Australian company ranks among world’s best for ESG reporting

Currie

An Australian company is ranked among the world’s best for transparency in environmental, social and governance (ESG) reporting, according to a new global study that compares the largest publicly listed companies across stock exchanges on three continents.

Investors are increasingly assessing the environmental, social and governance facets of a company to inform their decisions. They look to annual ESG or sustainability reports to make these assessments. The Global ESG Monitor (GEM) compares ESG reporting globally to help better inform investors and other stakeholders.

And Westpac Banking Corporation was the highest-ranked ASX-50 company, rivalling levels of transparency for ESG achieved by the top corporate reporters in Europe and the United States.

Globally, companies leave investors blind on ESG

  • ESG reports from leading companies lack comparability and transparency
  • Three out of five reports do not disclose when ESG objectives are not met
  • Only two companies from outside Europe rank in the top 10 globally
  • SDG13 (Climate action) is reported more often than any other UN SDG
  • Separate reports are more transparent than ESG sections in annual reports
  • GRI, SASB, SDG and TCFD are the most common frameworks referenced

“Broadly, the GEM found corporate ESG reporting shows remarkable differences in quality between and within regions, and that reporting globally lacks comparability and transparency,” says Mark Paterson, principal of Currie, a corporate sustainability specialist that co-authored the report.

Among the key global findings from the study are that one out of every four reports (26%) provides a methodology for reporting and even fewer reports (19%) provide formulas, approaches or calculation methods on how ESG data is gathered.

And the study reveals that not even half (41%) of the reports disclose when ESG objectives are not met.

Fully independent, the GEM assesses 185 non-financial sustainability reports (integrated and separate) from a total of 140 companies from the leading indices, DAX (Germany), EUROSTOXX-50 (Europe), Dow Jones Industrial Average (USA) and S&P/ASX-50 (Australia), based on 53 general and 490 industry-specific criteria, the latter of which were defined using the Sustainability Accounting Standards Board (SASB) accounting metrics.

Ariane Hofstetter, CEO of research firm KOHORTEN, says: “The evaluation of non-financial reports from individual companies around the world is painstaking. It is not transparent because there are no standardised, internationally valid technical terms for ESG reporting. Not to speak of a lack of legal ESG reporting obligations outside of Europe. The sooner this is addressed the clearer the companies’ progress on managing ESG risks will be.”

Global ranking: European companies dominate

As part of the analysis, indicators were developed to provide a ranking of all reports in the sample. With the maximum score being 66 points, most companies’ reporting was underwhelming with an average GEM reporting score of only 26 points.

Only two non-European companies, Westpac Banking Corporation (47 pts.; 5th rank) and US-American Walgreens Boots Alliance (45 pts.; 8th rank), managed to make the Top 10 with separate reports.

Global rank

Index

Company

Points

Report Format*

1

EURO STOXX

Inditex

53

I-NFR

2

EURO STOXX

Santander

51

I-NFR

3

EURO STOXX / DAX

BASF

49

I-NFR

4

EURO STOXX

Intesa Sanpaolo

48

S-NFR

5

ASX 50

Westpac Banking Group

47

S-NFR

6

EURO STOXX

Iberdrola

46

S-NFR

DAX

Infineon

46

S-NFR

8

DOW JONES

Walgreens Boots Alliance

45

S-NFR

9

EURO STOXX / DAX

Allianz

44

S-NFR

DAX

Merck

44

S-NFR

*I-NFR = integrated non-financial report, S-NFR = separate non-financial report

Australian companies among the best and worst

According to the study, ASX-50 companies lead the world in making their ESG objectives and targets clear in integrated reports (85%) and reporting ESG impacts in separate reports (74%). However, when it comes to making sustainability an integral part of business strategy (50% in separate reports and 42% in integrated reports) the ASX-50 is a moderate performer.

Where Australia performs worst:

  • Reporting names of stakeholder groups engaged by the company
  • Describing – and defining boundaries in – a company’s supply chain
  • Disclosing in-depth details (separate reports have the fewest pages)

Where Australia performs best:

  • Stating sustainability or ESG objectives or targets
  • Reporting ESG impacts (in reports that reference a materiality analysis)
  • Including glossaries for ESG terms (this happens in only 30% of reports)

Top Australian companies for ESG reporting transparency

Australian rank

Company

Points

Report Format*

1

Westpac Banking Group

47

S-NFR

2

Woodside Petroleum Ltd

42

S-NFR

3

Newcrest Mining Ltd

40

S-NFR

South32

40

S-NFR

Amcor Ltd

40

S-NFR

6

ANZ Banking Group

38

S-NFR

7

National Australia Bank Ltd

37

S-NFR

8

Woolworths Ltd.

35

S-NFR

QBE Insurance Group Ltd

35

S-NFR

10

DEXUS

34

S-NFR

*I-NFR = integrated non-financial report, S-NFR = separate non-financial report

Although no integrated reports made Australia’s top 10 for transparency, Transurban Group NPV and Rio Tinto topped the Australian rankings for sustainability reporting in integrated reports.

Stakeholders still not taken seriously enough

More than 60% of all reports globally provide general information on ESG stakeholder dialogue, only 42% disclose details about the company’s approach to stakeholder engagement and only 18% disclose how companies have responded to ESG issues raised by their stakeholders.

Says Mark Paterson: “Global standards make stakeholder dialogue a priority for sustainability reporting, yet a weakness in reporting common to all regions is transparency around stakeholder involvement. You need look no further than Rio Tinto’s destruction of Australia’s cultural heritage at the Juukan Gorge rock shelter to see what can happen when a company does not listen and respond to stakeholders’ concerns about its impacts.”

In Australia, three-quarters (76%) of separate sustainability reports do not disclose details about how stakeholders are identified, two out of five (41%) do not report how they engage stakeholders and almost two out of five (38%) do not provide a list of stakeholder groups.

/Public Release. This material comes from the originating organization and may be of a point-in-time nature, edited for clarity, style and length.