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May 10, 2013

Companies aware of sustainability but failing to plan: E&Y

Ernst & Young US reports that companies are recognising the links between sustainability and risk management but are failing to make sustainability issues a priority in their corporate agenda.

In a survey of sustainability leaders conducted in late 2012, the firm found shareholders and executives are becoming more involved, although there is not enough alignment of risk response with the scale of sustainability issues.

The report highlighted six growing trends in corporate sustainability:

First, ‘tone from the top’ is important for sustainability awareness or preparedness, with CEO and Board engagement critical; 36% of companies reporting total alignment with financial sustainability reporting had the full engagement, with 80% saying it was embedded in strategic planning, and 70% including such issues in their mission statement.

Secondly, it found consumers are a big influence in the advancement of sustainability, with 61% of companies citing them as a driver, as opposed to governments and multilateral institutions, which were not seen as key.

Thirdly, was a heightened awareness of natural resource shortages, with 51% of respondents expecting their company’s core objectives to be affected by shortages in the next three to five years. Water was the biggest worry, with 76% seeing it as the top cause for concern.

Fourth, while awareness appears high, corporate risk response is badly matched to the scale of the challenges, with only 30% of companies having run scenario analyses, and 36% saying they had no plans to do so.

The fifth trend was E&Y said, a slow uptake in integrated reporting despite 43% saying it would be "extremely" or "very" helpful for involving the chief financial officer or the finance team in sustainability initiatives and validating non-financial information reporting.

Finally, the report found the number of investor and shareholder inquiries are rising, with half of respondents having received an increase in sustainability-related inquiries during 2012, and more investors voting on proxy proposals.

E&Y global climate change and sustainability services leader Steve Starbuck said executives across America were focusing more on "the risks and opportunities around sustainability", however they still need to engage in scenario planning, "which means company awareness has not translated into the necessary preparedness that would minimize risk and maximize opportunities for their organisation."

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Ernst & Young US

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