STUDENT SPOTLIGHT: David Master

Sustainability Reporting: The Financial Bottom Line

David Master is a full-time MBA student who has recently procured a great opportunity working with the Governance & Accountability Institute. The G&A Institute provides clients in the corporate, public and investment sectors with systematic resources that help address sustainability measures. David was one of the primary researchers and authors of a report looking at the possible relationships between S&P 500 companies that release sustainable business reports and other factors, such as financial performance and the appearance on reputable lists and indexes. The GCMC sat down with David to find out more about his experience and role in this insightful venture.

GCMC: David, your internship and work on the ESG report sounds like a phenomenal opportunity. How did you get involved with this project?

I had the opportunity to join this project through an internship with the Governance & Accountability Institute. My work was mainly focused on supporting efforts to analyze the possible relationships between S&P 500 companies that release sustainable business reports and other factors, such as financial performance and the appearance on reputable lists and indexes. It was a project that took nine months, and culminated in a report titled "Corporate ESG / Sustainability Reporting – Does It Matter?” that was released in December 2012.

GCMC: When companies and individuals think of sustainability issues, many are skeptical about their impact. From a business perspective, does ESG reporting hit the financial bottom line for companies?

ESG reporting (Sustainability Reporting or Corporate Social Responsibility Reporting) has been gaining prevalence in corporations over the past several years. Putting out a report highlights two main areas:  First, how transparent a company is, and second what is going on behind the scenes regarding its environmental and social impact.

One primary finding is that more than half of S&P 500 companies publish ESG reports. If you’re an S&P 500 company that doesn’t release such a report, you are [considered] in the minority and behind the curve. The other finding is that in every area the report examined, including financial performance, equity indexes, key corporate reputational lists/awards, and key corporate ratings and ranking, companies that released reports scored better than those that did not.

Ultimately, these reports are important because they add standardized metrics to qualitative aspects of companies that can otherwise be difficult to measure. Focusing on these areas allows for a long-term, stakeholder-focused company growth [in comparison to a] short-term shareholder-focused approach, [which has] been proven ineffective for a company to gain and retain a competitive edge. An added benefit is that the emphasis on social and environmental impact allows companies to increase employee productivity and consumer loyalty, while decreasing risk by managing issues before they have a chance to become crises.  These areas, while more difficult to measure, influence the positive relationship that exists between companies that release ESG reporting and their financial bottom line.

GCMC: That seems like a highly involved and rigorous process, and we’re sure many individuals don’t even know the impact it has. Were there any unexpected results that came out in your work on this report?

While the overall findings were not unexpected, the high degree of relationships between each of the factors we researched was surprising. Another surprise was the media pickup of this report and its findings. Since its release, this report has been referenced in more than a dozen publications, including Bloomberg and Motley Fool.

I encourage everyone interested in the topic to read the findings. The report is public, and can be downloaded for free at http://www.ga-institute.com/research-reports/2012-corporate-esg-sustainability-responsibility-reporting-does-it-matter.html