On your marks, get set…write your CSR report!

By Wright Communications

In coming months, publicly listed companies on the New Zealand Stock Exchange will need to adhere to the Corporate Governance Code, which requires all 165 companies listed on the main board to provide a Corporate Responsibility Report, in conjunction with the company's usual annual financial report.

This marks an exciting era for New Zealand businesses, and those who invest in them, because it will give a true picture of a company's non-financial issues and priorities and how they are being handled.

In the most recent survey of New Zealand's publicly listed companies by KPMG, only 69 have done some kind of Corporate Responsibility Report - often called something else such as a sustainability, ESG or triple bottom line report - in 2017.

That number is going up, with the number of New Zealand companies carrying out some kind of Corporate Responsibility Report up 17 per cent on 2015, although we still lag behind the rest of the world, where 93 per cent of the largest companies carry out Corporate Responsibility Reporting.

The NZX Corporate Governance Code applies to all main board companies' reporting periods from the end of this year (31 December) onwards, so many companies only have a few months to prepare their first corporate responsibility report to reflect the non-financial operation of a company.

Companies are expected to make non-financial disclosures at least once a year, including exposure to environmental, economic, social sustainability and other key risks. They need to explain how they will manage the risks and how non-financial targets are measured.

Currently, the detail of reporting varies widely, from companies simply stating they have sustainability policies and briefly outlining what they are, to those using the Global Reporting Initiative (GRI) to produce a comprehensive sustainability report, and others producing a full Integrated Report based on the International Integrated Reporting Council framework.

To understand the non-financial, environmental and social issues that could impact a company's financial performance, companies will probably have to carry out stakeholder surveys and materiality assessments. That is a hugely beneficial process in itself, which leads to a better understanding and management of risks to the company's reputation.

The increasing importance of this kind of work within a company is exemplified by Air New Zealand, where the sustainability team now report directly to the company's senior management strategy group and the collection of and reporting on non-financial matters is standard operating practice, with the additional benefit of making the company more customer-centric.

There is no one right way to prepare a Corporate Responsibility Report; rather it's the quality of the information and the processes behind them that counts. Consequently, independent verification of data integrity and collection practices will add credibility to any Corporate Responsibility Report and make it more acceptable to investors, who will look for balanced and transparent non-financial disclosures.

A good report can tell sustainability stories with video content and case studies to illustrate a company's policy or position on non-financial matters and how this relates to the business and affects it. It is an opportunity to put positive stories into the core of its businesses operations, and achieve the complete transparency that investors are looking for.

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