Transparency in non-financial reporting; labour rights abuses by fashion brands; and FAO warnings on biodiversity are highlighted in Oliver Balch’s latest roundup of sustainability news
The corporate reporting landscape has changed dramatically in recent times. Two decades ago, most companies weren’t sure what they were doing on social or environmental issues, let alone how to report on it. A decade ago, policies and practices were increasingly commonplace, but public disclosure remained sporadic. Today, the regulatory environment is much clearer and company performance much improved. Yet major transparency challenges still remain.
So concludes a detailed recent report by the Alliance for Corporate Transparency, a coalition of civil society organisations and experts set up to analyse corporate compliance with the EU Non-financial Reporting Directive, which came into force in 2018. On the positive side, the research finds that the “vast majority” of corporate reports acknowledge the importance of environmental and social issues for their business. Less positive is the lack of clear information that companies are providing about material issues, targets or principal risks. On environmental issues, only 50% of company reports hit the mark.
Take water issues. The alliance’s report, which focuses primarily on the extractive and energy sectors, finds 74% of energy companies provide details of their water consumption levels. Yet only 24% do so in reference to water-scarce areas. Similarly, 74% of energy companies describe their biodiversity policy, yet only 11% explain how their business operations actually affect the biodiversity where they work.
The same pattern appears in the area of social impacts as well. Over 90% of the 100 companies analysed in-depth disclose a commitment to human rights, yet only 36% describe their due diligence systems and 10% detail how they are managing related issues.
One of the most worrying gaps relates to climate change. While 90% of companies reference policies on the issue, only 47% explain what these policies are designed to actually achieve.
The gaps highlighted by the alliance chime with the findings of disclosure specialist CDP in its latest assessmentof the climate reporting practices of European firms.
Of the 849 corporations that participated in the study, 80% include climate-related risks in their reports. Yet, only 39% of these currently use a scenario-based approach to inform their strategy, as per best practice (although an additional 33% say they anticipate doing so by 2020). Furthermore, only 84 of the respondents claim that their climate reporting is fully in line with the benchmark Climate Disclosure Standards Board Framework. A mere 44 respondents, meanwhile, claim to have made full use of the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD) regarding the disclosure of climate-related risks and opportunities.
In an effort to improve the situation, a group of leading corporate reporting bodies is coming together to help companies better align their business strategy with climate issues and other non-financial matters. The Corporate Reporting Dialogue, which counts CDP, the Global Reporting Initiative and the International Integrated Reporting Council among its eight members, recently released a seven-page position paper regarding their future co-operation. The paper sets out a joint commitment to further develop and harmonise their respective frameworks so that company reporting delivers more meaningful information.
The focus of this alignment effort is the 169 targets of the Sustainable Development Goals. “We will look for further alignment and harmonisation as feasible between us,” the dialogue’s participants state in the joint declaration. The move anticipates a similar promise by the UN Global Compact to launch a publicly available tool in 2020 that will allow business to assess, compare and improve their performance against the SDGs.
Another organisation stepping up to help is the Science Based Targets initiative. The non-profit organisation has said it will release a new set of resources to assist companies in setting science-based climate targets and then reporting on their progress. The initiative seeks to persuade companies to set ambitious carbon reduction aims in line with the Paris Agreement. In this vein, its organisers have said that they intend to switch the minimum target requirement for participating companies from a 2C reduction pathway to one that is “well-below 2C”. The change will come into effect next month. Also stepping up the pressure is the UN Principles for Responsible Investment initiative. As of next year, all the initiative’s 2,250 signatories (which comprise asset owners, investment managers and service providers) will be required to report how they have considered specific climate change risks in their portfolios.
Fashion brands under fire for labour rights abuses
C0TTON ON, Target and Kmart are among the fashion brands in Australia to have working conditions in their global supply chains come under fire. Australia’s $23bn fashion industry is guilty of a “system of entrenched exploitation” that sees workers in its south-east Asian supplier factories paid as little as 55 Australian cents (39 US cents) per hour. So argues a damning new report by Oxfam Australia. According to field research by the anti-poverty charity, seven out of every 10 Bangladeshi garment workers who supply Australian brands cannot afford medical treatment while 76% have no running water inside their home. At the same time, Oxfam Australia notes that Australia’s five major clothing companies have posted an annual 81% increase in shareholder returns since 2015.
The news coincides with a similarly hard-hitting report from the World Bank, which finds that women workers have only three-quarters of the legal protections given to men. Lack of equal pay ranks high on the list of gender inequalities within national laws, according to the study of 187 different countries. The study also throws up anomalies around the right to work, penalties for sexual harassment at work and parental work protections, among other issues.
That said, the Bank does recognise a slight improvement over the last decade. Its researchers have tracked 274 legal reforms in 131 different countries, leading to a 4.65 point increase in its Women, Business and the Law index. Contrary to the picture painted in the Oxfam report, south Asia and east Asia were the regions that saw the greatest improvements, increasing their rating by 8.36 points and 5.93 points, respectively. Six countries – Belgium, Denmark, France, Latvia, Luxembourg and Sweden – now hold perfect scores of 100.
Legislation can help resolve the worst abuses, but it takes action by companies as well. In a move that could provide a model for multinational businesses with complex supply chains, a group of UK supermarkets has come together to endorse a new initiative designed to improve workers’ rights. The Responsible Recruitment Toolkit defines 27 ethical labour standards to guide companies in the sourcing and supply of labour. The free set of tools will help tackle modern slavery and eliminate illegal recruitment fees, said a spokesperson for Co-op, one of the participating supermarkets. Others to have got behind the new initiative include Aldi, M&S, Sainsbury’s, Tesco and Waitrose.
Meanwhile, in Thailand, the food and automotive components sectors announced plans to collaborate in a three-year programme with the International Labour Organization to standardise employment conditions. The initiative, which will be supported by Thailand’s Labour Ministry, grows out of the UN Global Compact’s Decent Work for Sustainable Enterprises in Global Supply Chains programme. Thailand is the sixth country to join, following China, Japan, Myanmar, Philippines and Vietnam. Meanwhile, legislative moves are already afoot to improve workers’ rights in Thailand as part of recent reforms to the country’s Labour Protection Act. Under the new law, pregnant employees will be entitled to 98 days of maternity leave, an increase of 8 days. The legislative reform also obliges employers to pay women equally to men when undertaking the same work.
FAO predicts ‘debilitating’ losses in biodiversity
AS A SPECIES, we are eating ourselves out of house and home. That is the stark warning issued by the Food and Agriculture Organization, which predicts a drastic decrease in the biological systems that support global food production unless action is taken. In a mammoth 529-page report, the FAO says the planet is facing a “debilitating” loss of soil biodiversity, forests, grasslands, coral reefs, mangroves, seagrass beds and genetic diversity in crop and livestock species.
According to the study, there is over-reliance on a limited variety of crops and animal species. For example, fewer than 200 of the 6,000 or so plant species cultivated for food contribute “substantially” to global food output. Of these, only nine account for a staggering 66% of total crop production. Livestock shows a similar overdependency on a limited number of species, with only a handful of animal species providing the bulk of our meat, milk and eggs. As for fish, nearly one-third of global stocks are overfished, while more than half have reached their sustainable limit.
In an effort to promote greater food diversity while encouraging lower food-related environmental impacts, the environmental charity WWF recently released a list of 50 future foods. The list, developed in conjunction with Unilever’s food brand, Knorr, recommends a greater consumption of algae, beans, pulses, and cacti, among other products. WWF notes that agriculture accounts for around one-quarter of all greenhouse gas emissions, of which approximately 60% is due to animal agriculture. Another startling statistic is that three staple crops – rice, maize, wheat – make up nearly 60% of all calories from plants in the entire human diet.
If the global food industry is to get serious about reducing its impact on the planet, however, it will need to look outside its own farms and plantations. Some 80% of global food production is carried out by smallholder farmers. One area where the agribusiness sector could substantially increase crop production – and thereby food security – is in the promotion of climate-resistant seeds. An assessment of 13 leading seed companies operating in south and south-east Asia, however, finds that only one (Thailand’s East-West Seed) has an explicit focus on smallholder farmers, and scores 3.7/5. The Access to Seeds Index places Syngenta and Bayer in second and third place, with scores of 3.35/5 and 3.34/5, respectively. The Amsterdam-based Access to Seeds Foundation, the organisation behind the scheme, says a similar ranking for different regions of Africa will follow in the coming weeks.
Main picture credit: Costea Andrea M/Shutterstock
#CSRCheatSheet Corporate Reporting Dialogue TCFD garment industry UN Global Compact Unilever WWF Human rights FAO PRI biodiversity Access to Seeds Index CDSB SBTi IIRC SDGs