Firms ‘cherry-pick’ on green measures
Companies are cherry-picking sustainability measures that make them look good, a global study headed by an Auckland academic indicates.
All around the world, there’s growing pressure on sharemarket-listed companies to prove they are environmentally and socially ‘‘sustainable’’ in a bid to win favour from both investors and consumers.
But Ramona Zharfpeykan, a lecturer in the University of Auckland Business School’s Graduate School of Management, said many companies appeared to report only on the sustainability measures that made them look good.
‘‘Companies seemed to cherrypick indicators that were either easy to collect, or easy to imply positive or neutral messages, while some of the most sensitive indicators have barely been covered,’’ Zharfpeykan said.
‘‘It is not clear whether firms report merely to stay legitimate and gain their stakeholders’ approval, or report honestly and effectively.
‘‘If it’s the former, then this raises serious concerns about the usefulness of reporting, and the decisions it informs, such as around ethical investment.’’
Zharfpeykan favours a global set of reporting standards, similar to those used in financial reporting, to ensure stakeholders such as super fund investors get the information they need to compare companies, and understand how they are doing on sustainability.
‘‘Companies are under increasing pressure from the public and shareholders to account for their environmental and social performance, as well as their financial performance,’’ she said.
‘‘A 2017 KPMG survey showed 93 per cent of the world’s 250 largest corporations now report on their sustainability performance, and 69 per cent of New Zealand’s top 100 companies. Yet there is still no single global standard and reporting is voluntary in most countries.’’
The research team headed by Zharfpeykan analysed reporting by 797 companies around the world from 2010 to 2014.
They found that none used all 91 Global Reporting Initiative voluntary sustainability indicators.
The number reported on varied by company and region, but companies in Australia and New Zealand reported the fewest, alongside companies in Africa.
The focus for companies in Oceania was on environmental reporting, while African and European companies showed greater focus on social indicators, the researchers found.
The sustainability indicator most companies failed to report on was greenhouse gas emissions, and for oil companies, the number of spills, and water sources affected by water use.
Sometimes the reporting lacked substance, and was limited to making references to areas of sustainability concern without giving any specific measures of their performance investors could compare to other companies, or to their performance in previous years, she said.
Deaths and injuries at work were among the most-frequently reported of the sustainability indicators.
Unless there were recognised reporting standards companies could not avoid, cherry-picking would continue, Zharfpeykan believed.
‘‘Why would you report on something you were doing poorly when your competitors are only reporting things that make them look good?
‘‘It undermines the whole point, which is to provide an accurate, comparable picture of how companies are doing across the sustainability spectrum. We will probably only get this when minimum reporting standards are imposed.’’