Israeli Government Encourages Companies to Publish Corporate Responsibility Reports

Barnea Jaffa Lande & Co.
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A recently launched government program aims to encourage companies to publish social responsibility reports, or ESG (environmental, social, and government) responsibility reports. The Ministry of Strategic Affairs in the Prime Minister’s Office announced the launch of the “Impact Nation” program, as part of a broad move to promote publication of positive economic information regarding Israeli companies, following the publication of the Israeli companies database by UN Human Rights Council. The program allows for the distribution of financial grants of up to NIS 100,000 per company with NIS 3 million total budget, on a first-come, first-served basis. Applications may be submitted until November 27, 2020.

The goal of social responsibility reports is to reflect the activity and resources invested by the corporation to better the social and environmental impact of its business operation. This comes alongside transparency regarding fair and honest business conduct and compliance with the principles of proper corporate governance.

Such a move, which encourages corporations not only to conduct themselves responsibly but also to publish their activity in this context, is welcome in itself. Offering financial incentives to corporations deemed worthy is even more so.

In light of the significant role corporations play in society and the impact they have on both employees’ and customers’ lives, and with the understanding of the social power and influence enterprises hold, encouraging responsible social conduct has become an aspect of the investment policies of various investment bodies around the world. At the same time, adopting corporate responsibility and preparing social responsibility reports are not without their legal challenges.

Before a corporation collects data and creates spreadsheets for the purposes of preparing and publishing such a report, it is important consider to the legal complexity involved in such process.

The credit and positive implications of publishing such reports, reflecting the positive impact of the corporation’s activity, are only one side of the coin. One should remember that publishing information on a corporation’s activity is a binding act. Moreover, to the extent this information is published for investors, it may even be subject to the regulation applicable to reports the corporation issues.

A corporate responsibility report is the last link in the chain. The chain begins with internal process conducted within the corporation, accompanied by legal advisors and experts on the matter.

This process includes identifying the corporation’s intentions in terms of corporate responsibility, while acknowledging the corporation’s goals as bearing financial fruits for its shareholders. Then, the identified goals should be adjusted to the corporation’s nature and business activity, taking into consideration the resources the corporation is willing to allocate and so on.

A corporate responsibility report, like an internal enforcement plan for example, cannot be identical across all corporations. If a corporation has a sincere desire to conduct itself responsibly in its business activity, and to receive credit for it, it must first think through the complexity involved and avail itself of assistance from professionals.

It is important to note that in recent years investors have sought out responsible investments. The existence of a corporate responsibility plan is often a factor in setting their investment policies. Therefore, in a world where different bodies compete for financing sources, a corporate responsibility plan and proper publication of a corporation’s actions is another tool for gaining investors’ trust.

We recommend that every company, particularly public companies, examine if the time has come to adopt a corporate responsibility plan. Publishing a report on these measures may score a company points, even before the lack of such a policy is held against it in the market’s eyes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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