The corporate world is now well-versed in producing an annual document showcasing best practice. But can sustainability reports actually be used effectively as a stakeholder engagement tool? asks Tom Idle
The practice of producing an annual publication showcasing sustainability achievements and documenting the performance of an organisation in reducing its social and environmental impacts is now firmly established in many corporate calendars.
Increased demand from investors keen to understand the risks and opportunities associated with their investments, and a plethora of benchmarking indices that companies now find themselves plugged into – from the Dow Jones Sustainability Index, to CDP and Sedex – has locked many organisations into fairly expensive cycles of reporting process.
According to KPMG, of the world’s biggest 250 companies, 90% of them now produce a corporate responsibility document. That figure was 83% in 2008 and 64% in 2005.
While integrated reporting – whereby non-financial data is published as part of annual accounts – has so far failed to take off (just10% of the G250 do this), including corporate responsibility data alongside financial reports is now a firmly established trend, with three in five companies are doing this, compared with just one in five in 2011.
And it’s a truly global trend, with companies in India, Indonesia, Malaysia and South Africa currently possessing the highest sustainability reporting rates in the world.
The investment made in these reports – both in time and resources – continues at a pace too. A recent survey carried out by the online community 2degrees found that almost 20% of companies spend up to $120,000 a year producing their sustainability report.
Back in 1992, just 26 corporate responsibility reports were issued. Since then, of course, non-financial reporting has grown into an important vehicle to boost credibility and transparency, as well as to adhere to a number of regulations. In the UK, for example, the Companies Act requires quoted companies to report greenhouse gas emissions in their annual report.
But what about using these reports to engage stakeholders? What about using the content within the report to get people excited about what the company has been doing? Plenty of anecdotal evidence points to the fact that very few people actually read annual sustainability reports. The current challenge facing the reporting fraternity is how their beloved documents might be used to improve communications and relations between a company and its customers, or a board member or a group of investors.
For Elaine Cohen, a sustainability reporting consultant with Beyond Business, CSR reports are not meant to be read, they are meant to be used. “These reports are not meant to be bestsellers,” she says. “A report is a repository of information in one place covering a specific time period, demonstrating the performance, results and impacts of an organisation.”
Cohen says the fact that reporting motions are filed in AGMs and more stock exchanges require sustainability reporting as a basic term of trade testifies to the continuing expansion of CSR reporting. “However, it doesn’t testify to the fact that stakeholders are reading reports. But then, I wouldn’t necessarily expect them to.
“The only evidence we have that reporting is meaningful to stakeholders is the existence of the reports themselves. Surely, if they were useless, more than 8,000 companies around the world would not waste their time publishing them every year.”
Recognising the need to create value from their investment in the reporting process, some companies are trialling a range of techniques to enhance their reports and bring them to life for the intended audience.
For example, at the European broadcaster and telecoms firm Sky, the annual report is just one element of it’s so-called Bigger Picture reporting and engagement strategy. There’s downloadable PDFs, blogs, a new interactive online tool and, as you’d expect, lots of videos. It has even tried to bring some of its core sustainability campaigns – such as its partnership with WWF to protect the Amazon rainforest, offsetting some of its carbon impacts – into its programming schedule. Sustainability reporting is merely one part of Sky’s wider communications strategy.
“Our reporting used to take place during a four-month block of the year. Over time that’s changed,” says Fiona Ball, head of responsible business. “Yes, it’s good having a snapshot at the end of the year but by the time the report comes around, the majority of the initiatives we report on have been and gone.” To avoid time lag, the company now measures the performance and evaluates initiatives as soon as they are finished – and engages people around them straight away.
Sky’s approach is one welcomed by Cohen who says it’s unrealistic to “shove a 150-page report under the noses of a group of stakeholders and expect them to read it and engage around it”.
“But you can extract relevant information from a report and present it effectively, creatively, interactively and selectively to stakeholder groups.
“Presenting a 50-page section on environmental sustainability to a human rights activist may not get you very far. But presenting your policy on human rights and details of your performance and multi-year KPIs on human rights will be a useful start to a meaningful dialogue.”
At the US sportswear brand Nike, the reporting process offers a chance to get feedback – not only on its report, but also on its wider business strategy and initiatives. Leaning on the likes of BSR and SustainAbility to facilitate small stakeholder groups, the company asks panels of experts to provide feedback on early report drafts and to give opinion and advice on things like whether the content is material or relevant, as well as the tone of voice being used. Past participants in the process have included the likes of Lindsay Bass at WWF, Mark Kenber, CEO at The Climate Group and Matthew Thurston, head of product and supply chain sustainability at REI. Engaging stakeholders in the reporting process gives the company’s leadership “direct insight and perspective from external experts,” it says.
Online surveying, using consulting firms to conduct interviews with selected individuals, initiating round table discussions and creating online platforms to integrate stakeholder responses in real-time; many of these techniques are being adopted to complement traditional reports and enhance engagement. However, Cohen has her reservations. “Not all stakeholders were created equal and these interventions mostly serve to tick the box of stakeholder consultation,” she says.
The format of ongoing corporate advisory committees, consisting of relevant and diverse individuals that rotates every five years, is the best approach, adds Cohen. “This forms a permanent sounding board for sustainability issues over time and is a more effective way of capturing changes in sentiment from individuals that are actually engaged and invested in providing good input.
“But the interaction with this group should not be only at reporting time.”
While the nature and practice of sustainability reporting evolves, so too will the intended purpose, says Dr Nelmara Arbex, a senior advisor with the reporting standards body GRI. Some early trends to have emerged from the GRI’s Reporting 2025 Project suggests that disclosure and reporting will no longer be just an accountability tool but will develop as an instrument through which businesses can demonstrate their commitments to big picture goals, such as tackling climate change or improving wealth distribution.
Meanwhile, the proliferation of online social media and analysis tools will continue to throw up a number of challenges and opportunities for stakeholder engagement. “As tools to interact with stakeholders, the reports of the future will not be printed documents, but instead dynamic, accessible data sets,” says Arbex.
“Companies will also have less control. Business performance data will be gathered and analysed using search engines and analysis software, which will empower stakeholders to find new correlations and make independent assessments of the consistency of company communications.”
As Cohen concludes, the creation of a sustainability report does not signal the end of the stakeholder engagement process, merely the beginning. “People seem to think that the sustainability report is the engagement. But the engagement process has a life all of its own. The report is merely the platform that enables engagement.”