NEW YORK, Jan. 20, 2022 /PRNewswire/ -- Amid growing
expectations from regulators and investors, a new report reveals a
stark gap between the climate disclosures of large and small
companies. Indeed, larger firms disclose greenhouse gas (GHG)
emissions at 2.5 times the rate of smaller firms.
Produced by The Conference Board in collaboration with Heidrick
& Struggles and ESG data analytics firm ESGAUGE,
Sustainability Disclosure Practices 2022 Edition: Getting Off
the Sidelines examines corporate disclosure and performance
data of US publicly traded companies, including the Russell 3000, S&P 500, and S&P MidCap
400. The report is accompanied by an online dashboard to analyze
and create reports on the data by index, sector, and company
size.
"Companies that have not been addressing climate, diversity, and
other key sustainability issues in their public-facing
communications should take a fresh look at whether to do so," said
Thomas Singer, Principal Researcher
at The Conference Board ESG Center and the report's lead author.
"More and more, these disclosures are expected by key stakeholders
who can influence the company's reputation and bottom line. Smaller
companies that have not yet prepared climate disclosures will
inevitably face greater pressure to do so, not least because the
SEC is expected to propose rules on climate disclosure early this
year."
The report also notes an increase in the number of companies
obtaining external assurance for their sustainability information,
with larger firms six times more likely to do so compared to
smaller companies. CEOs and their management teams should
anticipate that investors, lenders, credit rating agencies, ESG
ranking firms, business partners, and regulators will increasingly
expect assurance. Firms that begin to phase in assurance now can do
so more strategically and efficiently than if they wait for
regulatory mandates, including reporting standards being developed
by the International Sustainability Standards Board (ISSB), the
formation of which was announced at COP26.
Insights from the report include:
Larger firms disclose greenhouse gas (GHG) emissions at 2.5
times the rate of smaller companies.
- More than half of S&P 500 companies disclose climate risks
in annual reports; 71 percent disclose GHG emissions in their
annual reports, sustainability reports, or company websites.
- Among the S&P MidCap 400, only 28 percent of companies
disclose their GHG emissions.
- Companies should be prepared to address both their impact on
climate and climate's impact on the firm.
Investors are seeking more information on companies' policies
on biodiversity and deforestation, which are also connected to
climate change.
- 15 percent of S&P 500 companies, 8 percent of S&P
MidCap 400 companies, and 5 percent of Russell 3000 companies have biodiversity
policies.
- Consumer staples companies have been the focus of recent
shareholder resolutions on deforestation, yet only 15 percent in
this sector have a biodiversity policy.
- Companies should assess how their supply chain can affect, or
be affected by, biodiversity loss and deforestation.
Companies need to assess their exposure to water risks, as
the financial cost of inaction can significantly outweigh the cost
of mitigation.
- 12 percent of S&P 500 companies, 6 percent of S&P
MidCap 400 companies, and 4 percent of Russell 3000 companies disclose the amount of
water withdrawn from water-stressed areas.
- Even industries that are highly exposed to water risks do not
consistently provide relevant information on water.
- Fewer than one in five companies in the Materials sector—a
high-water-risk industry—disclose the amount of water withdrawn
from water-stressed areas.
"In 2022, boards of directors and CEOs will be increasingly
focused on how to advance corporate ESG goals for their
organizations, ensuring they have in place a strong foundation and
are taking the necessary steps to drive meaningful, sustainable
change and impact," said Jeremy
Hanson, a partner in the global CEO & Board of Directors
Practice and co-lead of the global Sustainability Office at
Heidrick & Struggles. "We also expect to see more emphasis on
disclosure and measurement as ESG reporting and metrics affect the
terms on which a company can access capital in the future. Going
forward, the ability to show concrete results and precise data,
while also being clear on where a company stands in addressing
sustainability issues, is going to be a duty for every board, CEO,
and organization, regardless of size or sector."
In 2021, compared to 2020, there were three times as many
voted shareholder proposals filed on board and workplace
diversity.
- Companies both large and small should expect a continued push
by shareholders on diversity, particularly as disclosure data
reveal some notable gaps in the representation of women and
minorities in leadership positions.
- Financial and health care companies have majority-women
workforces, but in both sectors, women account for just over
one-third of management positions. These two sectors also have some
of the lowest percentages of women on boards.
- Few companies report the number of minorities in management
positions. Among those that do, minorities represent less than one
in four management positions at both Russell 3000 and S&P 500 companies.
Larger companies verify their sustainability information
through external assurance at six times the rate of smaller
companies.
- More than one-third of S&P 500 companies obtain external
assurance for at least some of their sustainability information,
compared to only 6 percent of S&P MidCap 400 companies.
- Expect investors, lenders, credit rating agencies, ESG ranking
firms, business partners, and regulators to increasingly ask that
companies have their sustainability information verified through
external assurance.
- Companies with operations in Europe will need to prepare for new rules
beginning in 2024 requiring external assurance of sustainability
information.
About The Conference Board
The Conference Board is
the member-driven think tank that delivers trusted insights for
what's ahead. Founded in 1916, we are a non-partisan,
not-for-profit entity holding 501 (c) (3) tax-exempt status in the
United States. www.conference-board.org
About The Conference Board ESG Center
The Conference
Board ESG Center serves as a resource, platform, and partner to
help Member companies address their priorities in corporate
governance, sustainability, and citizenship.
www.conference-board.org/ESG
About Heidrick & Struggles
Heidrick &
Struggles (Nasdaq: HSII) is a premier provider of global leadership
advisory and on-demand talent solutions, serving the senior-level
talent and consulting needs of the world's top organizations. In
our role as trusted leadership advisors, we partner with our
clients to develop future-ready leaders and organizations, bringing
together our services and offerings in executive search, diversity
and inclusion, leadership assessment and development, organization
and team acceleration, culture shaping and on-demand, independent
talent solutions. Heidrick & Struggles pioneered the profession
of executive search more than 65 years ago. Today, the firm
provides integrated talent and human capital solutions to help our
clients change the world, one leadership team at a time.®
www.heidrick.com
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SOURCE The Conference Board