There are many good reasons to report this year, and limited resources can help, not hinder, the quality of your company’s next report.
By Alyson Slater
As the economic crisis deepens observers are watching closely to see whether companies will stick to their sustainability commitments; or whether these social and environmental programs, including reporting, will be the first on the chopping block.
A recent article in The Economist[1] claimed that sustainability departments and programs were not suffering any more or less than others in terms of cutbacks. Sustainability teams are coping with shrinking budgets and must prioritize some activities and initiatives over others, but for the most part, they are still in tact.
Is it possible that the business case for sustainability has finally emerged? The type of company that will weather this storm, or any other, is one that has a focus on long-term strategy, not just short-term gains; maintains best practice in corporate governance; and is at the cutting edge of integrated risk-management practices. These are all the hallmarks of what it means to be committed to sustainability.
An early study into how companies are coping with the financial crisis by A.T. Kearney[2] showed that companies focused on sustainability outperformed their peers by 15%. Over the six months from May through November 2008, the study found that in 16 of the 18 industries studied, companies committed to sustainability averaged $650 million more than the industry average in protected market capitalization per company.
There is evidence emerging that companies committed to sustainability are benefiting from these programs when put to the toughest financial test of our times. Now, more than ever, is the time to ensure strong communications to a variety of stakeholders about the link between sustainability and successfully navigating the financial crisis.
Four good reasons
The current financial crisis is taking place in the context of other complicated global challenges – environment and climate change, and social unrest and poverty. It is now understood that these economic, environmental and social crises are interlinked.
The Global Reporting Initiative is the body that sets the standard for corporate reporting on economic, environmental, and social issues. The GRI Board of Directors issued a recent declaration[3] aimed at governments stating that “…the root causes of the current economic crisis would have been moderated had company directors’ properly exercised their due diligence and reviewed long term risks, including those related to companies’ responsibilities regarding their environmental, social, and economic impacts.” The signatories believe that the lack of transparency in the existing system for corporate reporting has failed its stakeholders.
And governments are responding. Across Europe, in Canada, South Africa, and other places governments are already recognizing that a revitalized and resilient economic system will only be sustained if it accounts for the full costs and value of all activity. This is the first good reason to report this year – stay one step ahead of regulation, and be prepared for some changes to the rules of the game.
The second good reason is to maintain a strong customer base. A recent survey by The Greenwash Index[4] found that four out of five people in the US say they are still buying green products and services today—which sometimes cost more—even in the midst of a recession. In the UK similar figures were released in late 2008 in a report on ethical consumer spending by the Co-operative Bank[5]. The report stated that the economic downturn would not halt the growth in ethical consumerism, and that despite the first tremors of the downturn being felt towards the end of last year, the overall ethical market in the UK was up 15 percent from the previous 12 months. In neighboring Ireland, 8 of 10 people claimed that, when forming a decision to buy a product or service, an organization's commitment to social and environmental responsibility is important[6]. Thus companies that are socially and environmentally responsible can claim a major competitive advantage, but they need to communicate their activities to consumers or they will miss this opportunity.
Like discerning consumers, ethical or socially responsible investors are also thought to be ‘sticky investors’ and provide the third reason to issue a sustainability report this year. They are typically long-term investors who look beyond short-term market fluctuations and want to benefit from sustainable wealth creation. In early 2009 the UK Social Investment Forum[7] released figures showing that retail inflows into ethical funds have now exceeded outflows for each of the fourteen months since February 2008. Ethical investors will stand by a company – as long as that company stands by them. Providing investors with proof in the form of data and analysis that the company has maintained or grown its commitment to sustainability is the best way to do this.
Finally, and possibly the most important reason to report this year, are employees.
Keeping employee morale high and maintaining an innovative work environment are requisite for delivering quality products and services to clients and therefore keeping the business flourishing. Keeping lines of communication open with employees, showing how the business is affected by the crisis and how it is responding is crucial. Making good on previous sustainability commitments relating to community and workers and communicating this to employees can help alleviate anxiety and let employees focus on what they do best.
Each company is likely to have several other urgent and valid reasons for reporting this year to add to the four above. But reporting is a time-intensive and costly task. The remainder of the article shows communicators how they can do more with less. Now is the time to change the reporting process for the better by focusing on the things that matter most.
Finish what you started
Corporate governance has emerged as a key issue in the wake of the economic crisis. Investors, the public, and even employees are suddenly taking a closer look at their company’s governance system and wondering if the company has what it takes to weather the storm. But a recent survey by KPMG[8] of the Global Fortune 250 (G250) found that although 92% of G250 companies disclosed a code of conduct or ethics in their sustainability reports, only 59% reported on performance or compliance with this code.
The abovementioned KPMG survey[8] found a similar trend when looking at supply chain reporting among the G250. Social and environmental risks in the supply chain have emerged over the past two years as a key sustainability issue for companies with international reach. Companies with strong brands at home risk reputational and sales damage when the truth about dismal working conditions or damaging environmental emissions are discovered by the media or external auditors at the (typically overseas located) factories contracted to produce the goods or services. Ninety percent of the G250 report their code of ethics or conduct for suppliers, 65 percent went further to report on supplier strategy and operations, but only six percent reported on performance details such as the number of suppliers audited against the code.
If the budget is tight this year, focus on a small number of material issues for the company and identify opportunities to move from high level policy disclosures to really drill down and report on substance. This is one way to show continuous improvement in reporting, and to build on internal relationships and systems that have already been put into place during previous reporting processes. Deep disclosure can sometimes take several years for a company to achieve for valid reasons, including gaining internal buy-in and building the right systems to capture previously untracked data.
A related strategy is to look for quick gains by capitalizing on low hanging fruit. Reporting on carbon footprint is one such example. The KPMG study[8] revealed that 41 percent of the G250 and 62 percent of the top 100 companies by revenue in 22 nations did not report their carbon footprint. This is somewhat surprising considering the economic, social and political prominence of the issue. Reporting on the company’s carbon footprint is a win-win for external stakeholders who have come to expect this information, and senior management who will be interested to find ways to reduce costs and risks associated with carbon emissions.
Talk less, listen more
The old adage that listening is just as important as talking is something that communicators can forget in the drive to build brands, control messages, and execute outreach strategies. If there are scarce resources for talking this year, turn it into an opportunity to listen.
The sustainability reporting process is often times an untapped opportunity to build relationships and understand key constituencies better. But all too often the reporting process is a one-way street. A recent study by Radley Yeldar (RY) and GRI[9] found that only four of their sample of 40 reporting organizations provided an online feedback form. For companies that have already issued sustainability reports in the past, an easy next step is to reach out to key audiences and get their opinions and reactions.
Interacting with the target audience is a methodology better known as stakeholder dialogue. Companies do this in the regular course of business with investors, government officials, employees, customers, consumers, suppliers, non-governmental organizations and community groups to name a few. But sometimes these existing conversations are not aimed at sustainability. Consider findings from the 2008 GRI Readers Choice Award Survey[10] where 25% of readers felt that the most important sustainability issues or impacts were altogether absent from reports, and additional 55% thought that key issues were not covered in enough detail. This points to a major opportunity for streamlining reports to focus on only the most relevant and material issues, and to use stakeholder dialogue to help determine what these are.
Roundtables, hard copy or on-line questionnaires, and other web-based interactions were the most popular means of engagement for companies in 2008 according to the KPMG survey[8]. But the best established forums for existing stakeholder communications are the least utilized for talking and listening about sustainability: Annual General Meetings (AGMs), investor relations and analyst presentations, customer contacts at point of sale, and internal communications with employees were the least cited channels.
Taken together, these recent studies show that most companies do not have to look far for the conversation starter (a previously issued or new sustainability report) and the channels (pre-existing and well established forums and contact points). It is just a question of using old systems for new purposes. The report can provide a platform for long-term dialogue and can be a useful tool for building, improving and maintaining important relationships.
Get creative
One of the challenges faced by companies is how to put together a single report that reflects all the issues of importance to the company and its stakeholders, but is still easy to use for a wide variety of readers with very different needs and interests. The RY/GRI[9] report found that 32.5% of organizations provided a full online report, but the PDF is still the format of choice with 100% of reporters in their sample using it as a component of their reporting. This trend towards PDF versions was reinforced with KPMG’s finding that nearly 80% of G250 companies rely on this format alone or in combination with other formats[8]. Another study on 100 reports issued in 2007 by Ernst and Young[11] found that most reports printed or in PDF format were 75 pages or longer.
Sixty percent of respondents to the GRI Readers Choice Survey[10] said they don’t have time to navigate deep websites or find the information they need in lengthy reports. In addition to this, 55% of the respondents who classified themselves as not being readers of sustainability reports claimed that they were not aware of the possible value of such reports and therefore did not look to them for the information they sought about the companies of interest to them.
It is time to unlock the goldmine of information trapped deep in sustainability Web pages or PDF documents. The RY/GRI[9] study showed that most companies have not yet figured out how to distribute the information in reports into the hands of their stakeholders. Only 10% of companies were using new Web-based technologies to enable users to produce a customized version of their report. The same study found that 7.5% of organizations had an RSS feed or E-mail service to keep stakeholders up to date on sustainability issues in real time. But with web 2.0 platforms like Twitter allowing people to communicate instantaneously, and most major news outlets pushing breaking stories to mobile devices in real time, stakeholders have come to expect this new style of short but timely information packets.
An analysis of which data is available on a regular basis (weekly, monthly or quarterly) and which stakeholders need or want this data in which time interval and/or format will help unlock the value of corporate reporting by getting the right information into the right hands at the right time.
References
1. Corporate Social Responsibility: A Stress Test of Companies’ Commitments to Doing Good. The Economist. May 16 2009, page 67. www.economist.com/businessview
2. Green Winners: The Performance of Sustainability-focused Companies in the Financial Crisis. 2009. A.T. Kearney. http://www.atkearney.com/index.php/Publications/green-winners.html
3. Global Reporting Initiative. Reporting Statistics 1999-2009; and full text of the Amsterdam Declaration. www.globalreporting.org.
4. The Greenwashing Index. Enviromedia and the University of Oregon, 2009. http://www.greenwashingindex.com/index.php
5. 9th Annual Ethical Consumerism Report. Cooperative Bank, 2008.
http://www.cooperativebank.co.uk/servlet/Satellite?c=Page&cid=1169627027939&pagename=Corp/Page/tplCorp
6. The 2009 Survey of Consumer Attitudes in Ireland towards Corporate Responsibility. Business in the Community (BITC) Ireland, March 2009. http://www.bitc.ie/news/story.html?id=129
7. UKSIF The Sustainable Investment and Finance Association. 2009. http://www.uksif.org/about/Latest_News
8. The KPMG International Survey of Corporate Responsibility Reporting. KPMG International, 2008. http://www.kpmg.com/Global/IssuesAndInsights/ArticlesAndPublications/Pages/Sustainability-corporate-responsibility-reporting-2008.aspx
9. Trends in Online Sustainability Reporting. Radley Yeldar and Global Reporting Initiative, 2009.
http://www.sustainabilityreportingonline.com/
10. Count Me In. The 2008 GRI Readers Choice Awards – Readers Survey. KPMG and SustainAbility, 2008.
http://www.sustainability.com/researchandadvocacy/reports_article.asp?id=1489
11. Keep the Balance Steady: Survey of the Quality of Sustainability Reports 2007. Ernst and Young, 2009.
www.ey.com
About the author
Alyson Slater founded Sustainability Advisory Services in 2008, where she works with corporate and non-profit clients on sustainability strategy and communications. Prior to 2008 Alyson was the Director of Strategy and Communications at the Global Reporting Initiative.
www.alysonslater.com
This article was reprinted courtesy of IABC www.iabc.com
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