Increasing public concern about corporate behaviour could damage the reputation and finances of companies, PricewaterhouseCoopers (PwC) warned on Wednesday.
It said this could also jeopardise relationships with customers, suppliers and financial institutions.
These are the findings of the PwC 2002 Sustainability Survey, a study involving US-based Fortune 1 000 companies.
The survey, conducted in preparation for the World Summit on Sustainable Development, suggests that US firms currently understand that the public will hold them to a ”triple bottom line” of sustainability.
This is a new standard of corporate performance that moves beyond evaluation of short-term financial goals to evaluation of the long-term social, economic and environmental impacts of corporate activities.
It said that despite the increased awareness by corporations of public scrutiny, the survey finds that corporations have yet to take adequate action to address this new standard.
”Although companies recognise these risks and opportunities as important, they are not taking steps to identify and evaluate them,” Andrew Savitz, a partner in PricewaterhouseCoopers’ sustainability services practice, said in a statement.
”This could be explosive and very costly, especially for companies with high public visibility.”
The survey findings showed that 72% of respondents rated the importance of sustainability to their companies as a six or higher on a one to 10 scale.
A total of 72% of the respondents did not incorporate the risks and opportunities associated with sustainability into their formal project and investment evaluation processes.
It said 63% of those that identified reputation as a key factor related to sustainability were not evaluating sustainability risks and 69% of respondents were currently reviewing or revising their ethics programmes or corporate governance process.
The report showed that companies systematically failed to identify or assess a variety of risks related to long-term social, economic and environmental impacts.
Examples given included the disruption of critical customer and supplier relationships, shareholder and investor flight based on perceived self-dealing, unfair or unethical behaviour, and labour unrest and disruption due to workplace conditions or practices perceived to be unfair or exploitative.
The survey found that failing to meet the sustainability standards presented a series of financial and business risks to companies.
This included lower stock prices and reduced shareholder value, loss of valuable customer or supplier relationships, reduced access to, or higher cost of capital and paying damages relating to shareholders or consumers for false claims.
”There has been a major crisis of confidence in corporate America… as companies appear to have ignored their responsibilities in pursuit of a better looking bottom line.
”Sustainability is essentially a code of conduct that goes beyond the bottom line to protect social value as well as financial,” said Savitz.
”Given public concern, it is now in the interests of corporations to address these concerns. While sustainability is a new and evolving standard, most of the companies we surveyed believe that it represents a permanent change in the way that companies will be evaluated in the future.”
PwC surveyed 140 large US companies in May and June this year to determine their attitudes and approaches to sustainability.
Respondents were predominately publicly traded, multinational companies. They represented about %2,5-trillion in annual sales and 101 respondents were listed in the Fortune 1000.
PwC said the web-based survey was aimed at the highest-ranking executive within each company with responsibility for economic, social and environmental performance.
PwC global chief executive Sam DiPiazza said in a message to those attending the summit that challenges the world was facing had grown, but so had our capacity for understanding and addressing those challenges.
”Sustainable development offers a new path forward, a way to meet our needs and leave the world a better place than when we found it.” – Sapa