This is the third column in a three-part series on CSR Reporting.
Producing CSR reports requires a substantial investment of time and money. Is all the work worth it? I was surprised by some of the answers I heard during a panel on CSR reporting at the recent Financial Times Conference “Investing in a Sustainable Future.” Panelist responses ranged from firmly committed (Intel), enthusiastic (the Global Reporting Initiative), skeptical (Merck & Co.), and selectively supportive (California State Teachers’ Retirement System – CalSTRTS).
Merck takes a step back
I was surprised when Merck’s Director of Corporate Responsibility, Maggie Kohn, announced that Merck will not be publishing a CSR report this year. Instead, it will take some time off to reassess its reporting activities. Kohn intends to seek additional stakeholder input, identify short-, medium- and long-term metrics for the company and explore different methods of reaching stakeholders.
“When is enough reporting enough?” queried Kohn. “When you’re trying to please everyone and in the process pleasing no one.”
CSR reports should serve as a management tool and help drive shareholder value, Kohn continued. They shouldn’t be done to achieve green rankings or for PR value. “We don’t produce a report ‘just because.’ We do it because it’s important to the CEO, the board of directors and stakeholders.”
Kohn cited three important returns that reporting provides Merck. First, she acknowledges that “what gets measured gets managed.”
Second, it boosts employee engagement. “It’s very motivating for employees to see that their company focuses on important issues,” Kohn shared. And finally, investors rely on the information in their decision making.
Kohn pleaded with stakeholders to be more vocal about why they want to see in reports. For those who participate in Merck’s quarterly earnings calls, Kohn pleaded “Let us know that ESG factors are important to you.”
In addition to its 64-page print 2008 report, Merck provides additional information, case studies and metrics on its Website. The Merck Website promises that, “An abbreviated executive summary with key highlights of the company’s CSR activities and a key performance indicator brochure will also available on the Website later this year.” The company encourages stakeholder feedback on the report at www.merck.com/cr.
Articulating business value at Intel
Intel has found a way to balance the demand for extensive ESG information with the environmental impact and financial costs of publishing a hefty printed report. Intel, which has been reporting since 1990, published a 100-page, hyper-linked PDF report that adheres to the GRI G3 guidelines, along with a 16-page executive summary, reported Suzanne Fallender, corporate responsibility communications manager for Intel.
The ongoing challenge is to connect all information in a report back to business value. Companies must articulate internally how their activities create value before they begin reporting publicly, stressed Fallender. Meaningful reporting requires discipline to identify the relevant metrics and not simply report everything that could be reported.
Managing sustainability risk at CalSTRS
As the largest US teachers’ retirement fund and the second largest US public pension fund, the California State Teachers Retirement System serves 833,000 members and manages $132.6 billion in assets. Its role is that of a fiduciary, responsible for safeguarding the investments of all those teachers, noted panelist Brian Rice, investment officer, corporate governance, for CalSTRS. So while other investors can be driven by socially responsible investment principles, CalSTRS’ primary responsibility is managing sustainability risk. This risk-averse orientation means that Rice reads CSR reports from a different perspective than many other stakeholders. Report discussions of risk management strategy and policies command his attention.
Panelists concluded that reports provide the most value when they:
• Place performance data in context and relative to peers.
• Link metrics and discussions back to the business strategy.
• Maintain a robust, ongoing materiality process to determine which issues are most important to the company and its stakeholders.
• Align the CSR reporting scheme to the management reporting scheme.
• Collect and comprehend information on an ongoing basis.
• Be courageous enough to report when you fail to reach a goal.
Ed Note: 3p and ISOS group consulting have teamed up to offer a GRI Certified Sustainability Reporting course in Berkeley, CA on July 29-30 this year. Please click here to sign up and get more information.