page
9
The policy landscape for corporate sustainability
disclosure has also been highlighted in recent
years by several key developments. Chief among
these is the outcome document of the 2012 United
Nations Conference on Sustainable Development
(Rio+20). Paragraph 47 of the document called on
governments and other stakeholders, with the
support of the UN system, “to develop models for
best practice and facilitate action for the integration
of sustainability reporting.”
10
Moreover, the European Commission’s proposed
legislation on non-financial reporting could enhance
the social and environmental transparency of large
European companies and further encourage
quantitative sustainability disclosures.
11
These developments make the case that corporate
sustainability reporting is becoming an increasingly
important business tool. Despite its (largely)
voluntary nature, sustainability reporting has been
found to be “a vital component of shareholder,
employee, and stakeholder relations, a differentiator
in competitive industries and (a means to) foster
investor confidence, trust and employee loyalty.”
12
Several academic papers have found that rms
that voluntarily disclose information to the market,
including sustainability data, have a lower cost of
capital than rms that do not.
13
For these reasons, demand among institutional
investors, asset managers, community groups and
other stakeholders for comparable, quantitative
corporate sustainability data is likely to increase
going forward.
10 Excerpt taken from “The Future We Want,” paragraph 47. To download the
report, please visit
11 For a review of the proposed legislation and stakeholder consultation, see
12 “The Value of Sustainability Reporting,” Ernst & Young and the Boston
College Center for Corporate Citizenship, 2013, page 4.
13 For a good discussion of this relationship, see Cheynel, Edwige,
“A Theory of Voluntary Disclosure and Cost of Capital” (April 12, 2012).
Review of Accounting Studies, Forthcoming. Available at SSRN:
Against this backdrop, stock exchanges have
hitherto played a relatively minor role in the
development of sustainability disclosure policy,
although their potential role is recognized to be
hugely significant. By incorporating sustainability
disclosure requirements into their listing standards,
stock exchanges can create a powerful incentive
for companies to measure and publicly disclose
sustainability performance data to the market.
Many stock exchanges have expressed the
legitimate concern that imposing stricter listing
requirements could discourage future listings,
which runs central to their business model.
Some exchanges, such as the BM&FBOVESPA in
Brazil and the Johannesburg Stock Exchange in
South Africa, have carved out an early leadership
position on the sustainability disclosure front.
Eight exchanges and counting have joined the
Sustainable Stock Exchanges, a United Nations
initiative aimed at exploring how stock exchanges
can enhance corporate transparency.
14
And while most exchanges have not formally
committed to the concept of sustainability
reporting, a great many are strategically reviewing
whether (and how) sustainability reporting fits
with their long-term business plan. Many of these
challenges are likely to be discussed at the 53
rd
General Assembly of the World Federation of
Exchanges, during a special panel discussion
on Sustainability.
15
14 Sustainable Stock Exchanges is an initiative co-convened by the United
Nations-supported Principles for Responsible Investment, the UN Conference
on Trade and Development, the UN Environment Programme Finance
Initiative, and the UN Global Compact. It is a peer-to-peer learning platform
for exploring how exchanges, in collaboration with investors, regulators
and companies, can enhance corporate transparency—and ultimately
performance—on ESG (environmental, social and corporate governance)
issues and encourage sustainable investment. For more information, see
15 As of October 3, 2013, the agenda includes a Sustainability panel
from 14:30 to 15:30 on October 30, 2013. For more information, see
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