There was an interesting proposal from Aviva Investors waiting on my desk when I returned from maternity leave.
In the lead-up to the Rio+20 Earth Summit in June, Aviva Investors is busy pushing for more international action around corporate reporting of environmental, social and governance issues.
New laws on corporate sustainability reporting
I was pleasantly surprised to find that their proposal is directed at national governments: they want to see all UN member-states committing to develop national regulations that will encourage companies to report on environmental, social and governance issues.
The idea is that the regulation would require companies to integrate ‘material’ sustainability issues into their annual reports and would also create a means for investors to hold companies to account on the quality of their disclosures including, for example, through an advisory vote at the company’s annual general meeting (AGM).
What do I like about this proposal?
I like that it is directed towards governments. Broader regulatory standards for corporate sustainability reporting are long overdue.
I also like that the proposal is being driven by an institutional investor, which shows that debates about environmental, social and governance issues are not just important for children’s rights and economic justice, but also for business profitability.
What don’t I like about the proposal?
The proposal doesn’t seek to define ‘material’ sustainability issues. I can see why, as these issues will vary widely depending on the company and the sector.
But, as with so many of these things, the devil is in the detail and it remains to be seen whether what companies define as ‘material’ covers all of the issues those of us worried about social and economic justice want to see. Impact on human rights comes to mind, for example.
I also think there is a missed opportunity to integrate calls for country-by-country reporting (where multinational corporations disclose information about their operations and financial performance at a country level to enable citizens of those countries to better understand payments made to their governments), especially as there is existing support from some institutional investors for this.
And, finally, the proposal is based on ‘comply or explain’, so there is a worry that many companies will get out of the reporting requirement using this opt out.
Why Save the Children is supporting Aviva’s campaign
But, on balance, we will be formally supporting this initiative. If this were adopted it could provide a platform at the national level in most countries across the world to address broader issues related to corporate accountability and transparency.
On the agenda for the Rio+20 Earth Summit
The good news is there is already significant support for Aviva’s proposal.
It has convened a Corporate Sustainability Reporting Coalition of more than 40 organisations, including institutional investors managing in excess of US$1.6 trillion.
There are also signs that the proposal may get included in the discussions at the Earth Summit in Rio in June.
The current zero draft of the Summit outcome document includes the following: “We call for a global policy framework requiring all listed and large private companies to consider sustainability issues and to integrate sustainability information within the reporting cycle.”
Let’s keep it that way!
The bad news is that a number of countries are actively lobbying to have the clause about corporate sustainability reporting removed from the Summit outcome document.
Save the Children would like this statement to stay in and urges other civil society actors concerned about improving corporate accountability and transparency to add their support.