why disclosing a C- is better than not taking the test at all
published 12.7.22
Although my teenage years are far behind me, there’s one phrase I still commonly return to (despite its low success rate with my parents). “Everyone is doing it” will likely be familiar to every single sustainability professional and teenager alike, trying to convince their legal team and C-suite or parents, respectively, that “everyone is doing it”.
Over the last decade, the most consistent part of my work in sustainability writ largely has been advocating for increased corporate disclosures around ESG. I have found myself making the same point, from the investment, corporate and consulting sides over and over again:
Whether or not the numbers are great, it is the process of collecting and publishing them that matters.
This exercise of public disclosures creates internal processes and reviews, drives accountability amongst internal stakeholders, provides transparency to both internal and external stakeholders, and sends a signal to external stakeholders that these are issues taken seriously by corporate leadership.
However clear these benefits can seem, I have never met a company that didn’t push back when being asked to disclose a new ESG metric. Not a Fortune 500 Company, not a B Corp, not a tech startup. Concerns are of course understandable - that if the information presented isn’t flattering, why would we voluntarily publish it if not required to do so, and put a target on our back? The answer requires trust in knowing that we are in the midst of a true paradigm shift - whereas in a traditional financial earnings call, every metric is regularly disclosed and scrutinized by the investment community as there is only framework by which to interpret these numbers: Exceed, Meet and Underperform.
When it comes to ESG data and material, non-financial information, we are operating under a new standard in which transparency and disclosure are key as they signal an ability to collect, measure and report on data alongside programs that aim to improve performance across environmental, social and governance objectives. I do empathize with CFOs and GCs, used to minding every word said publicly out of concern for negative backlash from investors - but it’s time to recognize a true change in standards when it comes to ESG disclosures.
In a recent article titled “What’s ESG Got to Do With It” published in the Harvard Law School Forum on Corporate Governance - the authors read over 200 corporate sustainability reports to relay key findings, one of which was…huge surprise to follow: “Don’t Hesitate to Show Your ESG Report Card It is imperative for companies to be thoughtful and transparent in reporting progress on ESG goals. If they do not, watchdogs are likely to disclose for them, perhaps in an unfavorable manner.” I love this point because it so clearly explains that in the age of information, the data is out there, and companies still have a final moment in which they can choose to be proactive in releasing data, however unflattering, alongside stated goals and plans for improvement - or wait for watchdogs, employees, or customers to call them out on poor performance. Even false accusations will carry weight if you haven’t made the proper disclosures to point to. Robust ESG disclosures are a place where companies should truly strive for a participation award - not consider this a race to the finish line.
While I’m glad my parents didn’t cave to (all) my teenage requests, I do think it’s time that companies give into peer pressure and get comfortable with this uncomfortable but necessary new chapter. To bring this little analogy full circle and echo my parents, I would reiterate to the companies on the sidelines when I say “One day you’ll thank me!”
by Danielle Jezienicki
qb. Collaborator
