This year the materials sector, which includes mining, chemicals, metals, glass, as well as oil & gas companies, was again the best performing sector by a large margin in the Accountability Rating.
With an average score of 64%, materials companies dominated the rankings, with seven companies from the sector in the Top 10. This was followed by the financial sector with an average score of 38%, industrial (35%), retail/fast-moving consumer goods (29%) and computer, electronic and telecommunication sectors (27%).
"The higher scores in some sectors were closely correlated with the strength of institutional frameworks that govern each sector," says Accountability Rating lead researcher Ven Pillay.
"For example, the materials sector is governed by strong sector-specific legislative frameworks and a mining sector charter, while the financial services sector is strongly influenced by the financial sector charter (FSC)."
She points out that though the Broad-based Black Economic Empowerment Codes of Good Practice help to provide a framework that governs business practice, some charters tend to be skewed towards addressing social and economic development issues.
The FSC, for example, does not address environmental concerns. As a result, the Accountability Rating research found companies in the sector tended to overlook the importance of their decision-making in the areas of investment and lending on the environment.
"Companies in sectors other than materials tend to assume their impact on the environment is low," says Pillay. "Few companies have taken their supply chains into consideration, where the largest impact is likely to be."
Companies such as Nedbank have taken a proactive approach. Through the group's long-term association with the Worldwide Wildlife Fund, Nedbank has developed a range of new policies and procedures when it comes to committing funding to companies or projects that may have an environmental effect.
"It's gone beyond donations," says Nedbank head of governance and sustainability Justin Smith.
"Through consultation with WWF, we've developed a framework to help guide our employees when it comes to difficult decisions."
Sasol safety, health & environmental centre GM Kim Fraser says the origins of sustainable development reporting lie in environmental reporting. "It was an obvious place for most companies to start, because the impact was so visible," he says. "From there it was a natural evolution for companies to begin considering their impact on the communities in which they work."
The Accountability Rating shows that the performance of the industrial companies on accountability was poor over the past year. Pillay says this is mainly because the sector's focus varies greatly - from transport, construction and electronics to timber, chemicals, furniture and food production, among others.
"As a result, the frameworks that guide this sector are highly variable and consistency is difficult to measure," says Pillay.
The lack of a strong institutional framework also affected the performance of the retail/fast-moving consumer goods sector, while the computer, electronic & telecommunication sector's poor performance on accountability issues is expected to improve with the introduction of the communication technology sector charter.
"An industry approach to accountability works so well because it requires that peers and competitors work together to come up with a common strategy to address social, environmental and broader economic issues," says founding director of the Unisa Centre for Corporate Citizenship Derick de Jongh. "It also allows companies to benchmark themselves against others in their sector and track the improvement in their performance over time."
Historically the mining and financial sector developed strong relationships with a range of stakeholders, including organised labour. These sectors also have strong established industry bodies that collectively engage different stakeholders on various issues. Younger sectors such as the computer, electronic & telecommunication sectors or sectors with diversified interests, still need to establish that capacity.
De Jongh says in highly diversified and fragmented industries, natural "pockets of excellence" will emerge as some companies will take the lead in terms of meeting higher accountability standards. Leaders in such cases will encourage others to follow their example through peer pressure. For example, many charters already require companies to ensure that they procure goods and services from suppliers that are transformed.
"Companies will simply lose out on business if they don't properly report and disclose their nonfinancial performance," says De Jongh.
He says change is driven by bigger companies, which demand that smaller ones along their supply chain improve their public disclosure. The supply chain will be the main driver of change and improvement in accountability.
Ray Anne Sedres, integrated sustainability manager at Santam, says that Santam uses its procurement policy to influence its suppliers. "Because of our size and sophistication of processes, we try to take smaller players along with us," she says.
