A measure for corporate citizenship

Ever since the publication of the second King Report on Corporate Governance for South Africa (King II) in 2002, South African corporates have sharpened their focus on their commitment to the ‘triple bottom line”, an expanded baseline for measuring a company’s performance which includes, in addition to the traditional financial yardstick, an accounting of the impact of their activities on society and the environment.

In addition, in an increasingly globalised world, South Africa has to compete for investment funding against many other emerging markets. Research shows that international investors often prefer to invest in companies that can demonstrate high standards of corporate governance as well as clear policies and initiatives for social responsibility and protection of the environment.

In May this year, the JSE Securities Exchange South Africa made public its first Socially Responsible Investment Index (SRI Index) for listed companies — a triple-first achievement, as it is the first index of its kind in an emerging market and also the first in the world launched by a stock exchange.

‘The last few years have seen an increasing awareness of and need to measure sustainable business practices. In South Africa, in particular, the King II Report urges companies to embrace the triple bottom line as a method of doing business,” says Nicky Newton-King, deputy CEO of the JSE. ‘The JSE has been working with people across society’s spectrum — to create the SRI Index as a means of helping to focus the debate — in addition to recognising the tremendous efforts already made by South African companies.”

Besides providing potential investors with a practical tool for assessing South African companies, the JSE believes the SRI Index will encourage more companies to have themselves benchmarked in this way.

All the companies in the FTSE/JSE All Share Index were invited to participate on a voluntary basis. Of the 74 that participated, 51 met all the criteria. These have deliberately been focused as a point of departure in recognition of the nascence of this business practice and to encourage more companies to implement and report on their triple bottom line programmes.

‘We expect the criteria will evolve over time as companies start to place more emphasis on quantitative aspects relating to the implementation of policies and the disclosure of performance,” says Newton-King.

Find more about the SRI Index and the selection criteria at www.jse.co.za