What gets measured gets controlled. That’s been a common mantra in the corporate world for decades. We should now add a corollary: what gets reported is what really matters. “Employees look at corporate disclosures to decide who they want to work for,” notes Nadja Picard, PwC’s global reporting leader. “Customers look at corporate disclosures…to decide what they want to buy.” And the punishments for missing the boat on reporting can be significant.
At this year’s World Economic Forum in Davos, Picard participated in a panel discussion with Emmanuel Faber, chair of the International Sustainability Standards Board, and Eelco van der Enden, CEO of the Global Reporting Initiative, and they dug deep into the growing demand for ESG reporting and the need for global alignment in reporting standards. These conversations lie at the heart of Episode 5 in our Take on Tomorrow podcast series.
Reporting isn’t just a requirement for companies. It’s a driver for real change, and it extends to an ever-increasing range of topics: how a company creates value for its shareholders, its impact on the environment, and its action on social inequality and diversity. In fact, stakeholders of all kinds are demanding information that is more detailed, more readily measured, and more easily verified.
Noting PwC’s 2021 Global Investor survey, Picard added that 79% of investors are really looking at ESG risks and opportunities as they pertain to companies. Van der Enden concurred: “It is a myth to say that investors are only interested in yields and the financial aspects and financial risk.”
Companies that don’t disclose the information stakeholders want to see, or that try to “greenwash” information to appear more ESG-friendly than they are in reality, are taking a big gamble. “Besides doing something that is unlawful,” Picard said, “the bigger risk is a reputational risk, the risk of being known as a company that says it’s doing good, but it’s actually not…. You might lose out on the customer side. You might lose out on the employee side, and you certainly will lose out on the investor side.”
It is a myth to say that investors are only interested in yields and the financial aspects and financial risk.”
Ensuring full—and honest—disclosure exposes a completely separate challenge: how to get countries in different parts of the world with different political systems, laws, values, and visions to abide by the same set of standards. Though there are some things that everyone can agree upon—forced labor is a bad thing, for example—to really build a global system, temperance may be key. “I think we need to be quite deliberate in not wanting too many disclosures, too specific, that respond to everybody’s needs and requirements,” Picard said.
“We want that global baseline to truly meet the needs of the largest investors, largest companies, and yet be inclusive of the smaller ones,” Faber added.
Listen to the podcast in its entirety here.