I popped over to London this week on my way back from another engagement to catch the second day of the action-packed Ethical Corporation Annual Reporting Summit. I arrived just in time to catch Anne-Marie Flannagan, Director of Corporate Social Responsibility at Fazer, hand out a whole pile of her company's products and pass them around the room. That was quite fortuitous. You might be wondering, as I was, who on earth is Fazer? Well, it's a chocolate company, founded in 1891 and privately owned to this day. After you tasted their products (and I did, all of them), you don't forget the name. Fazer is pronounced Fat-Sir, by the way, which is probably fairly appropriate :) Anne-Marie shared with us the processes of stakeholder engagement this company has undertaken to get into line with expectations from NGOs and consumers to address fair cocoa sourcing and traceability, which, as Hershey found to their discomfort, never goes away.
Then, a little later, the showstopper of this Reporting Summit was underway. Three reports, with three company representatives presenting their report highlights. Two judges who brought their own soapboxes, evaluating which, if any, of these reports have The X Factor. And Toby Webb, the smart guy that leads Ethical Corporation, was moderating and casting the deciding vote.
Dr. Márcia Balisciano, Director of Corporate Responsibility at Reed Elsevier started out with a song... yes, she actually did sing... I think she took the X Factor title of this session a little too literally. Simon Cowell would have probably turned whiter than he did when Susan Boyle first rendered "I Dreamed a Dream", listening to Marcia put sustainability reporting into song, but heck, maybe this is a new direction for The X Factor. They could call it the Reporting ZZZZZZZZZZZZZ Factor. Anyway, Márcia presented the shortest report of the three at 57 pages, advising that Reed Elsevier's 2011 Corporate Responsibility Report tries to focus on their "unique contributions" in the area of access to information, promoting the rule of law and more. She admitted that one of the biggest challenges is how to tell the bad news as well as the good news.
So, presentations made, the judges had a field day, using this opportunity to regurgitate anything negative that has ever been said about sustainability reporting.
Mallen Baker, a long-time respected voice in the sustainability and CSR communications arena, said he didn't enjoy reading any of these three reports and that "generically all three reports live within the paradigm of the current state-of-the-art, which is not satisfactory". He didn't quite explain what is not satisfactory about that, but he did go on to say that all the reports show a body of good work and that it's a sign of leadership that the three companies are on the Reporting X Factor stage at all, prepared to put themselves in the hot seat. And it got hotter.
Mallen criticized one report for presenting meaningless statistics and inadequate, unchallenging non-credible targets, noting that he had "lost the will to live by the time he had reached page 100." He said that the question in his mind was at which point you admit to being less than perfect. Mallen has the view that you only make progress by failing. He spoke about one of the longer reports using dense, corporate speak, without which the report could have been about two thirds shorter in length. About the Coop, Mallen said he expected more, because "they have done more for ethical business than any other retailer", but he also mentioned that there was too much verbiage. He also looked for the warts, something which I blogged about a while back, and he did find a few small ones. Mallen was not impressed with the target setting and lack of narrative explaining poor data in one of the reports, but he did find one report with clarity of communication and the clearest structure.
Mike Tyrell, a former Sustainable Investment analyst and founder of SRI-CONNECT, a web based tool for SRI engagement, announced that his role is to "connect your talent to the money", making no bones about the fact that he views reports from an investor standpoint. His expectation: "I want the investor to come and get me - I want detail about contacts, the timetable for reporting, an investor summary, an SRI page, and clear presentation of numbers." He took the opportunity to replace Triple bottom Line thinking with a Quadruple Bottom Line (even though that doesn't roll off the tongue quite as easily). This is Environmental, Social, Economic and Financial, where economic is the contribution the company makes to the health of the economy and Financial is the return of financial value to shareholders. Paradoxically, of course, sustainability reporting has traditionally left out the financial element, as this is the job of the Annual Report, so it's not clear if Mike is advocating for Integrated Reporting or he forgot that he was in a Sustainability Reporting X Factor debate. He also called himself a data-hater - he doesn't want all the data, he wants materially relevant data which connects sustainability performance to financial impacts.
Mike said that one of the reports was a tease, because it referenced revenue opportunities arising from sustainability practices but did not provide enough information. Mike was most disappointed, personally insulted even, when one report states at the outset that is is not targeted at investors but at other stakeholders. Nonetheless, he valiantly continued to read on and found that and ultimately the report gives good coverage of diverse activities in a credible way and engenders trust. On reading another report, Mike confessed to being in "agony" because the report omits to address sustainability issues which is are at the heart of the business model.
The panel, including Toby Webb, selected The Cooperative Group's report as the best of the three, and this was confirmed by the audience popular vote, which was a show of hands. There was no time for texting.
A perspective of my own:
I always maintain that reports are not meant to be read, they are meant to be used. So, sitting down to read over 300 pages of Sustainabilty Reports in one session is an excercise which would turn anybody's mind into jello. This is clearly what happened with the judges, who made their pronouncements, in part, on the basis of sensationalism rather than balanced opinion.
Too long, said the judges. The fact that, by their very nature, Sustainability Reports are designed to reach a wide and diverse audience, and are not intended to be a replica of an Annual Report, means that much of the criticisms leveled at the three reporters were, in my view, a little uncalled-for. A 186-page report is not meant to be read end-to-end, and suggesting that all the most material information could be crammed into 60 pages may leave certain stakeholder groups unable to find what they need. I am not advocating for long reports, but I don't believe reports should be judged on length. What they should have is a clear structure where information can be easily navigated and the most important information well highlighted.
Too many case studies, said the judges. Often, case studies are what make reports come alive and these tend to be the most sought-out parts of reports. Clearly, the case studies must be connected to performance and offer substance, but reports without case studies is like trifle without sherry.
Wishy-washy targets, said the judges, referring to targets which define process rather than outcomes. I have some sympathy for this, but too often in reporting, we see companies declare targets which are just long-range numbers which are very challenging versus current performance. Process-based targets, which show what a company is intending to do to achieve these targets, are useful milestones and support credibility.
Not enough bad news, said the judges. This is an unrealistic expectation. No company goes the Full Monty. Ever. Just get that. Sustainability Reports will never be a list of failures. It is reasonable to expect companies to present challenges and issues they are attempting to address, as well as explain actual dips in performance, but if we are expecting Sustainability Reports to read like John Steinbeck's "The Grapes of Wrath", described as one of the 10 most depressing novels ever, then maybe that is what we should read. Sustainability Reports must be optimistic, sustainability at its root is an optimistic exercise, otherwise none of us would do it. Reporting must be authentic, it must present a balanced picture, but looking for the Bad News is always going to be a fruitless endeavor.
What I didn't hear consistently from the judges, is whether these reports ultimately created greater trust. Trust is what reporting is about. Whatever stakeholder group you belong to, and whatever specific information you seek, when you use a Sustainabilty Report, you want to come away feeling that you trust that company just a little more. Mike Tyrell made this point about the Cooperative Report. He felt that report did promote trust. Perhaps, at the end of the day, that's what swung the overall vote in their favor.
The Reporting X Factor was one of the best Reporting Conference sessions I have attended in a while, and both the judges and the reporters engaged in an entertaining and thought-provoking way. The perspectives were interesting and all companies, I am sure, received valuable feedback, while the judges got an opportunity to go public with everything they think is wrong about Sustainability Reporting using three willing sitting ducks. It was a fun-serious session and I am already looking forward to the next one. Maybe then, Ethical Corporation can invite Simon Cowell, who, in his inimitable way, will say something like:
"There was one great part to your report - it was the end!