CSR Disclosure Gets Hot

Yesterday I chaired a session of the CSR Singapore Compact Summit on measurement and disclosure of corporate responsibility. It was the type of topic I skipped at CSR conferences in the past decade, as I headed off to things seeming more exciting and new, like leadership, partnership, finance or enterprise. But now matters of measurement and disclosure are hotting up, becoming a sexy part of social responsibility (to the extent that any of this work has such appeal). People are excitedly debating whether the CSR or sustainability report should be ditched, as so few people read them. Proponents of that view could point to Chiquita Brands, who debuted with an award winning report and then went sustainably silent these past 7 years, with minor CSR mentions in preambles to their annual financial reports. Not reporting has not seemed to harm Chiquita, who have remained participants in various CSR networks, partnered with many NGOs and worked with trade union federations. Some of those who believe more systematic disclosure is important for accountability, and to inform the growing responsible investment community, call for more integrated reporting, with some companies, including Philips, already trialling versions of one combined annual report. New initiatives on integrated reporting are picking up steam. Others say that in the age of social networks and tweeting, issuing annual reports on matters of stakeholder interest is outmoded, and companies should use new technologies to enable real time interaction with stakeholders.

So, the field of measurement and disclosure of CSR and sustainability has become a bit funky. So, with that in mind, I was asked by Ethical Corporation contributor Rajesh Chhabara for my thoughts on the new disclosure agenda…

When considering the implications of the new ideas and interests, it is important to remember what CSR measurement and disclosure has been good for until now. Social and environmental reporting serves both internal and external communications functions. A reporting process is helpful for motivating people in an organisation to share information with each other. For that reason a deadline for an annual report works well. However, for external communications, not only is an annual report flawed, any report is flawed, because hardly anyone other than CSR consultants and ESG analysts actually read such reports.

Therefore, for internal communications reasons and to establish a baseline, all organisations should at some point complete a social and environmental report, but such a stand alone report does not need to be annual one. In saying that I’m not letting Chiquita off the hook – revelations in 2007 about relations with paramilitaries would have prompted many companies to appear concerned enough to do a stock-take of the company’s CSR. But a specialist annual report is not essential, because each stakeholder group has different interests, and can be engaged in different ways.

Action and performance on many environmental, social and governance issues are important to the commercial success of a business, and so they should increasingly be reported on in financial reports. Such reports should be annual, not quarterly, as constant reporting to investors encourages short-term and superficial targeting, as the board of Unilever have expressed more clearly than most. With such integrated reports, it is important for investors to receive information on actual impacts and performance, rather than only evidence of management systems. For instance, it needs to include hard data on actual carbon footprints, gender equality in pay, the number of court cases brought against the employer, and so on. There is more work to be done on the generation of credible protocols for producing such hard data, which is one of the conclusions of the recent UN’s Investor and Enterprise Responsibility Review, that I guest edited.

Integration is not everything, however, for at least three reasons. First, because not all environmental, social and governance issues are important to the commercial success of a business, yet are important to some stakeholders or wider society. For instance, child labour is of commercial importance due to reputational risk, while the absence of freedom of association and collective bargaining might be a root cause and potential solution to child labour, yet doesn’t present the same reputational risk and is therefore less relevant for understanding commercial performance implications. Consequently if all issues are viewed solely in terms of financial performance, some issues may be marginalised. Second, for good communication we should not whittle everything down to narrow metrics, as the field of corporate responsibility is always evolving and involves conversations between business and society. Third, because annual or even quarterly cycles of communication will not be useful for some stakeholders. Therefore, although integration of financial and other reporting is a useful trend, there is still a need for more open and engaging forms of communication on the social and environmental performance of business. Online tools and working with other organisations makes a lot of sense for achieving more interactive and exploratory conversations with stakeholders.

Companies can therefore benefit from releasing data and invite advice on various issues on a regular non scheduled basis through various online networks. They can even develop their own micro sites and smart phone apps for such initiatives, but it makes more sense to reach out to existing communities, such as JustMeans, 2Degrees and NetImpact. In time it is those independent non commercial and free websites that may be seen to host the most independent engagements with companies. I would be pleased to see a major company seek to engage the public through WiserEarth, for instance. And if you worry about not being able to control or turn off the debate if it turns bad? Forget it, the debate will happen somewhere at some point anyway.

Which brings me to the hottest part of the disclosure agenda, the deeper impacts of social networks on society and therefore any organisation. That means we should not limit our thinking to only looking at how a communications strategist may decide how a company reaches out. The changes from social networking challenge that view entirely.  Now your staff can interact outside the company with a wider range of informed professionals and the public on a daily basis. People always used to chat to people about work outside of work, but now this is wider as geography does not limit us, narrower as networks and search make relevant people easily identifiable, constant as the interactions can occur during work, and recorded as interactions often use text. Therefore staff need to be supported with the means to engage in such networks in productive ways, and that will be a major focus area for corporate responsibility professionals in firms in future, as companies begin to open up to the inevitability of needing to enable their staff to engage social media for their work.

This measurement and disclosure agenda is made all the more spicy by the rising criticism of the credibility and efficacy of the industry of environmental, social and governance analysts. Whether its NGOs, UNCTAD, industry insiders or CSR thinktanks, the ESG analysts have been coming in for some stick this autumn. The problem for the analyst firms is that as most keep their methodologies confidential, they don’t have much with which to respond. Their new owners might be wondering whether what is under the hood will be strong enough to drive through the storm, when the real issue is opening up the hood to improve the engine, and find new business models for analysis. We will look at that in issue 40 of the Journal of Corporate Citizenship.

In closing the seminar in Singapore, Mark Goyder of Tomorrow’s Company, reminded the audience that in all these debates and initiatives we shouldn’t take our eye of the real reason for working on measurement and disclosure… and that is to improve our practices in line with our values. Unless we start with clarity on our values, and how we impact others, then changes to forms of measurement and disclosure will not get to the heart of the matter, and not create real change. And heartfelt change is what makes something sexy, and what we must strive for if warranting the funky ‘chicks’ and ‘blokes’ self-image many assume in this field.

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