Sustainability/responsibility – one story or two?

Peter Truesdale

 

Posted in: Reporting, Speaking Out, Strategy, Sustainable Development

Sustainability/responsibility – one story or two?

September 06, 2017

A company’s sustainability story and business strategy needn’t be seen as separate. In fact, the tide toward integrated reporting reinforces the need for a coherent message from companies on their plans for long-term sustainable success, argues Peter Truesdale.

As I edge up towards my 60th birthday a terrible realisation grows on me. Society has changed. But it’s worse than that. Society has changed in my life time – and I can remember the changes. The problem I have is that my younger colleagues can’t. And no time is more closed to a person’s view than the day before yesterday. I find that increasingly I have to give contextual explanation about the past before I make my point. Otherwise they just don’t get it.

So here is a bit of historical context.

Not that long ago issues were not as explicitly debated as they are today. A wide number of assumptions were shared. Nobody needed to point them out. This is the basis of one of my favourite jokes:

Question: How do you behave if you are a member of the Brigade of Guards?

Answer: If you have to answer that question, you can’t be a member of the Brigade of Guards.

It was not just the Brigade of Guards that operated on that basis. Until about the early 70s most companies operated without the need for even so much as a code of business ethics. They certainly didn’t feel the need for the visions, mission statements and principles which cover the corporate stage like litter after a pop concert. With the increasing internationalisation of business, with the decline of direct family ownership and (yes, let it be said) in response to ethical failures companies began to write down codes of behaviour.

For the most part this was laudable but it did put a bit of distance between the core business processes and ‘What we are supposed to do’.

A similar process occurred 20 years later reinforcing the division.

The late 90s were marked by companies wanting to tell the story of their corporate responsibility. Some were doing so because, like Body Shop, they thought they were wonderful. They wanted everybody else to think so too. In the case of companies like Shell it was more a case of: “Houston, we’ve had a problem here”.  The report was intended to show the problem was being attended to. Whatever the motivation for reporting the result was that the responsibility and sustainability of companies ended up being recorded separately from the document of record: The Annual Report and Accounts.

Asked to explain themselves companies told stories in two separate places about who they were, what they did and why it mattered. So the split between the story of the core business processes and ‘What we are supposed to do’ widened further.

Was that planned? No.

Did it matter? Increasingly companies seem to think it does.

Why?

Partly it is a recognition that how a company manages responsibly/sustainably really is part of its character. Partly it is that investors are increasingly interested in non-financial performance indicators.  In the EU, it is also to do with more non-financial information being mandatorily required in the Annual Report. (A full explanation of what this means can be found here). I suspect it may also be to do with reducing the effort going into creating multiple reports year-after-year.

Whatever the justification, the tide is certainly flowing in the direction of integrated reporting. As we have seen companies slipped into non-integrated reporting through chance rather than choice.

Many corporate responsibility reporters have worried too much about various ‘audiences’ and too little about a single, coherent, business focused narrative. Issuing an Annual Report is a form of corporate autobiography. The company is the author and it is, or ought to be, telling a single coherent story about the purpose, health and direction of the business. Biographers can have different takes on their subject. Autobiographers cannot. If they don’t manage to convey a consistent portrait of themselves they will come across as inadequate or phoney.

The potential corporate autobiogapher can gorge themselves on an alphabety-spaghetti plate full of initiatives: CDP, GRI, IIRC, SASB, TCFD. It maybe that these can improve the quality of supporting data. What they can’t do (and don’t pretend to do) is replace the necessity of working out what the single story is and telling it clearly.

Finally we note that the transition that a number of companies are making to incorporating the main annual responsibility/sustainability reporting into the Annual Report has bite to it. A diminution in the space given to nice stories about the company crafted for particular audiences is sacrificed to an increased focus on how economic, environment and social matters are managed responsibly to ensure long-term sustainable success.

Not all companies will make the change to a single integrated report. It is best to calculate the benefits and the costs before doing so.

 

Peter Truesdale is a Director at Corporate Citizenship.

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