About Sustainability Ratings: CPAs Are Being Educated by Their Profession’s Journal – A Good First Effort to Push Information to All Levels of CPAs




About Sustainability Ratings: CPAs Are Being Educated by Their Profession’s Journal – A Good First Effort to Push Information to All Levels of CPAs

The professional CPAs working inside a public company, or in the outside accounting firm working with a company may or may not yet be involved in assisting corporate managers in responding to a growing number of third-party surveys focused on the company’s ESG strategies, actions and achievements.  Responses to these periodic surveys and engagements by other means with the ratings and rankings organizations are increasingly shaping outcomes – that is, investor opinions of the company. 

Many more companies are now receiving surveys from and responding to a growing number of third-party ESG rating providers – and as we are told by our corporate connections, very often managers are straining under the effort to effectively respond given the breadth of information sought and the information available in the corporation.

As we advise corporate managers, it is important to know that there is a publicly-available ESG profile of your company that investors are considering in various ways – and either you will shape the profile and tell the company’s sustainability progress story, or someone else will.  That “someone else” would be the global universe of ESG rating providers -- and their output is directed to their investor clients. The ones who invest in, or could invest in, your company.

Savvy corporate managers of course “get it” and really make the effort to effectively respond to as many queries and surveys as possible.  But what about the internal financial managers and outside accountants – are they involved?  At some firms, yes, and other firms no -- or not yet.  The Big Four are tuned in to corporate ESG / sustainability disclosure and reporting.  But many smaller CPA firms are not. 

And among small- and mid-cap publicly-traded firms, the role of the ratings and rankings service providers could still be an unknown and under-appreciated factor in shaping the firm’s reputation, valuation, access to and cost of capital, and other considerations. The article in the influential CPA Journal this month is a worthwhile attempt to educate professional CPAs, whatever their position.

Five professors -- co-authors and colleagues at the Feliciano School of Business, Montclair State University -- explored the question, “Are Sustainability Rankings Consistent Across Rating Agencies?”  One obvious element in the piece that we noticed is something happening in both the corporate sector and investment community:  the fluid interchangeability of terms of reference.

Is what is being explored by the ESG ratings and rankings service providers and their investor clients performance related to …CSR (corporate social responsibility)…ESG performance factors (environment/social/governance)…corporate sustainability…corporate citizenship…sustainable investing?  Combinations? All of these?
The authors use the terms interchangeably, as do company managers and capital markets practitioners in discussing the ever-more important role that “corporate sustainability rating providers” play in investor decision-making.  

They cite the 2014 overview of rating agencies by Novethic Research (7 international rating agencies, 2 non-financial data providers, 8 specialized agencies and 20 local/regional agencies). Several studies and books are identified as reference sources.  

Specific CSR rankings examined for 2015 results:  Newsweek’s Greenest Companies; Forbes Global 100 Most Sustainable Corporations; and, CSR Magazine Top 100 Global RepTrak companies.
We offer the perspectives of the Journal authors in our Top Story so that you can see what CPA’s will be reading in their Journal. There are important points raised -- but the three rankings examined do not cover the full breadth of the expanding universe of ESG rating organizations.  And we are light years away from 2015 in terms of the rating agencies’ influence.

The three rankings cited are not as “investor decision-useful” as would be the analytical work of teams at such firms as MSCI, Sustainalytics, Institutional Shareholder Services (ISS); what was offered in 2015 doesn’t compare to the depth of ESG data available today via Bloomberg and T-R Eikon terminals; the RobecoSAM Corporate Sustainability Assessment (CSA) ratings that influence inclusion in the DJSI; and, volumes of information made available by CDP (formerly the Carbon Disclosure Project).

The G&A Institute team assists corporate managers in responding to these important players and an ever-widening range of third-party ESG service providers.  We'd like to share three basic observations with you and with CPAs: (1) the third party queries are becoming more probing in the information and data sought; (2) the corporate response effort is much more organized and thorough these days; (3) the results of both of these efforts are increasingly important to, and utilized by, the institutional investment community (both asset owners and their managers).

So -- the more information that CPAs have about sustainable investing and corporate ESG performance the better equipped they’ll be to support their clients.  The article is a good start in this regard.
The journal authors are academics Betsy Lin, Silvia Romero, Agatha Jeffers, Laurence DeGaetano, and Frank Aquilino.

Top Story

Are Sustainability Rankings Consistent Across Ratings Agencies?   
(Thursday - July 26, 2018) Source: CPA Journal - As more and more companies begin to devote serious attention to sustainability reporting, many different systems of rating the depth and effectiveness of sustainability efforts have arisen. The authors compare three leading…

 

Sustainability: Forward Momentum!
For Your Attention: Items From the The Editors' Global Scans

2022 FIFA World Cup to be a showcase of sustainability in Qatar
(Monday - July 23, 2018) Source: Gulf Times - Whether you are a football fan or not, the FIFA World Cup cannot pass you by. The sporting event which attracts over three billion viewers worldwide and around three million attendees is a spectacle which brings people together,... 

Science-based buildings and plastic-waste football kits: This week's top 5 sustainability success stories
(Monday - July 23, 2018) Source: Edie - As part of our Mission Possible campaign, edie brings you this weekly round-up of five of the best sustainability success stories of the week from across the globe. 

The 8 attributes of successful sustainability leaders
(Monday - July 23, 2018) Source: GreenBiz - "I was fortunate to see firsthand how courageous trailblazers used all different leadership styles to produce significant positive, sometimes transformational changes." 

Move Over Sustainability Accounting, Here Comes Purpose Accounting
(Tuesday - July 24, 2018) Source: Sustainable Brands - Everyone’s heard of financial performance, asset performance and sustainability performance. Now comes purpose performance, a new measure of organizational performance that assesses impacts relative to the voluntary commitments...

Using ESG Ratings to Build a Sustainability Investing Strategy
(Tuesday - July 24, 2018) Source: CPA Journal - Sustainability investing continues to grow in popularity, but the lack of standardization in sustainability reporting poses a challenge for investors wishing to maximize the social responsibility, and minimize the social damage,... 

Why sustainability stacks up
(Wednesday - July 25, 2018) Source: Money Management (Au) - Sustainable investing can be approached in many different ways. A traditional ethical approach will screen specific unfavourable sectors however, increasingly managers are using sustainability criteria to actively select, rather...

Sustainability is key objective for communities
(Wednesday - July 25, 2018) Source: Herald Zeitung - The International Economic Development Council’s (IEDC) “future forum” in Buffalo, N.Y. IEDC has quarterly conferences around the nation and provides economic practioners like myself with great access to new ideas and trends that.

3 Easy Concepts for Sustainable Packaging to Reduce Food Waste  
(Wednesday - July 25, 2018) Source: Sustainable Brands - Packaging waste, especially plastics, is the sustainability issue of our time, driven by growing public and media attention. Yet just two years ago, we were talking about food waste and one overlapping yet unresolved question is..

Sustainability Rocks! Top Music Festival CEO On Saving Radiohead And Partnering With The UN
(Thursday - July 26, 2018) Source: Forbes - Repeatedly voted one of the best music festivals in the world, NOS Alive is well known for its perennially sensational headline acts, its convenient location from central Lisbon, and also the famous warmth of its audience. But...

An integrated approach is needed toward sustainability
(Friday - July 27, 2018) Source: Ahwatukee Foothills News - If we want to create a society in Arizona that is more than a series of booms and busts, we need to make the fit between nature and culture more like a membrane and less like a life-support system. There is too much at stake in...

GreenLink – Driving Sustainability And Social Change Through Blockchain Technology
(Friday - July 27, 2018) Source: Ethereun World News - Boxgreen, a Singapore-based sustainable snack e-tailer has launched GreenLink, a blockchain-based platform aimed at driving sustainable practices and digital eco-certifications. Put simply, it will enable the anyone to trace…

 

A Range of ESG Topics & Issues – More Things For You to Think About -– What Will Be the Future Impact? 

Humans Are Causing Earth's Seasons To Change In A Way Never Seen Before
(Wednesday - July 25, 2018) Source: IFL Science - A study in the journal Science has found that humans are having a direct effect on Earth’s atmosphere in a way not seen before. 

Deadliest year on record for environmentalists: 207 activists were killed in 2017 while trying to protect land, watchdog warns
(Wednesday - July 25, 2018) Source: Daily Mail - At least 207 environmentalist activists were murdered last year, campaign group Global Witness has found.The NGO's report highlighted government-sponsored killings had soared, with police or soldiers responsible for 53 of the... 

 Energy security must be high on the agenda
(Wednesday - July 25, 2018) Source: The Hill - Whether it’s the flip of a light switch or plugging in your cell phone to charge – never has the reliability of our energy supply been more important to so much in our daily lives. That also means never has energy infrastructure... 

Building An Ethics-First Employee Culture Is Crucial For All Leaders
(Friday - July 27, 2018) Source: Forbes - "Tone from the top" is an overused phrase because it's hugely important, but embracing ethics from the ground up is just as critical. We’re seeing this very idea manifest at today’s biggest brands. Just a few months ago Google..

From the Corporate Sector - Both Positive & Negative – Headline Scans for You 

First, news and perspectives ABOUT the business community and sustainability for you – the important trends affecting the corporate sector.

Oil companies rush to prove sustainability bona fides, as investors circle
(Monday - July 23, 2018) Source: Houston Chronicle - Climate change, political influence, human right abuses — these are not topics oil company CEOs like to confront. But these days activist investors like Andrew Logan are sitting down to discuss these very issues with...

New report: Benchmarking the outdoor industry’s sustainability efforts
(Tuesday - July 24, 2018) Source: SNews - The Outdoor Industry Association (OIA) debuted the first-ever sustainability benchmarking report on Day 1 of Outdoor Retailer Summer Market. 

U.S. Paper and Wood Products Manufacturers Report Sustainability Progress 
 (Wednesday - July 25, 2018) Source: Digital Journal - The American Forest & Paper Association (AF&PA) today released its 2018 Sustainability Report, which highlights the U.S. pulp, paper, packaging, tissue and wood products manufacturing industry's contributions to...

And now, specific companies in the news:
Supplier News: Marriott, Wynn Make Sustainability Moves 
(Wednesday - July 25, 2018) 
Source: International Meetings Review - Big news in sustainable events: Marriott International, which, at more than 6,500 properties across 30 brands worldwide, is the largest hotel company in the world, is banning plastic straw. The luxury Oetker Collection also..

Headlines of interest:

Papa John's adopts 'poison pill' to limit founder John Schnatter's stake
(Monday - July 23, 2018) Source: CNBC

Mcdonald's Salads Tainted By Parasite Have Now Sickened 163 People In 10 States
(Monday - July 23, 2018) Source: Thrillist

'Made in America': Lockheed Martin adds jobs to boost F-35 production
(Tuesday - July 24, 2018) Source: Fox Business 

Jamie Dimon on the trade war, infrastructure 'emergency' and Trump
(Tuesday - July 24, 2018) Source: CNN Money

Harley-Davidson expects tariffs will cost it $45 million to $55 million this year
(Wednesday - July 25, 2018) Source: CNBC
 
Drinking Habits Are Changing So Much Anheuser Busch Created a 'Chief Non-Alcohol Beverages Officer' Role
(Friday - July 27, 2018) Source: Fortune

10 years after crisis, Fannie, Freddie trigger new alarms about growing role
(Friday - July 27, 2018) Source: Politico

News & Opinion: Asset Managers, Sovereign Wealth Funds, Pension Funds

Climate-risk plan for sovereign funds
(Monday - July 23, 2018) Associated Profiles : New Zealand Superannuation Fund 
Source: top1000funds.com - The six founding members of the working group, which collectively manage more than $3 trillion, are: Abu Dhabi Investment Authority, Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment... . 

Walters: Pension fund earnings keep rising — so why still crushing debts'
(Thursday - July 26, 2018) Associated Profiles : California State Teachers’ Retirement System 
Source: The Mercury News - The California Public Employees Retirement System (CalPERS) said its investment portfolio earned 8.6 percent during the year that ended June 30, while the California State Teachers Retirement System (CalSTRS) topped that with an...

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Governance & Accountability Institute's blog focusing on the sustainable world evolving daily before our eyes. Read it, absorb it, question it and challenge.

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G&A's To The Point! is a businesss intelligence web-platform resource. This management briefing service offers timely insights and perspectives on Corporate Sustainability, Responsibility & Citizenship. Click here to request a trial subscription. Below are links to a sampling of three recent briefs:

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