No. 2012-26
23 August 2012
To the Point
Sustainability reporting
gets a boost from
stock exchanges
A growing number of
stock exchanges are
urging listed companies to
report on environmental
and social issues.
What you need to know
• Stock exchanges are joining regulators and investors in pressing public
companies to report on environmental and social issues.
• In June, the NASDAQ Stock Market became one of the latest stock exchanges
to urge listed companies to measure and report on these issues.
• Companies that don’t currently report on their performance in these areas
should consider doing so.
Overview
The NASDAQ Stock Market in the US and stock exchanges in Istanbul and Cairo
recently urged their listed companies to begin measuring and reporting on
environmental and social issues.
NASDAQ recommends that its listed companies report on issues such as
greenhouse gas emissions, water use and gender equality, or explain why they
won’t,1 but this isn’t a condition of listing.
The exchanges announced their reporting push at a meeting of the Sustainable
Stock Exchanges Initiative in June 2012 at the Earth Summit in Rio de Janeiro. The
initiative, backed by United Nations organizations and programs, is trying to
increase transparency on environmental, social and governance issues for public
companies. The São Paulo, Johannesburg, Kuala Lumpur and Copenhagen
exchanges already require companies to report on environmental, social and
governance issues or explain why they won’t.
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Stock exchanges surveyed for the 2012 Progress Report from the Sustainable
Stock Exchanges Initiative “overwhelmingly” affirmed that they should encourage
corporate responsibility on sustainability issues, the report stated.2
According to the report, the call for sustainability disclosures has been propelled
primarily by institutional investors. In 2012, environmental and social proposals
accounted for an estimated 45% of all US shareholder resolutions on proxy ballots.3
Companies are also concerned about issues such as natural resource depletion and
carbon emissions because they affect the bottom line.
In addition, regulatory pressure is mounting for companies to adopt more robust
disclosure about these types of metrics. For instance, UK regulators will require
companies listed on the London Stock Exchange’s Main Market to begin reporting their
levels of greenhouse gas emissions on 1 April 2013.4 This week, the US Securities and
Exchange Commission adopted a rule requiring public companies to disclose their
use of “conflict minerals” from the Democratic Republic of the Congo and adjoining
countries, beginning in 2014. Congress mandated the rule in response to concerns
that trade in the minerals is financing armed groups in the region.
Key considerations
Many large companies now report on their corporate responsibility activities, and
a growing number are now seeking independent assurance on such reports.
Sustainability reports cover a range of issues related to the environmental and
social performance of companies such as reduction of energy, water and waste
use, improving supply chain management, safe working conditions for workers
and community involvement.
Although reporting frameworks such as the Global Reporting Initiative’s (GRI)
Sustainability Reporting Guidelines exist, stock exchanges provide little guidance
on how to measure performance in these areas. In a rare exception, the Singapore
Stock Exchange has published guidance on sustainability reporting,5 which is
voluntary for its listed companies. It also advises companies to use the GRI
framework to report on performance.
The Johannesburg Stock Exchange, meanwhile, asks listed companies to provide
integrated reports that include information about their financial performance as
well as their performance on environmental and social issues.
NASDAQ and other exchanges are expected to discuss developing common
sustainability reporting standards at the World Federation of Exchanges annual
meeting in October.
Next steps
• Companies that don’t already issue sustainability reports should consider how
they can measure and report on their performance in these areas. Leading
companies already use these reports to demonstrate their performance and
enhance their reputation with stakeholders.
• Companies also should monitor any requirements that stock exchanges may
be contemplating.
2
23 August 2012 To the Point Sustainability reporting gets a boost from stock exchanges
Ernst & Young AccountingLink
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Endnotes:
1
2
3
4
5
NASDAQ OMX Joins Four Exchanges in Sustainability Effort, item number 3 in News & Announcements
Sustainable Stock Exchanges: A Report on Progress.
Leading corporate sustainability issues in the 2012 proxy season, Ernst & Young.
UK Department of Environment Food and Rural Affairs.
Guide to Sustainability Reporting for Listed Companies, Singapore Stock Exchange.
Ernst & Young
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23 August 2012 To the Point Sustainability reporting gets a boost from stock exchanges