A recent survey by two of Europe’s leading reporting organisations has shown that the majority of investors across the continent are dissatisfied with how companies are reporting on their sustainability practices.
This is a story of hackers versus disciplined organisers, of gobbledegook versus plain English, and of the inadequate use of intellect versus a clear focus on the commercial issues in hand.
Ernst and Young’s twelfth annual Global Fraud Survey has revealed that one in five of almost 3,500 staff in 36 nations confirmed manipulation in their firms. Unethical conduct including fraud, bribery and corruption are becoming more prevalent as large firms struggle to meet projections.
The study, by compliance consultancy firm The Red Flag Group, looked at information released by UAE listed companies and scrutinised how they adhered to generally held corporate governance standards. These included the publication of codes of conduct and information on compliance officers. According to the findings, 61 percent of companies in the UAE polled had failed to mention whether they had a designated Chief Compliance Officer, while only one in ten companies had committees that took care of compliance issues.
Plans to improve the way the financial services industry report on their sustainability practices in the US were discussed last week at a conference in New York.
EU negotiations have resulted in the implementation of progressive and stringent laws requiring for extractive industries to disclose tax payments made to foreign governments. European Commissioner Michel Barnier, charged with heading regulatory policies, said of the deal that it would bring “a new era of transparency to an industry which is far too often shrouded in secrecy”.
Once seen as a “monstrous imposition”, corporate managers are now starting to embrace sustainability reporting as a consequence of the heightened scrutiny from investors, according to research firm Oekom Research AG.
The EU’s plans for increasing transparency and requiring companies to offer much more detailed information on how they carry out social, environmental and employee strategies has suffered a crucial blow after being rejected by Germany’s four leading industry bodies.
Regulators around the world have been looking at tightening rules that require publicly listed companies to clearly identify the strategies employed over the course of the year and their subsequent success.
Both mandatory and discretionary, auditing comes in many guises
A necessary undertaking for public companies, an integrated audit entails the auditing of both financial statements and internal control over financial reporting. Necessarily conducted by an external auditor, integrated audits are advantageous in that they encourage a holistic approach to the internal auditing process.
Conducted by either an asset manager or an outside firm, a performance audit verifies performance figures with those demonstrated to the public. Beneficial in that a performance audit allows an accurate insight into a firm’s returns.
Quality audits entail the systematic examination of a quality system, undertaken by either an internal or external quality auditor. Quality audits are integral in determining compliance with a defined quality system process and are a necessary requirement in maintaining the ISO quality system standard.
Regular health check audits are carried out for purposes in understanding the present state of a specific project. Primarily conducted by an independent party, regular health checks are intended to further increase productivity or otherwise effectiveness.
Energy audits consist of an inspection, survey and analysis of energy consumption. Largely intended for the bettering of energy conservation, input is often sought to be reduced though without the hindering of subsequent output. Energy audits are largely meant for reducing overheads.
Otherwise termed financial, regulatory audits are intended for assessing the legality of processes pertaining to financial operations. Encompassing management, collections and expenditure, regulatory audits seek to determine a true and fair representation of policy and financial management.
Research has shown that companies giving back to the communities in which they work tend to enjoy better long-term results
An organisation famed for valuing innovation and entrepreneurship, IBM helps its employees to give back to the community in the way they best see fit. IBM distributes Activity Kits, each one designed around different volunteering opportunities. For those who want to use their expertise to help educate others, there are kits advising on how to conduct workshops for adults who want to get into the industries IBM operates in. Employees wanting to inspire future generation can use kits to engage children in workshops that see students make anything from paper dog houses to solar-powered model cars. Or those who prefer a more hands-on approach they can volunteer to help in disaster zones.
According to Henry Ford, “A business that makes nothing but money is a poor business”. This inspired Ford’s Accelerated Action Day in 2012, which saw more than 600 employees in American branches step away from their desks to work in local community projects, supported by various charities. Volunteers were dispatched to shelters, schools and family centres, helping to clean, paint and build in their on-going renovation missions. Projects included renovating shelter rooms for the Salvation Army’s centre in Detroit, building houses with Habitat for Humanity and creating therapy rooms for children with the First Step Domestic Violence Program.
JP Morgan engages in many community projects globally, but recent years have seen emphasise focused on improving education on both sides of the Atlantic. Last year they helped to fund Achieve Together, a drive to recruit and inspire good teachers in disadvantaged areas of the UK. The first phase of the programme will roll out later this year, estimating to help 8,000 pupils. 2010 saw the firm launch a $325m initiative to support publically-funded schools in the US. The company granted $50m to community-development financial institutions to support new schools, as well as helping to tackle the financial problems of schools that already have a strong academic track record to keep them afloat.
5by20 is Coca-Cola’s initiative to empower five million female entrepreneurs worldwide by 2020. The multinational aims to focus its efforts on the small businesses across the world, currently focusing on Brazil, South Africa, the Philippines and India, by providing training with financial resources and mentors to women looking to get ahead in business. Since launching the program in 2010, Coca-Cola claim to have economically enabled more than 131,000 women. As part of the program, a new initiative in Kenya has helped female farmers grow mangoes for locally sold fruit juices, which has in turn helped create sustainable livelihoods around the farms.
As part of Johnson and Johnson’s No More Tears brand’s 50th anniversary, its Clean Water Initiative was launched as a combined effort with non-profit charity Water for People. Operating under the slogan “Because every baby deserves clean water”, the program has aided small, rural communities in ten of world’s poorest countries, including Malawi and West Bengal to tackle water contamination. The charity not only educates communities but also installs sanitation facilities in schools to provide clean water to hundreds of thousands of children.
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The presence of clutter in an annual report actively detracts from its usefulness to both shareholder and investor alike
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