It’s unlikely that anyone’s ever cited the UN as a first mover or an organization that leads the way in international policy, but one cannot deny it’s clout. Just last week UNCTAD (United Nations Conference on Trade and Development) presented the Investment and Enterprise Responsibility Review at the World Investment Forum in Xiamen, China. The report strives to compare CSR and ESG (Environmental, Social and Governance) metrics amongst the top 100 transnational companies and move forward in an attempt to standardize reporting.
The report covers a number of bases including what types of information are being disclosed. As it turns out, the majority of companies report the standard environmental measures (or as the UN refers to it climate change related information), but pretty much fail across the board, to report measurements on social issues such as those that pertain to their supply chain. To be fair, these issues are generally more difficult to quantify than environmental metrics, although there’s also a decent chance that violations of company policy or human rights for that matter are taking place within the supply chain realm.
So, is there anything new being discussed here? Well, one might find the investment section to contain some fresher information. The report assesses investments by large pension funds and interestingly enough larger institutional investors (those with the greatest asset value) tend to be more active in adopting “responsible investment practices”. This term is defined by the report as, “the efforts of investors to incorporate ESG issues into investment decisions and to actively engage with investee companies to encourage improved ESG practices”.
Everyone can agree that reporting ESG metrics can benefit corporation and investor alike, but the issue has always been standardization across companies. The report attempts to look at green house gas (GHS) emissions as an example. That’s probably one of the easier options and a good starting point, however while standardization is important in comparing companies, particularly for investors, it would be more useful to standardize across sectors rather than across businesses as a whole because each sector has impacts unique to it. Unfortunately, like many other issues in international/business policy, CSR/ESG reporting standardization is being undertaken by a number of organizations, that may or may not be working with one another.
A UN report such as this is important in getting ideas into the mainstream and hopefully gaining some momentum, but when I read some of these UN reports I can’t help but think of some investing advice. When a company is being touted as the next best thing on the front of the New York Times, you’ve probably already missed the boat. In other words, due to the time that it takes to produce these reports, there’s a decent chance new things are happening. Let’s hope these organizations, businesses and ensuing conferences can create some partnerships and move the standardization process forward.
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