Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, June 10, 2010

And so to the GRI conference to give a talk about using digital media to communicate sustainability messages.

The Global Reporting Initiative is a not for profit organisation, supported by ‘stakeholders’ ranging from individuals, to companies and governments. Their aim is improve the communication of ESG information to investors and other users, so that it becomes as commonplace as financial reporting. To help, they have created a framework against which companies are increasingly reporting. The conference was an international event, with delegates from all continents.

Key outtakes. The headline was the agreement to seek mandatory ESG disclosures in every country by 2015. Given announcements in the US, UK, and the interest from the European Commission in their review of the Transparency Directive, this looks an increasingly likely target.

The second big theme was ‘integrated’ reporting – for shorthand the combination of financial and sustainability reporting, ensuring that sustainability issues assume the same weight. An agreed target of 2020 for fully integrated reporting was established. Oh dear, my rocking chair beckons long before then...

But what of the shorter term? Most seem to agree that the day of the ‘SRI fund’ has passed and that mainstream investors have now added sustainability as a key issue in investment decisions. So sustainability is (slowly) advancing up the list of concerns for IRO’s.

So what are the challenges? First, getting an understanding of the company’s sustainability position, and, as always, identifying material issues for investor communication. For example, what value should investors place on the company’s investment in sustainability, and what information do they need to achieve a fair valuation? Many companies have a sustainability team, with which the IR may – or may not – already engage.

Finally, who is doing a good job? For a start, look at the Brazilian companies. They won award after award at the GRI conference so they must be doing something right. And some companies are lifting the GRI Sustainability Reporting Framework wholesale, and using it. One company – Copel – offers both GRI and IFRS measures in its sustainability report. Another – Inditex, the Spanish retailer and one of Europe’s top 100 companies – uses the GRI framework in its annual report. Both examples to look at.

But where to learn more? Radley Yeldar has just published an all-encompassing report describing the background and examples of best practice. Worth giving them a call for a copy.

Friday, June 04, 2010

Why would an IRO limit news dissemination?

Its that time again. NIRI National conference will take place next week, and we are full of hope and expectation. I see that the opening session has the optimistic title “Deliver Your Message with Confidence: Owning the Conversation”.

There is a subtext to this year’s NIRI that has a personal ring to it (see disclosure below). The issue is whether digital disclosure alone can meet the needs of all investors. The launch of 2 new web disclosure services opens up the choice for public companies in a way not seen for a while.

Step back a minute. “Shareholder engagement” has been a constant theme of this blog since we started 4 years ago; corporate governance on both sides of the Atlantic is a theme that IR is being more and more involved with. Increasingly we are seeing the voice of Board in governance communications, NOT the voice of Compliance. This means as wide an outreach to investors – known and unknown, current and potential – as possible.

As companies have a choice of disclosure means, so too investors have a choice as to where they get their information. Many choose web commentary, others choose print media, others still choose the corporate website. What ALL want is an accurately delivered message, from a verified source.

Now here’s what I don’t quite get. Against a background of economically tough times and turmoil, why would you choose to limit any aspect of that communication? Why would you elect NOT to reach aspects that audience at a time when many are opting to deliver guidance through regular updates of non financial information? Why would you exclude a set of controls that allow accurate delivery eliminating potential errors?

Now for that disclosure bit. Aside from advising service providers in shareholder identification, corporate reporting – and yes web hosting and design solutions, like some other commentators – I still provide part time consultancy to PR Newswire. If I believed that they were making buggy whips, I wouldn’t be there.

Choosing a mix of media for delivery has to be the best way to “Deliver Your Message with Confidence”.