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Millennial Motivation — Why ESG Reporting Is An Emerging Standard

Maureen Kline is Vice President, Public Affairs and Sustainability for Pirelli Tire North America, responsible for the U.S., Canada and Mexico. She chairs the board of the Tire and Rubber Association of Canada and sits on the advisory board of the Corporate Responsibility Association, where she co-chairs a Thought Leadership Council on Brand and Reputation Management.

Previously she managed Pirelli’s global public affairs, and before that, international communications from the company’s headquarters in Milan, Italy. Prior to her public affairs and communications career, Maureen worked as a journalist. She was a Milan correspondent for the Wall Street Journal Europe and Businessweek, among others, and holds a Bachelor’s degree from Yale University and a Master’s degree from the London School of Economics.

Christopher P. Skroupa: You represent a European company in the U.S. There is an EU directive requiring sustainability reporting; tell us how you see the future of corporate reporting on environmental, social and governance (ESG) factors developing in Europe and the U.S.

Maureen Kline: Corporate reporting, like anything else developed over 50 years ago, needs to be updated. Today, much of a company’s value is determined not by its bricks-and-mortar physical assets, but by intangible assets: the company’s patents, its know-how and culture, its reputation. Behind that reputation there are so many factors: a company’s commitment to the communities it operates in, the loyalty of millennial consumers based on its ethics, a governance structure that people believe keeps risks under control. We need reporting tools to express and measure those intangibles, and investors need to be able to know that one company’s reporting is comparable to another’s, so the reporting needs to be standardized.

GRI (the Global Reporting Initiative) has provided a great framework for reporting on intangible environmental, social and governance assets, and is itself not only a framework but a process that helps raise the bar; it helps companies improve their sustainability programs from year to year. The EU directive will keep the momentum up, but I think all multinational companies now feel the need to report on ESG as well as traditional assets and liabilities.

Skroupa: Does shareholder pressure for short-term profits get in the way of corporations focusing on other stakeholders, such as the community, the environment, customers and employees? How can ESG reporting contribute to bringing greater focus to more stakeholders and a longer term approach?

Kline: People mostly recognize the downside of that short-term focus when there is a problem. A short-term vision inevitably means reacting to events rather than preparing for them—managing crisis rather than mitigating risk in advance. We are now in a business environment where it pays to do good proactively, not just to do less harm, or to avoid risk. There are certain sustainability systems in place now.

For instance, in the case of a tire company like Pirelli, our automotive and retail customers expect us to contribute to their sustainability programs by implementing environmental, social and governance improvements, and we, in turn, operate in the same way with our supply chain. These improvements are all initiatives with a longer-term horizon. ESG reporting is useful because it requires a process of evaluating what is material to all the company’s stakeholders over a longer term than the next quarter. And looking beyond a quarter to quarter approach is really important, for a company’s adaptability to changing markets, and ultimately, its survival. Shareholders are the first to benefit from a longer term approach.

Compliments of Pirelli – a member of the EACCNY

Forbes Column written by Christopher P. Skroupa, CEO of Skytop Strategies
The original article was p
reviously published by Forbes Magazine see here