The grown-up companies, telling it as it is

After a slow start, companies have responded well to political and stakeholder demands to report on their corporate responsibility (CR) performance. Since the early 1990s, UK governments have consistently championed such reporting.

What started as a minority sport in the early 1990s — with the publication of rather fluffy corporate reports on environmental issues — has blossomed into a global phenomenon. Europe still leads the reporting field, at least in terms of quantity. It is now extremely rare for a top European company not to produce some form of CR report. Virtually all of the FTSE 100 companies report.

These purely voluntary publications now cover the environment, human rights, the supply chain, and workplace diversity. If well done, they provide a unique insight into how aware a company is of its role in society and therefore its ability to respond to market pressures.

As new reporters join the field, many of the more experienced companies are showing frustration with the emerging standards and conventions. ‘Every year the number of issues covered by the term CR grows,’ says Dr Chris Tuppen, BT’s head of sustainable development and corporate accountability. ‘So too, the number of indicators people expect companies to report against. Yet every year reporting ‘experts’ tell us to make sustainability reporting more focused and better linked to company strategy,’ he says.

BT, the telecommunications company, has long been involved in the reporting debate, helping to develop CR standards. It has been reporting since 1992 and is known for its very comprehensive CR report on the web. After winning a barrow load of awards, it now finds itself in the vanguard of companies who are flirting with (in a manner of speaking) extra-marital reporting.

For BT, its actions have been influenced by changes in the strategic direction of the business. In 2006, the company, now an important player in networked services and broadband, has published an additional short printed report, called Changing World: Sustained Values.

The report tackles two specific tasks. First, it focuses only on the issues that really matter to the company and its stakeholders. Second, it examines the potential social and environmental impacts of BT’s business strategy.

‘The challenge is to find a reporting approach that provides the comprehensive data some stakeholders require, while still being able to show what’s really important to the success of the business. We don’t want to overwhelm the reader with information,’ says Tuppen.

Another veteran and award-winning reporter, Shell, published its 9th sustainability report in 2006. At first glance there is little different in the approach from last year. But a closer look reveals it has dropped the comprehensive (and very costly) assurance from auditors KPMG and PWC. The company has instead appointed a five-person external review committee chaired by Jermyn Brooks of Transparency International.

While such panels are not unique (Ford and Nike use them) in the specialist world of CR reporting, Shell’s decision to jettison the auditors could mark a shift away from formal verification. The company was the first to spend huge sums on its heavy-weight financial auditors to verify its sustainability report. The choice of such auditors was, partly, designed to add credibility to its reporting at a time that Shell was being constantly accused of greenwashing.

‘Auditor verification of data at the early stages of reporting is a powerful tool to get your systems and data in order. But it has diminishing returns as your reporting matures. It can then become a drain on resources and can divert your attention from tackling more critical issues,’ says Mark Weintraub, editor of the Shell Sustainability Report.

Shell publishes its main environmental and social data in its annual report to shareholders, so they are subject to the normal financial reporting controls. For its 2005 sustainability report (published in 2006), it tested a review committee made up of sustainability experts.

‘We were looking for a challenge from experts who understood the issues and knew how our business works. This is another step forward for us as we move to a new stage of reporting.

‘We wanted to have a conversation with these experts to help us manage the issues better. We feel our data systems and the numbers are sound and the auditors have helped us achieve this. Now we want to concentrate on improving performance,’ says Weintraub.

The company will be testing reactions as part of its regular market survey of readers. ‘I think people are relieved that they now have a statement they can understand, from a credible and believable group of experts.’

Defence contractor BAe Systems, a relative reporting rookie with just four years reporting behind it, has dramatically reduced the amount of community and environmental coverage and introduced strong stakeholder voices into its latest report. It gave two leading commentators space to challenge the company on highly sensitive, sector-specific issues: bribery and corruption, and political lobbying: Philippa Foster Back, director of the Institute of Business Ethics, challenged the company to keep its ethics policy alive with regular training and Robert Barrington, director of governance and socially responsible investment at F&C Asset Management, scolded the company for being a ‘laggard in corporate transparency’.

‘This was a brave and adventurous step for us,’ says Dr Deborah Allen, BAe Systems’ CR director. ‘Because of security issues, the defence sector is not naturally open and transparent. By publishing these commentaries, and allowing ourselves to be publicly challenged, we have sent out an important message that we want to change.’

The itch afflicting Lloyds TSB (reporting since 1997) is rather more acute than most. After slimming down its report in 2005, this large UK-based retail bank abandoned the single comprehensive report in 2006 and published three reports instead of a single blockbuster.

The first is a review of its CR programme. This is aimed at a general audience, including customers, business partners, shareholders and staff. It contains a discussion of its main issues, is attractively laid out with photographs, but contains very limited data. For those who want the full detail it has produced a comprehensive overview of its activities and performance. The bank has ignored both GRI and Accountability, reporting instead against the European Foundation of Quality Management framework.

The audience for this utilitarian document is the benchmarker and socially responsible investor. The third ‘report’ is in the form of a supplement in its internal magazine. This is aimed squarely at staff and contains vox pops and short, informative and entertaining pieces on why CR is important to the bank, its employees and its customers.

‘We wanted to speak directly to the people that are important for our business,’ says John Swannick, CR reporting specialist at the bank. ‘We decided to tie in our reporting to a management framework that has relevance to our business rather than some esoteric, meaningless reporting standard.’

The overriding message from these four leading reporters is one of confidence. All have gained the self-assurance to do what they think is right for their business and not to follow unthinkingly generalised standards which may not result in effective communications.

CR reporting always benefits a business. If it reflects the workings of the company, how it sees its role in society and how well it picks up on the societal signals that shape its markets, its benefits will be greater still.

Peter Knight, a director of Context, is a former UK Environment Journalist of the Year. Context specialises in corporate responsibility communications, working with multinationals.