The number of companies issuing some sort of non-financial report is growing exponentially
The number of companies issuing some sort of non-financial report is growing exponentially. Alongside, the proliferation of standards, guidelines, indexes, questionnaires and ‘kitemark’ certifications continues unabated. Many are starting to ask what all this is achieving. In the US, the questioning is likely to grow louder, with the muddled outcome of the Nike case leaving great uncertainty: trying to be transparent on difficult issues and dilemmas may still leave you open to being sued.
America aside, for companies themselves, one must presume their reporting satisfies some sort of communication or stakeholder need, if only to avoid being singled out as a non-reporter. For external (and often internal) audiences, even the most self-congratulatory of these reports do shed some additional light on individual company practice. So far, so good.
However, the driving force behind many of the external standards etc etc is to allow comparison and rating. Is company X better than company Y, if one wants to invest in a sustainable business or work for an ethical company or buy a socially responsible product? The problem is that making these assessments requires gross simplification and lots of comparing apples with pears.
BITC got into hot water last year when companies complained of being marked down for lack of attention to issues that were simply not relevant in their industry sector. Following extensive consultation, this year’s CR Index is more flexible, but will still end up in a quintile league table, listing oil companies alongside computer firms, to cite just two very different businesses. Many readers of Briefing will be struggling this month over their 60+ page CR Index submissions, doubtful whether the effort is going to be worthwhile.
We’ve commented before that GRI is having to go down the route of sector supplements to address the fact that its main indicators can only go so far – somewhat undermining the point of having a single global reporting standard. Of all the ethical investor indexes, we like Dow Jones the best: both because it focuses on the positive aspects of sustainability, rather than excluding ‘bad’ behaviour, and, pertinent to this discussion, because it presents the results by sector – the top ten percent in each industry category. We report on this year’s update later in this issue (see page 15).
Comparing like-with-like in sector must be the way forward, both for external audiences and, just as important, for the companies themselves – their need is to use benchmarking techniques to identify areas where improvement is practically possible. The chemical industry’s Responsible Care initiative is so much more enlightening than a clutch of individual reports all focusing on different issues or using slightly different measures even on the issues they agree about. Work is underway in other sectors too – supermarkets, media and finance as we’ve reported before, and property as we profile later in this edition. Individual reporting is a good starting point, but it’s time to be moving on.
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