Companies should work harder to improve their social-reporting practices, but the change should come from molding corporate perceptions and attitudes rather than by introducing new regulations, says a report released last week.
Prepared for the Ontario Securities Commission and the provincial Ministry of Finance, the “Corporate Social Reporting Initiative” report looks at how corporations’ disclosure can be improved on topics like human and labour rights, employee health and safety, local community development, and product safety.
The majority of stakeholders consulted would like to see the OSC assume a greater role in advancing and promoting corporate governance and environmental disclosure, says the report, prepared by the Hennick Centre for Business and Law and Jantzi-Sustainalytics.
“However, most of them believe that this can best be achieved through providing more guidance to issuers and conducting more continuous disclosure reviews, rather than by expanding existing disclosure requirements,” the authors added.
Ed Waitzer, director of the Hennick Centre and a former OSC chairman, was one of the key people behind the report. He says the OSC could assist in improving the process without regulating it. It could do so by sponsoring engagement and offering guidance, while monitoring the response that comes in.
“It’s a process we think can have a very significant impact at this stage, without having new regulations, Waitzer tells InHouse. “The focus should be on changing attitudes rather than changing laws.”
The report also recommended the OSC clarify existing disclosure obligations to indicate the need to consider the materiality of social issues to investors’ decisions and long-term corporate performance.
Waitzer says this issue is rapidly becoming important around the world and doing nothing means Ontario will fall behind.
Social disclosure can be a great tool when used properly, he adds.
“We can think of disclosure as a tool for decision-making both within corporations, as a tool by investors, and for corporations to better engage their shareholders.”
Ontario Finance Minister Dwight Duncan released a statement about the report, saying, “the recommendations and discussion set out in this report provide valuable and timely insights on public company social issue disclosure obligations.”
The report is the outcome of a December 2009 consultation held in response to an April 2009 non-binding resolution by the provincial legislature. That resolution called on the OSC to conduct a consultation into best practices on corporate social responsibility reporting standards.
The roundtable consultation and subsequent solicitation of comments drew on the expertise of more than 50 representatives from the investment community, government agencies, non-profit organizations, and business, including the mining, energy, and banking sectors.