Non-financial material risks are not adequately reported

Reporting on material issues in the financial context has been legally required for decades and is widely understood. It is less widely understood – and not yet well applied – in non-financial contexts.
 
Corporate sustainability efforts depend on identifying and executing on material issues.
 
The failure of Coal Producers to report material non-financial issues, and to execute on those risks, has led to a rash of bankruptcies, and an epic loss of value for many stakeholders. Six publicly listed U.S. coal producers dived into Chapter 11 bankruptcy in the past 12 months, according to a Reuters review of regulatory filings. The world's biggest private-sector coal producer, St. Louis-based Peabody Energy Corp., filed for U.S. bankruptcy protection earlier this month after it was unable to service its $10.1 billion debt it incurred mostly for an expansion into Australia just before the demand for coal and prices declined sharply.
 
Harvard Business School’s 2015 study, Corporate Sustainability: First Evidence on Materiality, has refreshed the significant correlation between sustainability and financial performance when differentiating between material and immaterial sustainability issues.
 
The Securities and Exchange Commission (SEC) recently ruled that ExxonMobil must allow its shareholders to vote on a climate risk resolution. The SEC is signalling that business risks due to climate change must be considered material risk for the oil industry.
 
Without reporting of material risks, stakeholders are exposed, cannot accurately assess their positions, and may well suffer enormous losses. It’s no small matter.
 
This topic is discussed in more detail at Triple Pundit.