Britain’s insurance industry has asked businesses to improve the
quality of their disclosures through greater use of key performance
indicators (KPIs) when reporting publicly on their social and
environmental risks.
In revised disclosure guidelines published last month, the Association
of British Insurers urges companies to use KPIs ‘to show the extent to
which the company has complied with its policies and procedures for
managing material risks arising from environmental, social and
governance matters’.
The previous guidelines, produced in 2001, made no mention of KPIs.
The revised guidelines, though not substantially different, state more
emphatically that social and environmental risks are a responsibility
of the board of directors, and include a new section recommending that
boards look at such risks ‘as part of [their] regular assessment
procedures’. Annual reports should explain in detail the board’s role
in overseeing social and environmental risk management, they say.
The guidelines also have a new section on executive pay that says
companies should disclose whether they take CSR issues into account
when deciding executive remuneration. If they do not do so, they should
explain why. The association urges remuneration committees to ensure
senior management incentives do not ‘inadvertently’ motivate
irresponsible corporate behaviour.
The guidelines, which apply to companies of all sizes, have been
revised in the light of present reporting trends and to meet new
disclosure provisions laid out in the Companies Act 2006.
