April 11, 2023

ESG: Large Silicon Valley Co’s Continue to Enhance Disclosures

A new Fenwick memo shows that many of Silicon Valley’s largest tech companies are making strides on ESG disclosures, even as providing the info remains voluntary at this point in time. Here are the key takeaways:

– The number of SV 150 companies disclosing ESG information and the comprehensiveness of such disclosures increased in 2022.

– Although ESG reporting has not been mandated, most companies have opted to provide some level of disclosure in response to stakeholder demands and in anticipation of likely mandated disclosures by the SEC.

– Areas most frequently disclosed include: environmental issues, human capital resources, diversity, supply chains, customers and products, community impact and governance.

– 76% of SV 150 companies disclosed bord or committee oversight of ESG. In particular, 85% of the companies providing such disclosure stated that the nominating and corporate governance committee (or its equivalent) had primary responsibility for ESG oversight (with other committees overseeing particular aspects of ESG, at many companies).

– The quality of ESG disclosure varied by size of company, with the larger SV 150 companies generally providing more comprehensive disclosure, including quantitative metrics.

– Technology and life sciences companies contemplating whether to voluntarily disclose ESG information or expand their disclosure should consider these trends and the types of information disclosed, to better assess their preparedness for ESG disclosure and meeting the demands of investors and other stakeholders.

These findings also build on data from earlier this year that said that nearly all S&P 500 companies now detail ESG-related issues in their Form 10-K risk factors.

Keep in mind that although many of us have been suffering from a case of “ESG fatigue” that feels like it’s been lingering for years, we are still at the front end of this. Reporting standards – at the SEC and elsewhere – will continue to evolve. Fenwick notes that approximately half of the SV 150 companies reported using a third-party standard or framework to guide their disclosure. Here’s more detail on which standards currently are getting the most traction:

The most prominent frameworks and standards included Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosure (TCFD) and the United Nations Sustainable Development Goals (UNSDG).

SV 150 companies cited SASB most often as the standard to which they adhered, with 91% of the companies disclosing standards citing SASB compared to 87% in 2021. GRI was the second-most popular standard, with 63% of reporting companies favoring it. Finally, approximately 43% of companies that reported to a standard or framework (22% of all SV 150 companies) indicated that they used the TCFD framework.

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Liz Dunshee