Corporate responsibility reports contain some significant macro messages about company behaviour
St Augustine is best known for his prayer: “Lord make me chaste, but not just yet!” To judge by recent sustainability reports, the corporate equivalent is: “Lord make me sustainable, but not just yet.”
In an effort to understand how sustainability reporting has evolved, we recently carried out some research into the main trends of reporting by corporate sustainability leaders. We defined this target group as the companies listed on the latest DJSI Super Sector leaders, the FTSE4Good Global 100 and the Global 100 Most Sustainable Corporations.
The main focus of our research was to find out which corporate responsibility frameworks companies use and what, if any, conclusions might be drawn.
Our initial interest here was to see to what extent companies were using approaches developed by governmental organisations (eg the UN Global Compact and the OECD Guidelines for Multinational Enterprises) or using frameworks produced by NGOs or multi-stakeholder initiatives.
The methodology used was to analyse the references to one or other framework in the latest (usually 2010) sustainability report.
Here are the headline findings.
GRI sets the standard
The first thing that leaps out from these reports is that the Global Reporting Initiative (GRI) has become the default standard for sustainability reporting. Launched in 2002, the GRI is referenced by 95% of the DJSI Super Sector Leaders, 78% of the FTSE4Good Global 100, and 70% of the Global 100 Most Sustainable Corporations.
By being indicator-based, the GRI also comes across as a useful tool for organisations as it allows them to track their progress and to set objectives. Proof of this is the large number of companies that apply GRI at its highest levels (52% of the FTSE4Good Global 100 apply the GRI at levels A and B) and the fact that many companies state in their reports their aim to improve the application level in the next year.
Secondly, the AccountAbility 1000AS standard, another multi-stakeholder developed tool, stands out as the assurance standard of choice. It is used by 26% of the Global 100 Most Sustainable Corporations and also 26% of the DJSI Super Sector Leaders.
ISO standards (eg the 14000 series) also prove to be popular – used by 54% of the Global 100 Most Sustainable Corporations – reflecting ISO’s widespread international use as a certifiable management tool.
Framework focus
The third important point is that officially developed frameworks are referenced less frequently than GRI, but achieve nonetheless a creditable level of usage.
The UN Global Compact is cited by over half of all companies in the sample (65% of the Super Sector Leaders, 57% of the FTSE4Good list and 53% of the Most Sustainable). The less well profiled OECD Guidelines for Multinational Enterprises is referenced by up to a quarter of companies (DJSI Super Sector Leaders 16%, FTSE4Good 25% and Most Sustainable 15%). The ILO core labour standards are also referenced by a significant number of companies.
The final point of interest to note is the strong showing of references to the Carbon Disclosure Project, with 50% of the companies in the FTSE4Good Global 100 claiming their disclosure of information on their greenhouse gas emissions.
Other sectoral or cross sectoral initiatives, such as the Extractive Industries Transparency Initiative (EITI), the Equator Principles, and the Principles for Responsible Investment receive more limited reference, being understandably confined mainly to companies in the relevant extractive and financial sectors.
A closer reading of sustainability reports , however, raises a number of nagging questions that deserve further investigation. Our top three are the following.
Where’s the beef?
In many cases, companies make broad and commendable statements about their commitment to the Global Compact principles or how they use the OECD guidelines as a source of guidance or inspiration.
While the best cases show how these are embedded in internal codes of conduct or supplier codes, or use GRI indicators to report specific performance, most companies fail to provide any detail or concrete evidence, leaving the reader confused, cynical or none the wiser.
There is an abundance of statements such as “we are committed to upholding the principles of the Global Compact” when the company neither describes how the Global Compact principles are implemented nor communicates on measurable progress. Similarly, there are claims that “our report is inspired by the OECD Guidelines” without, however, providing any details.
In the absence of any systematic or independent monitoring of such statements, there is a high risk of abuse that could undermine the credibility of both the frameworks and the reporting process in the longer term.
Too much talk
The second point that comes through strongly is that companies are clearly having a hard time actually doing what they say they will do. Firms with a high carbon footprint, such as oil companies and airlines, might improve energy efficiency but overall emissions appear to be rising.
For manufacturers and retail, increases in production appear to be offsetting improvements in material efficiency. Few companies show an appetite for fundamentally revisiting their business strategy and introducing new designs (eg integrating a cradle to cradle approach), sourcing (eg using only renewable energy) or services (eg hiring rather than selling) based on sustainability considerations.
In the absence of greater government encouragement and incentives, it is only a matter of time before sustainability reports become evidence of unsustainability rather than the beacons of change, innovation and hope they could be.
Sample failure
The third problem is reflected not so much inside our sample as outside it. Our sample deliberately chose the listed companies considered to be the most progressive on the corporate responsibility front.
But even if one widens the pool of candidates (the Global Compact claims over 6000 business participants and GRI just under 1900 reporters in 2010), the conclusion one cannot avoid is that the vast majority of the world’s companies appear either not to be using any of the recognised corporate responsibility frameworks, or doing so and not talking about it. This would seem to support the recently launched Report or Explain Campaign Forum.
Either way, there is both a transparency issue and a larger public policy issue that government and business leaders need to consider. If the sustainability challenge is to be effectively confronted, we need to get business working on it, universally. A tall order, but one to which there is ultimately no sensible alternative.
Paul Hohnen is an Amsterdam-based consultant who advises, speaks and writes on global sustainable development issues. He is also a member of the Ethical Corporation advisory board. For more info visit here. Eva Riera is a CSR and sustainability consultant based in Brussels.