Many companies are responding to the green agenda by published corporate environmental performance reports, but some are so poorly prepared they become counter-productive; here is how to get it right.
The London-based consultancy, SustainAbility, recently joined forces with Deloitte Touche Tohmatsu International and Canada’s International Institute for Sustainable Development to carry out a major survey of the leading report-makers and users in Europe, North America and Japan. The aim was to find out how the patterns of reporting varied around the world. Based on this study they have drawn 20 lessons, which John Elkington sets out here.
1 DO IT NOW!
Don’t consign this challenge to your ‘Pending’ tray. If one message emerges from report makers and report users alike, it is that the reporting of corporate environmental performance is no longer an option for the world’s leading companies. As the UK Chemical Industry Association put it: “It is not enough to be doing. Companies have to be seen to be doing”.
Business is moving up a learning – and compliance – curve. Most reporting companies are still at Stage 1, producing lightweight brochures, ‘green glossies’ or a paragraph or two in their annual reports. The main body of pioneers are in Stages 2 (producing one-off reports, often linked to their first formal policy statement) or 3 (annual reports with text not figures); a few are now moving into Stage 4, with full regular reports. Stage 5 – reports linking environmental, economic and social performance and producing indicators of sustainability – remains largely unexplored territory.
Clearly, the higher the stage reached, the greater the potential for benchmarking your company’s success in meeting environmental management and sustainable development goals. On the other hand, each stage requires greater effort likely – at least until the transition to a more sustainable style of operation is achieved.
2 BE SYSTEMATIC
Recognise that the early report makers built their communications programmes on top of carefully drafted policy statements. They also had put in place management systems designed to provide the information they needed – and, in many cases, were committed to auditing the performance of those systems regularly.
Study the latest guidelines on environmental management systems – and make sure that your ones are start-of-the-art. One Canadian executive recommended detailed reports to each Board of Directors meeting for a year or two in advance of the launch of a company’s first environmental report, to ensure that its management and reporting systems were sufficiently well developed to support an ongoing reporting process.
3 DON’T FALL AT THE FIRST HURDLE
Make sure that you account for any environmental damage you may have caused – and that you reflect any liabilities and contingent costs in your financial statements.
4 BEWARE: THE HONEYMOON IS ALMOST OVER
Like the early bird catching the worm, most early report makers found a warm welcome for their efforts. Honesty was enormously appreciated in most cases, although North American companies remain acutely sensitive about the prospect of disclosure leading to litigation – and Japanese companies about the competitive implications. But the honeymoon period will soon be over.
5 DECIDE WHO YOUR KEY AUDIENCES ARE
Most report makers consider their own employees (and, in Japan, new recruits) to be the main target audience for their reporting activities. But they also recognise that, beyond their factory fences, there is a wide diversity of other stakeholder groups with a potential interest in their operations, impacts and targets for improvement. Among the audiences addressed by current report makers, and which you may consider worth targeting too, are:
politicians, regulators and enforcement agencies;
shareholders and financial analysts;
insurers, banks and other financial institutions;
customers and suppliers;
environmental and consumer organisations;
benchmarking organisations (see Appendix 1);
the media; and
a broad range of educational institutions.
6 FIND OUT WHAT STAKEHOLDERS THINK – AND WANT
It’s a simple idea, but – surprisingly – often overlooked. The easiest way to find out what your stakeholders want is to ask them. Some early report makers are revamping their reporting methods to make them more user-friendly. Take a short-cut: get stakeholders on your side from the outset.
7 HONE YOUR MESSAGES
While there are considerable disadvantages in being seen as a corporate chameleon, report makers need to consider what messages they are trying to communicate to which audiences. Whichever audience or audiences you decide to target, the messages should be clear – and effectively communicated. Sophisticated design and graphics should certainly be used, where they help to get the message across, but don’t let the medium obscure the message.
8 GIVE THE GOOD NEWS – AND THE BAD
Some of the most effective report makers have been those who have been prepared to adopt a ‘warts-and-all’ approach. Those who have taken this path have found that stakeholders are much more likely to believe the good news where there is also a frank, detailed discussion of the remaining problems.
9 FOCUS ON THE AREAS OF GREATEST IMPACT
Don’t be tempted to cover each of the myriad environmental issues raised by your operations in exhaustive detail. There are no prizes for encyclopedic reports. Pick the priority issues and report on them in depth. Remember, the objective is to identify the real environmental problems – and to tackle them.
“You can’t manage what you can’t measure,” is a maxim dear to most business people. Respondents in all three regions were increasingly convinced that totally descriptive reports will no longer be acceptable – and that a growing degree of quantification will be demanded. Keep track of the developing debate about environmental performance indicators.
Try to make the results meaningful. For example, you could convert the data into emissions or waste arisings per employee, or per £, 6 or ? of sales. But be sure to give the basic data as well – and, wherever possible, spell out the assumptions used in making your calculations, preferably in footnotes or a technical appendix.
Follow the lead of companies like Dow Europe and provide the sort of data needed to quantify the environmental performance of individual sites, year-on-year. At the same time, consider whether you should provide the data needed to benchmark your operations against those of your competitors and against industry averages. Remember: others will use your report in this way – make sure that you have provided them with clear guidance on how your figures should be interpreted.
Ask campaigning groups and green business networks for their latest reporting guidelines or criteria. And don’t be ashamed to ask competitors for copies of their reports. Most will be more than happy to supply a copy. Work out what they have done and how they have done it – and then improve on it.
13 SPELL OUT CLEAR TARGETS
Stakeholders are encouraging companies to set themselves stretching targets. So spell out your environmental priorities and performance targets for the coming year. In Europe, the 1992 BT report was recognised as a sound model in this respect.
14 MAKE IT USER-FRIENDLY
Keep it simple, clear and user-friendly. If stakeholders want the really complicated stuff, they can ask. The shortest report we received was BankAmerica’s 1991 Environmental Progress Report, which noted progress against nine Environmental Principles adopted in 1991. Spelling out the company’s goals and accomplishments, the document runs to just four pages.
15 PAY ATTENTION TO CREDIBILITY
If this is your first report, consider including a hard-hitting foreword from the chairman, president or chief executive officer. But make sure that he or she is prepared to deliver – and to get tough with those who fail to deliver.
Some free-standing reports have been verified by external consultants. Don’t go for verification just for the sake of it. Think carefully about what you are trying to achieve. But there is a growing sense that some sort of verification will be needed for the reports of the higher profile industries.
16 ASK FOR FEEDBACK
Encourage feedback. Make sure you include a contact name and address. Consider using a toll-free telephone number or postage-paid inserts to make responses easier still. The evidence to date suggests that it won’t break the bank.
17 WELCOME CRITICISM
In the few cases where stakeholder responses had been strongly negative, there was evidence that the result had been to raise a major question-mark over disclosure generally. This is a problem which is unavoidable, but usually manageable.
Don’t be depressed if some of the comments are negative. Remember that those who like what you have done are likely to be less vocal. Encourage them to speak up. Treat your critics as customers and work out what they really want.
18 AIM FOR CONTINUOUS IMPROVEMENT
Successful corporate environmental reporting is going to be a bit of an uphill climb for the next few years. Deal with environmental performance and communications in the same way that you would deal with any other part of your business – aim for quality and for continuous improvement.
19 LOOK BEYOND REPORTING
A number of respondents, particularly those who had not yet completed reports – or, in some instances, had no intention of doing so – stressed that quarterly or annual reports will only ever be part of the story. True. The key goal must be quality internal and external environmental communications.
20 BUILD IN SUSTAINABILITY
Shell Canada’s 1991 report was entitled Progress Toward Sustainable Development. But, wherever you look in the three world regions, even the leading report makers still have a long way to go before they achieve anything like sustainable development reporting. What we have dubbed ‘Stage 5’ reporting will involve a very different approach, based on mass balances and life cycle assessments. Corporate environmental reporting, as with any other area of business, will be an area where evolution never stops.
John Elkington is a Director of the London-based consultancy SustainAbility Ltd and co-author of Coming Clean: Corporate Environmental Reporting – Opening Up for Sustainable Development. Copies of the report are available from SustainAbility Ltd, 91-97 Freston Road, London W11 4BD (price £20.00)
Corporate Citizenship Briefing, issue no: 11 – August, 1993