, including employees and investors.
Salesforce.com is moving ESG data from separate reports into its filings, Siamas says. He adds that reporting ESG information is increasingly part of the firm’s shareholder engagement, and that his team goes to investor meetings prepared to talk about ESG issues. At the same time, he adds: ‘IR has to speak this language now.’