Sunday, November 9, 2008

Resources groups lead in sustainability report

By: Esmarie Swanepoel, 16/10/2008

Four of the five top rankings in Ernst & Young’s excellence in sustainability reporting survey, which was released on Thrusday, went to companies in the resources sector.

Platinum producer Anglo Platinum, and synfuel producer Sasol shared this year’s top honours, followed by diversified miner BHP Billiton, gold producer Anglogold Ashanti, and financial service provider Standard Bank.

Ernst & Young associate director Jayne Mammatt said the tendency for resources to outperform other sectors was probably attributable to the fact that sustainability reporting evolved from environmental reporting.

“Resources companies are perceived as having a greater impact on the environment and, hence, focused efforts on this type of reporting long before other sectors. This could be a reflection of maturity, more than a reflection of the willingness to report,” she said.

The survey determined the level and quality of sustainability reporting and evaluated the ability and propensity of 56 companies listed on the JSE’s socially responsible investment index to share information. Publicly available data, such as sustainability reports, were used as a starting point and were supplemented with other information, such as websites.

Mammatt pointed out that the results of the survey were not necessarily a reflection of the company’s future sustainability, nor a reflection of a company’s track record of with regard to social, economic, or environmental performance.

Adjudicators from the University of Johannesburg (UJ), together with members of Ernst & Young’s governance and sustainability team, conducted the survey.

UJ professor Alex van der Watt noted that the adjudicators were pleased with the quality of the reports for 2008. Four encouraging trends were highlighted, including an increased commitment to sustainability, increased effectiveness of communication, increased quality in the standard of reporting, and increased levels of trust and reliability.

He said that there was an increased integration of sustainability issues into other areas of the annual report, and that the reports contained a more obvious balance between good and bad news.

“The majority of the reports ranked as excellent or good, and contained a section setting out sustainability trends, risks, opportunities, and the organisation’s response to the identified risks and opportunities.”

Van der Watt also noted that the majority of the reports were more concise and user-friendly. Key performance indicators were also used more frequently, and the reports were increasingly dealing with both the positive and negative aspects of the sustainability performance.

“The majority of the reports allow for the comparison of information on a year-on-year basis, and reporting on employment equity, diversity management, and black economic empowerment is generally of high standard.”

However, he noted that there were also some areas of concern, with fewer companies outlining the business case for sustainability. There was also insufficient progress in demonstrating the impact of sustainability performance against the traditional measures of financial performance.

“Reports are not dealing with the wider context of sustainability, that is how the organisation contributes to the improvement or deterioration of social, economical, safety, health, and environmental performance at local, regional, and global level.”

Van der Watt stated that the survey was conducted according to a mark plan, which took several criteria into consideration. The mark plan, which was specifically designed for the survey, made use of best practice and new developments with regards to sustainability reporting.

“Progress has been made with sustainability reports in South Africa. I agree that there are a lot of challenges, but I think we need to recognise that there has been progress as well over the last few years,” he concluded.