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Companies buying into sustainability to boost value

By Rory Harrington , 05-Jan-2010
Last updated the 05-Jan-2010 at 17:16 GMT

The number of top publicly-traded US companies reporting on sustainability climbed by more than a third in the past 12 months, according to a report by the Social Investment Forum (SIF).

The findings demonstrated that corporate social responsibility is becoming increasingly important to industry and investors as a way of measuring company value, said the body.

The study, carried out by a SIF working group - the Sustainable Investment Research Analyst Network (SIRAN) – found that 66 firms on the S&P 100 list in 2008 produced a formal sustainability report with performance data. This compared to a figure of 49 in 2007, representing a jump of 35 per cent. The elite list, compiled by Standard & Poor’s, is made up of 100 major blue chip companies from a range of US industry sectors.

Global Reporting Initiative

These company eco-reports increasingly evaluated corporate sustainability according to the Global Reporting Initiative (GRI), said SIF. This standard, used world-wide, was established to develop uniform indicators for reporting on the continuously evolving environmental, social and governance (ESG) factors. In 2008, the number of S&P 100 firms making reference to the GRI in their sustainability reports rose by 25 per cent to 55. Since 2004, this number had more than doubled.

However, the SIRAN study found that while more of these companies were producing information on their sustainability performance, only six firms published complete sustainability dossiers that met the GRI’s highest, ‘A’ level reporting standard. None of the food companies included on the list – including Coca-Cola, Campbell Soup, Kraft, Heinz, Pepsico and Sara Lee – had achieved the GRI premier reporting benchmark.

Company reports that met the ‘A’ level standard must provide data for all the core GRI performance indicators, address the management approach for each indicator and include organizational information such as identification of key risks and a statement from the CEO addressing the relevance of sustainability at the organization.

The research, which has been published annually since 2005, also found that 93 of the S&P 100 firms provided some sustainability data on their web sites – a year-on-year increase of 60 per cent.

Increasingly important

SIF said the findings are significant as they point to the increasing importance of companies demonstrating their green credentials not just as a way to enhance their image but also as one to boost value in the eyes of investors.

“The fact that we saw an increase in companies issuing sustainability reports during one of the world’s worst economic downturns clearly demonstrates that ESG information is not a luxury but extremely relevant to companies and their investors,” said Peter DeSimone, SIF’s director of programs.

He added: “This trend supports the idea that investors look for solid ESG performance in valuing companies, and that more and more companies accept this development and are willing to supply information in this area.”

The Social Investment Forum is the US national non-profit membership association for professionals, firms and organizations dedicated to promoting the practice and growth of socially responsible investing (SRI). The SIRAN working group network supports more than 150 North American social research analysts from 30 investment firms, research providers, and affiliated investor groups.