Cost-benefit analysis shows merits of sustainability reporting

The Johannesburg Stock Exchange (JSE), supported by the International Finance Corporation, commissioned Genesis Analytics to help launch the JSE’s Sustainability and Climate Disclosure Guidance which advises companies on how to report on their environmental, social and governance (ESG) and climate-related performance.

The Guidance was released on 14 June 2022 with the aim of promoting transparency and good governance by guiding companies on the latest best practices in ESG and climate-related disclosure.

To support the rollout of the Guidance, the JSE aimed to better understand global trends in sustainability as well as the costs and benefits to companies of adopting new disclosure guidelines. With this in mind the JSE, in partnership with the IFC, commissioned Genesis Analytics to undertake:

1. Landscape research into voluntary and mandatory disclosure requirements in other jurisdictions.
2. A structured cost-benefit and pathway analysis for South African companies to implement ESG and climate-related disclosure requirements over a three-year period in line with the Guidance.

The cost-benefit analysis measured the costs and benefits for different types of reporting companies (beginners, budding reporters, established reporters and advanced reporters) across four phases of sustainability reporting:

The assessment found that for established and advanced reporting companies, adopting the JSE’s Guidance would be a quick and cost-effective exercise with the added benefits of additional disclosure support and the production of widely comparable reports. 

For newer reporters, the costs of adoption are higher, particularly in terms of establishing new sustainability approaches and data collection systems. The benefits of reporting are however large, including greater accountability to stakeholders, building a competitive advantage and possibly accessing cheaper capital.