Ahead of a Corporate Citizenship Company study on CSR reporting, Nick Jones examines the latest crop of CSR reports and finds change in underway.
The latest figures say it all: of the FTSE 100 companies, 91 now produce a CSR report, as do 69 of the Fortune global top 100 companies and 38 of the Fortune top 50 European companies. The best way to get noticed in the CSR world today, it seems, is to not publish a report.
But a backlash is underway. While there is little hard data on the costs of producing a report, a Global Reporting Initiative study estimated that multinational companies spent around £400,000 just on the reporting process each year. Unsurprisingly companies are asking what return they are making on this, with the welcome result that many of the 100-page monsters of previous years are being slimmed down to concise, readable dimensions.
As CSR managers know, reporting is as much about the process as the end product. Engaging with stakeholders, defining policies and setting indicators are the nuts and bolts of creating a report, but they also embed policy frameworks and measurement systems through which performance can be managed. Reporting may be under fire, but there is no sign that companies plan to stop. A forthcoming study from The Corporate Citizenship Company argues, if today’s identikit CSR reports fail to deliver more value to the business, they face being cut as a superfluous burden on cash-strapped companies. A look at the 2005 crop of reports shows some green stalks of change.
Getting heard
CSR reports are no-one’s favourite bedtime reading, which is why a number of leading firms have used 2005 to give theirs a good trimming. Mining firm BHP Billiton, a veteran reporter, marked 2005 with a decisive step forward for clarity and accessibility. Its usual title Health, Safety, Environment and Community Report has given way to the catchier Sustainability Report 2005. In place of the 75-page documents of the past, a 20-page Summary Report has been printed that signposts readers to http://sustainability.bhpbilliton.com, a full online report which features exhaustive performance data.
GlaxoSmithKline has gone furthest in boiling down its printed CSR communications. The drug company’s main printed document, a short brochure, covers the main thrust of performance data together with the year’s salient events. The document conveys key stories about CSR at GSK, while pointing those interested in more detailed information towards the main online report. Retailer GUS, the owner of Argos and Homebase, published a similarly slimmed down Corporate Responsibility Summary Report, in the form of a fold-out brochure describing performance in managing its eight priority areas of CSR.
Vodafone, meanwhile, made progress as a reporter that innovatively links CSR with internal communications. Employees are treated to a short publication that adapts the key content of the CSR report and packages it as a colourful, attractive brochure. And in financial services, both HSBC and Lloyds TSB took CSR to their customers with short information pamphlets to pick up during visits to a branch.
But is shorter necessarily sweeter? Undoubtedly some reports have excess text and pictures that tell stakeholders little they want to know. However while many went on a diet in 2005, other heavyweight reporters stuck with a ‘workhorse’ format: longer, heavy on detail and analysis, and making a strong case for the value CSR adds to the enterprise. Clothing and retail firms currently getting to grips with the challenge of labour rights in global supply chains, such as Nike and Gap produced lengthy reports that reflect difficult issues and serious effort. And BP’s latest Sustainability Report weighs in at 64 pages, but gained BP plaudits as the world’s top firm for managing social and environmental issues.
Changing the balance
The forthcoming study from The Corporate Citizenship Company evaluates FTSE100, Fortune GLobal 100 and Fortune Europe 50 companies on how they make reporting work for the business. The majority, the study finds, receive a worryingly low return on their investment by producing identikit CSR reports that give too much space to issues that are of limited interest. Too many CSR reports have remarkably similar content – while workplace, environment and community issues are important many reporters give disproportionate space to aspects with only weak links to business strategy or stakeholder concern. Many fail to give an adequate description of how the business actually works and few give readers an adequate understanding of the company’s economic impact.
Many reports are defensive in tone and structure, and are shaped more by external groups that have managed to set the agenda than by the strategy of the business itself, according to the study, which will recommend ways to make reporting work for business.
Leading reporters took steps in this direction during 2005. HSBC’s report radically changed the balance of content in favour of the core business, in comparison with previous years. In 2002, Responsible Finance was a two-page section giving only a broad description of the company’s policies and approach. The same subject matter takes up eight pages of a 36-page report in 2004, covering social and environmental criteria in lending policies for particular sectors, adherence to the Equator Principles, socially responsible investment products and financial exclusion in poor communities. Importantly, performance indicators are interspersed throughout together with commitments for the following year.
Economic focus
As in previous years, many 2005 reports give only a brief description of what the company actually does. But establishing the facts about the what, where and how of a company’s operations helps a number of reporters to establish clarity about their responsibilities. United Utilities starts its 2005 report with a detailed Group Overview section. This gives data and a description for each of its four operating companies, and a geographical overview showing the location and type of operations across the UK and the world.
Groupe Danone uses a product lifecycle chart to illustrate each stage its products pass through: including raw materials, production and packaging, distribution, consumption and disposal. At each point of the chart, which uses clear and attractive line drawings, text boxes are used to list what Danone considers to be its main impacts and responsibilities. This lifecycle approach is not commonly used despite being applicable to a range of sectors from food (‘from farm to fork’) to oil (‘from oil well to petrol pump’). Where there is contention over where the company’s sphere of influence ends and those of governments, consumers and others begin; it can help bring clarity to where responsibilities lie.
Paying dividends?
The sense of doubt in reporting right now may be down to the idea, promoted by a number of organisations, that there is a single ‘right way’ to report. But as US academic David Vogel argues in his new book The Market for Virtue (see book reviews section), CSR is just one dimension of business strategy, much like advertising, research & development or marketing. There is no ‘right way’ to do any of these, instead managers adapt and tailor them to the specific challenges they face and strategies they adopt.
Like any dimension of business strategy, CSR reporting must deliver returns to the company or face being withdrawn from use. But while some companies give serious thought to these hard questions, others are getting tangible dividends from giving a public face to CSR. Companies that are making corporate responsibility work for their business produced the most striking reports of 2005: mitigating risks, building relationships and finding new sources of value.
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