Rise in Nonfinancial Reports

It’s not always about the numbers.

According to a survey released by Big Five accounting firm KPMG, more companies are publishing reports on their environmental, social, and sustainability performance—and an increasing number are having these reports independently verified.

To be exact, 45 percent of the 250 largest companies in the world are issuing these nonfinancial-related reports, KPMG found.

KPMG’s corporate sustainability report was done in collaboration with the Graduate Business School of the University of Amsterdam.

Similar surveys were conducted in 1993, 1996, and 1999.

Here are some of the findings of the 2002 survey:

• Of the 250 largest companies in the world, 45 percent published a separate corporate report on their performance, compared with 35 percent in 1999.

• Of the top 100 companies in each of the 19 countries surveyed, Japan has the highest percentage (72 percent) producing nonfinancial corporate reports.

• The United Kingdom ranked second in companies producing such reports (49 percent), followed by the United States (36 percent), The Netherlands (35 percent), Finland (32 percent), and Germany (also 32 percent).

• Health, Safety and Environment (HSE) are still the most common types of reports, but others are emerging, including sustainability and social reports.

• Broken down by industry, utilities led the way, with 50 percent issuing separate nonfinancial corporate reports.

“The focus of these reports is shifting from the inclusion of only environmental performance to combined environmental, social, and economic reports, and an increasing number of reports are being externally verified,” according to KPMG’s report.

So why do corporate managers feel compelled to issue these separate reports?

Typically, to reduce operating costs and increase efficiency, develop new products, improve brand value, recruit and retain top-notch employees, and gain better access to capital, according to the report.

Coincidentally, earlier this week, the European Parliament endorsed a proposal that multinational companies assess the environmental and social impact of their businesses in their annual reports, according to published reports. The European Commission must pass legislation in order for these reports to become a requirement.