March 20, 2006

Financial, telecommunications sectors take the lead in sustainability reporting

Companies in the financial services and telecommunications sectors have overtaken those in resource industries in terms of the quality of social and environmental information they publicly disclose. Gaining Momentum: Corporate Sustainability Reporting in Canada 2005, the latest biennial survey by the Ottawa consulting firm Stratos, ranked Vancity and Telus in the top two positions, with BC Hydro and Suncor Energy tied for third place.

Altogether, 11 companies from eight different business sectors shared the top ten spots. In addition to Vancity, Telus, BC Hydro and Suncor, they were (in order of ranking): BCE (Bell Canada Enterprises), PotashCorp of Saskatchewan, Weyerhaeuser, TransAlta, Inco, Syncrude and Vancouver International Airport Authority.

Stratos listed a total of 114 Canadian companies, in 13 sectors, that publish stand-alone corporate sustainability or social responsibility reports, or integrate such information into their annual reports. It found that 70% of companies on the Toronto Stock Exchange Composite Index now disclose sustainability information, up from 60% in 2003 and 35% in 2001.

The coverage and quality of reports has continued to improve, with average scores having risen 10.3% since the 2003 survey; this is on top of an 11% increase between 2001 and 2003. Stratos also found significant improvements in areas where companies have experienced difficulty in the past, such as stakeholder relations and social performance.

The report notes that companies are demonstrating greater responsiveness to stakeholders by reporting on the input they have received and how they are using that feedback, for example by addressing stakeholder concerns in corporate or operational concerns or by expanding their reporting to address issues of importance to stakeholders.

The quality of economic performance reporting has traditionally been high, and this area is improving even more, with average scores having risen by 13.4% between 2003 and 2005 and 23.6% since 2001. Social performance metrics remain weak except for health and safety, but experimentation continues, adds the report.

Environmental performance reporting scores rose by 11% over the 2003 survey, with the energy inputs criterion showing the greatest improvement. Reporting remains weakest for the water and material inputs criterion, although water tends to be reported more broadly than material inputs. Stratos says the weak scores in this area suggest a focus by companies on managing and reporting higher-risk environmental issues such as spills and emissions.

Companies in the transportation, information technology and telecommunications sectors had the best scores for the effluents and spills criterion. Stratos also notes that the quality of reporting on air emissions remains low, even though legal requirements exist for reporting air emissions. Some individual companies, Inco and Dofasco among them, ranked highly on this criterion.

The quality of reporting on land use and biodiversity impacts has improved, with average scores rising by 10%. Many resource companies were found to be weak in disclosing data in this area, a result Stratos found surprising in view of the significance of land use impacts for companies in the oil and gas, mining and forest products sectors.

Greenhouse gas (GHG) emissions reporting was the strongest criterion in 2003, but came second in 2005 behind energy inputs reporting. Alcan and Enbridge led the list of companies in GHG reporting.

The report singles out several companies whose reporting on various environmental performance criteria is exemplary, including UPM, Petro-Canada, BCE, CIBC, Enbridge, Suncor, Barrick and Anglo American.

Canadian reporting companies are increasingly using the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines as the basis for their reports, with 35%, or 40 out of the 114 surveyed indicating that they used the Guidelines in preparing their reports. Another 11 companies described their reports as being "in accordance" with the Guidelines, while 29 more referenced their use. Stratos reports that scores for companies that used the Guidelines or were in accordance with them were substantially higher than scores for non-GRI users.

Discussing the future of sustainability reporting, Stratos notes that companies are realizing business benefits in sustainability reporting. Leading companies are integrating sustainability reporting into their business processes, and are gaining credibility and understanding by engaging stakeholders in the reporting process, including issue selection, report review, and providing assurance statements. Targeted reporting approaches are also being used, including short highlights reports/brochures, audience-specific reports with selected and relevant indicators, facility-level and community reports, and reference to material information in annual reports and other financial disclosure documents.

Gaining Momentum is the third national survey of corporate sustainability reporting practices in Canada conducted by Stratos. The report focuses on corporate disclosure of non-financial management and performance information - environmental and social issues, as well as the broader economic contributions companies make to society.

The findings will be of interest both to existing reporting companies (as a guide to best practices to help them improve the effectiveness of their reports and the efficiency of their preparation) and prospective reporters (companies interested in producing sustainability reports or integrating sustainability into annual reports. It provides a resource for governments developing public policy on corporate disclosure, and serves as an information source for employees, community leaders, labour organizations and NGOs on the rising standards for corporate disclosure in Canada.

The full survey report, along with a summary, may be viewed on the Stratos Web site, www.stratos-sts.com.

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