Mallen Baker calls for leading corporate reporters to challenge what is becoming an increasingly tired format of the non-financial report.
There is a growing crisis in social and environmental reporting. On the one hand, more such reports are now being produced than ever before – and we have seen a rapid evolution in terms of the balance between performance indicators and narrative.
Audiences for these reports, although still modest, have begun to grow – particularly around SRI analysts. On the other hand, there is still the background anecdotal evidence that CSR reports represent the unreadable produced for the uninterested. Some of the most sophisticated, leading companies are beginning to kick back against the relentless annual cycle of reporting, claiming that it has become a labour intensive treadmill of diminishing returns, swallowing up resources that could better be used in actually helping the company to make progress.
The real challenge is one of audiences. Any communication must be in a form its intended audience will understand, with a focus and language that works for that audience. So-called multi-stakeholder reports generally miss this target – aiming at all and therefore hitting none. It is easy to predict that in 20 years time, companies will not be spending hundreds of thousands on reports that few people read. It is less easy to work out what, therefore, happens in the next couple of years.
We have for some time been assuming that, just like the accountancy standards did over the last 300 years, social and environmental reporting would come together over a bedrock of agreed common global indicators that would allow real comparability between companies. The most visible and credible attempt to do this, the Global Reporting Initiative, is suffering somewhat under the weight of these aspirations. A number of companies complain about the complexity and onerous nature of indicators that, in their view, still fail to capture why their businesses should measure and report. The forthcoming revision of the framework may well be GRI’s last chance to show that it can add real value.
Ultimately, of course, the arbiters of what indicators and narrative should be used are the audiences. Financial analysts, who may be driven by considerations around quality of management and risk, would expect to see concrete measures that show a real grip. In the UK, the new Operating Financial Review should provide this, although it has produced a great deal of uncertainty over further reporting for other stakeholders. When it comes to direct stakeholders – customers and staff in particular – the business may find that its communication channels need to eschew the form and approach of the traditional report, finding routes that are more familiar and effective with the target audience The trick then will be to ensure that the integrity of what is being reported is not lost. We look to those same leading companies now to take this forward. They are probably currently in the fortunate position that, unlike the hundreds that have followed, their reports receive a fair amount of attention either because they are the biggest brands, or because people are interested in how their reports are developing. These companies are the only ones that can credibly, from a base of respect and experience, challenge the increasingly tired format of the standard report.
We have a long way to go. A key indicator is just how many reviews of company reports comment on the mechanics of how the company has reported rather than looking into the data and narrative the company has provided with a view to reflecting on what this tells us about that company’s past and likely future performance. Only when we have made that step will we know that reporting has reached a mature form.
Mallen Baker is the Development Director of Business in the Community and editor of the email newsletter on corporate social responsibility, Business Respect
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