US Chamber of Commerce Publishes CSR Reporting Guidelines
December 11, 2019
Following up on our previous article on the Business Roundtable’s August 19, 2019 statement urging boards of directors to consider corporate social responsibility factors when making decisions for a company, the U.S. Chamber of Commerce has published a “Best Practices” guide for corporate reporting on ESG practices (Environmental, Social and Governance). Released by the Chamber’s Project for Growth and Opportunity initiative, this Guide provides useful advice to companies that choose to publish ESG (or CSR) reports.
Noting that 86% of companies in the S&P 500 voluntarily publish ESG reports, the guidelines urge companies to tailor their reports to their particular business and market rather than adopting a form or template that may not capture the particular information that is most helpful to their investors, shareholders, employees, customers, communities or vendors. The overall aim of these reports should be to delineate what ESG-related measures the company has taken that are directly related to its long-term value.
The Best Practices set out by the Chamber include:
- Identify the audience. Some ESG reports are aimed at investors and shareholders, for whom the company’s “bottom line” matters most. Information and metrics set out for them should include quantitative measures demonstrating how ESG policies result in higher profits for the company, e.g., use of alternative energy results in cost savings. Reports aimed at outside constituencies such as customers, third-party vendors or communities may place more emphasis on the “good neighbor” policies of the company that make customers feel good about supporting the company, e.g., community service programs or employee safety and education policies. It is crucial for the company to identify what ESG information is relevant to the target audience and not necessarily use all of the same criteria as firms in other industries, or even in its own industry.
- Identify your metrics and reasons for them. Companies should explain their metrics and the reasons those metrics were chosen as most relevant to the report. A tight focus on the risks and opportunities that impact the company’s long-term financial and operational performance should drive the metrics. Sound methodology must be utilized and, where possible, the company should include any consensus that exists in the scientific or other expert community to support its use of certain metrics. The guidelines recommend that companies also consider describing their internal review and audit processes and any external verification of the information detailed in the ESG report.
- Gather information from in-house experts. A company should coordinate with relevant internal departments and functions to ensure that the information collected and published is accurate. ESG reports that are misleading or false can form the basis of a lawsuit under securities, consumer protection, and/or fraud statutes. Thus, corporate legal counsel should always sign off on an ESG report before it is published.
- Define jargon. If the report references any acronyms or professional jargon, it should be clearly defined in layman’s terms, especially if it does not have a generally accepted definition.
- Be careful of “materiality.” When used to describe information or data, the term “material” has a well-established definition in US securities laws, namely, that there is a substantial likelihood that a reasonable investor would consider the information important. Some information in an ESG report may be “material” in this sense, and if it is, it should be incorporated into the company’s SEC filings. Otherwise, be wary of using the word “material” (or any of its derivations) in the ESG report.
- Make it easy to find. ESG reports and information should be readily available on the company’s website and easy to find via web browsers and links.