Corporate social responsibility is now a familiar mantra. But too many companies fall short in disclosing or improving their performance on environmental, social and governance measures. It is disappointing, because CSR involves many practices that are, in fact, in most companies' own best interests.
The evidence come from a new review of the S&P/TSX 60 biggest publicly traded companies in Canada, conducted by Corporate Knights in association with The Globe. The study shows that companies have improved their disclosure, especially around environmental issues (with extractive industries being especially aware of the need to publish information, even if they are not required by securities regulators to do so). But only 10 of the 60 companies had data available for all four environment-related categories (carbon emissions, water usage, energy usage and waste production).
Pension plans are the outside institutional investors that have pushed many companies to disclose more. They are long-term shareholders, and more sensitive to issues that gestate, affecting a company's performance over years or decades rather than quarters. That includes reputation. In addition, many of their members may have an interest in seeing that the plan invests in companies that best represent their values.
When a company starts measuring its performance on environmental, social and governance issues, the biggest impact may be internal. Boards get the information, and are then in a position to ask senior management why they aren't performing better. This study is especially pertinent because it compares companies with peers in their industry.
One area where some tougher questions need to be asked is around representation on corporate boards. They do not represent the face of Canada. Only 15 per cent of directors at the 60 biggest companies are women, and only 4 per cent come from visible minority communities. In other words, too many companies are failing to represent their customers in the boardroom; it will take leadership from the top at individual companies to correct this defect.
Not only is the trend to disclose growing, but companies need to be ready to share information about more of their activities. The BP experience, and recent findings that the company regularly used wells the U.S. federal government considered risky, may inspire more disclosure of a company's safety record. Companies that can show that they are better at meeting safety or environmental standards could come out ahead of their competitors.
Much progress in corporate social responsibility has been made in the last decade, but one thing is certain - Canadian corporations can still do better.