2015 has been a pivotal year for corporate social responsibility (CSR). Major events - from the United Nations’s newly-adopted Sustainable Development Goals (SDGs) to the Paris agreement to limit greenhouse gas emissions inked at the UN summit earlier this month - have spurred ambitious business commitments ranging from renewable energy adoption to reporting their environmental and social impact.
The global momentum on sustainable development has also cemented for businesses the importance of operating responsibly. New research reports have reinforced the fact that integrating sustainability into business strategies is good not just for society - but also for the bottom line.
Here are our top 5 CSR stories for the year:
1. The year of corporate pledges
Riding on the momentum of the United Nations’s new SDGs and climate summit, the private sector has been busy unveiling a series of commitments that analysts have hailed as “unprecedented”. These initiatives range from the Science-Based Targets initiative, through which 114 companies including IKEA, Coca-Cola, and Kellogg will set emissions reduction targets in line with scientific recommendations, to the Responsible Corporate Engagement in Climate Policy programme, where more than 100 firms will track their activities that influence climate policy.
These initiatives were presented at the UN Global Compact’s Caring for Climate (C4C) Business Forum held earlier this month. UN Secretary-General Ban Ki-moon said of the initiatives: “The collective momentum among the private sector for climate action is growing daily, and more companies and investors are leading on climate action than at any time in history.”
2. Sustainability gets entrenched
In June, a new report titled “Impact – Transforming Business, Changing the World” found that sustainability is gradually taking hold in markets and sectors all around the world, with about 25 per cent of the world’s largest companies having signed up to the United Nations Global Compact (UNGC).
The study by DNV GL for the UNGC’s 15th anniversary, found that sustainability is firmly on the corporate agenda worldwide but more needs to be done to turn rhetoric and understanding into action so that there is further adoption of sustainability principles such as the safeguarding of human and labour rights and environmental conservation.
3. Sustainable investment hits new high
Everywhere around the world, responsible or ethical investing - the practice of incorporating environmental, social and governance (ESG) factors into the decision-making process - has been on the rise.
In Australia, responsible investments accounted for a whopping A$629.5 billion - or half of all assets under management in the country at the end of 2014, says Responsible Investment Association Australasia. And while Asia still lags Europe and the United States in sustainable investing, the market for funds employing such strategies is expanding rapidly in the region, with Singapore and Indonesia leading the growth.
Asia’s sustainable investment assets stood at US$53 billion at the beginning of 2014, a jump of 32 per cent from the US$40 billion at the start of 2012. That’s 0.2 per cent of the global total, according to Global Sustainable Investment Alliance, a group of sustainable investment organisations that include the European Sustainable Investment Forum (Eurosif) and Association for Sustainable & Responsible Investment in Asia (ASrIA).
4. Breaking the corruption chain
This year’s International Anti-Corruption Day, celebrated on 9 December, focused on the theme: Break the corruption chain. The campaign highlighted how corruption undermines democracy and the rule of law, leads to human rights violations, distorts markets, erodes quality of life and allows organised crime, terrorism and other threats to human security to flourish.
The campaign #breakthechain also sought to raise awareness that corruption is a cross-cutting crime, impacting many areas, and that acting against corruption is imperative to achieving the Sustainable Development Goals, which aim to end poverty, protect the planet, and ensure prosperity for all.
Various events were organised by the United Nations Office on Drugs and Crime (UNODC), civil society organisations, governments, and individuals to raise awareness about corruption. The June report Impact – Transforming Business, Changing the World shows that almost 100 per cent of UNGC’s over 8,000 business participants now have anti-corruption policies and practices in place. Explicit policies and zero tolerance are, however, still lagging.
5. Mainstreaming sustainability reporting
Sustainability reporting, in which companies disclose not just their financial results but their social and environmental impact, continued to gain momentum in 2015. A new KPMG report in November found that sustainability reporting is increasingly valued by investors and firms alike for the clarity it provides on the value creation process, its future-oriented perspective, and its emphasis on measurable performance.
The study of 56 Asian companies found that share price returns for firms which adopt sustainability reporting are consistently higher, suggesting that the market places a value on clear communication and transparency.
A separate study by WWF in May revealed that Southeast Asia, in particular, performs poorly when it comes to environmental, social and governance guidelines (ESG) and are lagging behind their international peers. The region is also falling behind on regulations on responsible lending and corporate sustainability disclosure requirements compared to their counterparts in Brazil, China, South Africa and Hong Kong, the report noted.
In October, the Association of Banks in Singapore made a landmark announcement that they would for the first time adopt standards that govern responsible financing and integrate ESG issues such as deforestation, human rights and corporate ethics into their lending and business practices. This groundbreaking move came in the wake of the worst haze to blanket Southeast Asia in years, with air pollution indicators hitting record levels and forcing schools to shut, flights to be cancelled and even causing several deaths in parts of the region.
But even though it is becoming mainstream, corporate sustainability reporting desperately needs to up its game. Companies are failing to accurately reflect the scale and extent of their environmental impacts, a November report from the United Nations Environment Programme (UNEP) found.
In the case of greenhouse gas emissions, only 9 out of 108 - or 8 per cent - surveyed companies have established reduction targets in accordance with the science-based target of limiting global warming to 2 degrees Celsius - the central goal of the historic Paris agreement inked earlier this month at the United Nations Climate Change Conference.
This story is part of our Year in Review 2015 series, which looks at the top stories that shaped the business and sustainability scene in each of our 11 categories.
Thanks for reading to the end of this story!
We would be grateful if you would consider joining as a member of The EB Circle. This helps to keep our stories and resources free for all, and it also supports independent journalism dedicated to sustainable development. For a small donation of S$60 a year, your help would make such a big difference.