November 21, 2014

Studies: Bridging Company/Investor Sustainability Gaps

The largest studies of CEOs and investors to date on sustainability reveal consensus on the value of sustainability generally, but a huge disconnect in CEOs’ and investors’ views on certain fundamental aspects of sustainability – particularly how well companies are (or aren’t) communicating their sustainability story.

These results reflect some of the major gaps:

  • 80% of CEOs believe that their company is approaching sustainability as a route to competitive advantage. Only 14% of investors believe that the companies they invest in are doing so.
  • 74% of CEOs believe that their company is measuring both positive & negative impacts of activities on sustainability outcomes. Only 17% of investors believe that the companies they invest in are doing this.
  • 57% of CEOs believe that their company is able to set out in detail a strategy for seizing opportunities presented by sustainability. Just 8% of investors believe that the companies they invest in are able to do this.
  • 38% of CEOs believe that their company is able to accurately quantify the business value of sustainability initiatives. Only 7% of investors believe that the companies they invest in can do so.

Notably, investors identified certain shortcomings in their own approach to sustainability as being part of the problem. They acknowledged viewing sustainability as merely a risk management/mitigation issue rather than an opportunity for company growth, differentiation and competitive advantage. Additionally, they noted a need to strengthen their knowledge and capabilities in order to ask the right questions on sustainability, and challenges in identifying which issues have a material effect on their investments.

Investors also identified certain financial market structural challenges – such as a short-term investment focus and quarterly reporting requirements – that contribute to the disconnect. Among the factors they identified to help bridge the communications gap and better integrate sustainability into the global markets are longer term investment strategies and the use of common, industry-wide sustainability metrics – on par with financial performance measures – to enable more accurate identification and comparison of industry leaders.

See the suggested concrete company and investor action steps on page 18 of the investor report, and this PRI release discussing the survey results.

How to React to SASB

The Sustainability Accounting Standards Board (SASB) is self-described as an independent non-profit whose mission is to develop and disseminate sustainability accounting standards that help publicly-listed companies disclose material factors in compliance with SEC requirements. This recent Baker & McKenzie memo does a fine job of succinctly describing how SASB works – as well as the legal and practical implications resulting from SASB’s work and its  increasing visibility and influence.

See also this article where SASB directors Aulana Peters and Elisse Walter discuss the basis for SASB and its sustainability disclosure scheme – including a good explanation of how its standards are designed merely to help companies meet their existing disclosure obligations under Regulation S-K.

Access SASB’s standards and additional resources in our “Social Responsibility” Practice Area.

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– UK Regulators Assess & Reject US Whistleblower Bounty Scheme
– Survey: Boards’ Risk Concerns Warrant Focus on Crisis Planning
– General Counsels: Tips for Managing Governance Demands & Risks
– CAQ Field Testing of PCAOB’s Auditor Report Proposal: Implementation Challenges
– Survey: Earnings Call Practices


– by Randi Val Morrison