Compliance & Governance

Dirty SOX?

Two teams of thought leaders clashed over the worth of the Sarbanes-Oxley Act—including one of the bill’s sponsors himself.

By Heather Clancey

A decade after passage of the Sarbanes-Oxley Act (SOX), critics complain that the mandate for disclosure drains the competitiveness of corporate America. Supporters, however, argue that the law contributes to a more holistic awareness of corporate responsibility across big businesses.

In short, SOX dictates policies for independent audits and approval of financial statements at large public companies. The legislation’s impact—and the issue of corporate disclosure generally—was debated in October at the COMMIT!Forum, CR Magazine’s annual gathering of high-level corporate responsibility (CR) professionals.

“It is helping extend fiduciary responsibility deep into the company,” said Laralee Martin, executive vice president and chief financial and operating officer at Jones Lang LaSalle, the commercial real estate company.

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The Water Chain

How disclosure can help companies mitigate risk.

By Zoe Tcholak-Antitch

Following the impacts of “Superstorm Sandy,” many members of America’s C-suite will be considering the impact that the storm has had on either their operations or supply chain. This will doubtless raise questions about what can be done to prevent business interruptions in the event of similar storms in the future.

Climate change could potentially increase the frequency of these types of storms, so it is good news for corporate America that 62 percent (311) of S&P 500 firms have already implemented board or executive level oversight of climate change, according to CDP’s 2012 survey. But water—which caused much of Sandy’s damage as a result of flooding—is a different story.

CDP’s Water Disclosure program surveyed companies in water sensitive or water intensive industries within the S&P 500, among others, on behalf of 470 investors with $50 trillion in assets in 2012.

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Oversight Overhaul

For better boards, better to exit the boardroom.

By Paul Strebel

The repeated failure of boards to intervene early enough to avert corporate disasters reflects a serious problem in the boardroom that cannot simply be swept under the carpet. The improvements in corporate governance made so far after each crisis have failed to address a fundamental weakness: Boards are too often out of touch with those who can make or break a company.

A disconnect hampers the relationship between the world inhabited by CEOs and board directors on the one hand, and the real world of customers, suppliers, employees, and society at large on the other. The world of CEOs and board directors is made up largely of other CEOs and top executives; in a repetitive routine, they interact mainly with one another, with management, and occasionally with analysts, consultants, and government officials.

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Fuller Disclosure

Little by little, the windows are opening.

By Zoe Tcholak-Antitch

New Carbon Disclosure Project (CDP) analysis shows that S&P 500 companies are making significant strides in transparency and progress toward carbon goals when compared to the Global 500. The results highlight a tipping point in the actions being taken in American C-suites and boardrooms to integrate a sustainability agenda into overall business strategy despite a lack of comprehensive regulatory requirements in the United States.

The CDP S&P 500 Climate Change Report, released in September and co-written by CDP and professional services firm PwC, on behalf of 655 institutional investors representing $78 trillion in assets, provides an annual update on greenhouse gas emissions data and climate change strategies at America’s largest public corporations.

It reveals that the average disclosure score, calculated by CDP to reflect each company’s transparency on climate change, has increased by 13 percent, and the average disclosure score required by companies to achieve a position in the Carbon Disclosure Leadership Index (CDLI) has increased by 11 percent to 92.

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The Transparency “Super-Pac”

Why sustainability reporting is on the rise.

By Mike Wallace

‘Tis the season for politics, and this year’s COMMIT!Forum is bringing together all sides in what is being billed as the Right-Left Unconvention. Having partnered closely with the forum organizers (i.e., this magazine) since GRI re-opened its doors in the United States, we are very excited to play a part in this year’s event. In fact, we’re incredibly honored to not only have the magazine’s parent company (SharedXpertise) as one of our GRI Organizational Stakeholders (OS), but also grateful for all their added support around transparency.

As most of you know, GRI’s Focal Point USA was officially launched in January 2011 at the New York Stock Exchange (NYSE). We drew more than 200 attendees, and at the event we distributed a list of all known GRI Reporters in the U.S. and Canada.

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An Ounce of Prevention

Having a safety culture is not the same as building a culture of safety.

By Kevin Beaty

Every company has a safety culture. But not every company has a “culture of safety” that protects its employees, its reputation, and its bottom line. Companies that don’t treat safety as an essential part of their mission and operations are not only increasing risk, they’re also missing out on important benefits.

A culture of safety focused on eliminating workplace injuries and illnesses can help reduce workers’ compensation, medical, legal and insurance costs; decrease absences, and improve productivity. For every dollar invested in safety, a company can save $4 to $6, according to the Occupational Safety and Health Administration (OSHA).

If you don’t focus on safety, accidents happen, and you’re at a loss as to why your employees continue to make poor decisions that result in injury. Whether you realize it or not, you have established a safety culture that is driving these results; it just so happens that the culture in question is not very good.

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Open Book Valuation

A “more is more” mindset is necessary but not sufficient. The big need: context.

By Brendan LeBlanc

Over the last 20 years, investor reporting expectations have evolved. In addition to traditional financial performance measurements, companies are being asked for more complete non-financial performance metrics and measurements, such as those associated with environmental and social challenges. To properly understand an organization’s true value, amid tremendous complexities, investors require ever more sophisticated and intelligible reporting, which contextualizes financial and non-financial information and goals alongside company strategies with short-, medium-, and long-term stewardship of material environmental, social, business, and economic issues.

This change in reporting can be attributed to two principle causes. First, it reflects a paradigm shift in market evaluation, where for many companies their intangible value now constitutes the major part of their market value.

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The Disclosure Revolution

The movement toward more integrated transparency begins with integrated thinking.

By Brad J. Monterio

The first step to integrated reporting begins with the realization that it’s simply the next stage in the evolution of corporate reporting. Much discussion about integrated reporting today is evidenced by blogs, articles, white papers, webinars, conferences, Congressional testimony, regulatory guidance, laws, and more. A Google search reveals more than 6,780,000 current entries on integrated reporting. Topping that list is the International Integrated Reporting Council (IIRC), the London-based organization working to define a globally accepted framework for integrated reporting.

IIRC defines integrated reporting as “a new approach to corporate reporting that demonstrates the linkages between an organization’s strategy, governance, and financial performance and the social, environmental, and economic context within which it operates. By reinforcing these connections, integrated reporting can help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing.

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No Reporter Is an Island

Sustainability cannot be practiced in a vacuum.

By Mark W. McElroy and Jo M.L. van Engelen

When it comes to corporate responsibility, our central claim is simple: Sustainability measurement, management, and reporting must be context-based in order to be meaningful. All aspects of corporate sustainability management (CSM) must be performed with explicit reference to, and in light of, actual social and/or environmental conditions in the world in order to be effective. The sustainability of water use, for example, cannot be determined without reference to the size and sufficiency of available water supplies; nor can the sustainability of an organization’s social impacts be determined without reference to the general well-being of its stakeholders.

For purposes of CSM, the logic of defining or determining context in sustainability measurement, management, and reporting can be described as a three-step procedure:

1) Carrying capacities of capitals.

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Contractual Responsibility

The companies that provide services to the federal government have a special duty to act transparently. Here are the highest performers.

By Richard Crespin

Click here to view the list of the top corporate citizens in government contracting.

On March 30 during a special White House event, the Obama Administration launched a Sustainable Supply Chain Community of Practice. This occasion marked yet another significant milestone not only for the administration but also for corporate responsibility as a whole. Over the past few years, it has become increasingly clear that the line between “greenwashing” and true corporate sustainability lies through the supply chain. Companies put their money where their mouths are when they commit to responsibility throughout their supply chains.

This sustainable supply chain community of practice unites two hallmarks of the President’s agenda and of this magazine’s own mission: transparency and sustainability.

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