Saturday, January 4, 2014

When is CSR Reporting honest?

What makes you read a sustainability report and come away thinking: "This company is really honest?" How many times has that happened to you in recent years? (assuming you have read a few sustainability reports). The Openness and Honesty Category in the annual CRRA online reporting awards is always an interesting one for me, as, let's face it, if we are not convinced of the honesty of the reporting company, then pretty much everything else is a waste of time. Am I right or am I right?, the CRRA host, says this about the Openness and Honesty Category: "It’s sometimes difficult to tell the whole truth. It’s easy to highlight the good news and ignore the bad. Whether performance is poor or excellent is less relevant for this award. This award is for the report which ‘comes clean’, tells both the good and the bad news, and which convinces us that this is a balanced picture."

Indeed, bad news was cited as one of the most significant credibility-builders in reporting, according to research the published in 2013. But there is bad news and there is bad news. Sometimes, bad news is so wrapped up in sugar that you don't even realize it's bad news. Sometimes, bad news is so insignificant that it's not even news, let alone bad. Sometimes bad news is also old news, and not worth wasting time on. Sometimes, bad news is simply a number in a chart which shows a target was not achieved, with no explanation or acknowledgment. Bad news is rarely that people screwed up, people made mistakes, people got it wrong, people failed. Bad news is rarely personalized (unless you are Tony Hayward), though it's usually quite personal. Maybe reports should include a section entitled: Who screwed up this year, why, and what we did about it. That would shoot any report right to the top of the Sustainability Reporting Honesty Leaderboard Rating of All Time.

But it's not just bad news that builds credibility. A report containing only bad news would never get past legal counsel. It's the combination of both good and bad news and the consistency with which the company's overall performance impacts are reported that creates a credible report and the feeling that we are reading an honest account of performance. The result is that you believe the company has made an effort to tell it like it is, even though you always know, deep down, that the company has pre-deselected a range of things that it will not disclose.

I took a look at the ten reports shortlisted for the Openness and Honesty Category to see if I could identify a good news - bad news combination. Previous winners in the Openness and Honesty category include Novo Nordisk Annual Report 2009 (CRRA '11), Marks and Spencer How We Do Business Report 2011 (CRRA '12) and Pacific Hydro Pty Annual Review & Sustainability Report 2012 (CRRA '13).

This time, the shortlisted lineup includes prior winner Pacific Hydro and nine other hopefuls. You can find all these reports and read them at CRRA '14 Best Openness and Honesty Category.

  • British American Tobacco plc Sustainability Summary 2012.  
  • Co-operative Group Limited Sustainability Report 2012.  
  • Fromageries Bel SA Corporate Social Responsibility Report 2012.  
  • Hydro Québec Sustainability Report 2012
  • La Trobe University 2012 Sustainability Report.  
  • Microsoft Corporation Citizenship Report 2013
  • Pacific Hydro Pty Limited Annual Review and Sustainability Report 2013
  • Royal BAM Group nv Sustainability report 2012
  • Smithfield Foods Inc 2012 Integrated Report.  
  • STMicroelectronics NV Sustainability Report 2012

BAT supplied 180 markets with over 694 billion cigarettes in 2012.  Is that bad news or good news?  You pick. But here's some really bad news. In 2012, there were 12 fatalities among BAT employees and contractors. In 2011, there were 7 fatalities. And no, these were not due to second-hand smoking but to injuries occurring during the course of work. BAT explains that a large factor causing these fatalities is assaults on sales and marketing people. I wonder what's more dangerous - smoking cigarettes or selling them? I checked back to an earlier BAT report (couldn't resist) and in 2010 there were four fatalities and in 2009, three. What's BAT doing about this four-fold increase in fatalities in three years? It's doing a lot of investigation and putting in place "focused support and action plans" and a global awareness campaign.  

Aside from these 19 people dying during the past two years, the rest of the BAT report is really quite good news. BAT faces the question of smoking-is-bad-for-everyone's-health head-on with wonderful news of nicotine alternatives which are safer than toxicants in tobacco, great stories of environmental added-value and support for a strict sector regulation.

The title of The Co-operative Group report - Building a Better Society - gives a hint that this report might be good-news oriented. However, the Co-op confirms that this is a balanced report. Chair Len Wardle says: "Good or bad, we report our impacts on everything from the environment to animal welfare, from people’s diet and health to diversity." Jonathon Porritt's "expert commentary" is only good news. Some of the superlatives in his short commentary include: remarkable, an inspiration, good story, impressive, pioneer, extraordinary". Perhaps the bad news is that there are few incredibly exceptionally admirably wonderfully astoundingly positive phrases he didn't manage to cram in.

True to its assertion, The Co-op reports the good and bad of target achievement.

The good news is that most companies have a hard time setting targets, let alone reporting performance against targets, so well done to the Co-op.  

Fromageries Bel's report - Sharing Smiles - is a first report. That's the good news. It's also the bad news, because it's a shame that this company did not deliver a report before now. It's a really well done report. The bad news is that there are zero women on the management committee at Bel, despite women making up 37% of all managers.

I had a hard time finding anything that looked like bad news in Hydro Quebec's report. That didn't make it less credible for me, but just to be on the safe side, I did a quick web search to see it I could come up with any major bloops about Hydro Quebec and I couldn't. The report, Hydro's 11th, is clear, readable and materially focused. The materiality process on the Hydro Quebec's website is impressively documented. So, no bad news. But don't let that fool you.

La Trobe University's report is another serious affair, but there is a little bit of bad news wrapped up in a little bit of good news. "While we have only achieved one of the three targets for women in senior roles, we are committed to gender equality and our Equal Opportunity for Women in the Workplace Strategic Plan 2012–2015 will provide guidance to move the University’s gender equality forward." The target was 42% and the achievement was 37%, so that's only almost bad. The other piece of good news in the La Trobe report is that target actions in all different performance areas throughout the report clearly state who is responsible for delivering (by job title). Now we know. And so do they.

Microsoft's 105 page report is rather a good news report. There is some really good news: For the first time ever, we’ve integrated carbon use into the financial decision making of the company. Our internal carbon fee builds a more responsible corporate culture while giving us a new perspective on the external costs of our emissions." That sounds like great news.  There's also good news from stakeholders. For example, Yutaio Wang from China: “ I can’t tell you how happy I was to find out I could get Microsoft training for free. I’ve always wanted to learn IT skills, but thought it was out of my reach.” There's good news about technology education, supporting NGOs, environmental performance, life-cycle impacts, human rights, online safety, data privacy, conflict minerals. In fact, it's all really really good. Why spoil it?

Pacific Hydro, on the other hand, piques our interest right on the very first page. The report gives a legend for understanding targets. Take a look at this:

Now, doesn't that make you sit up and race to try and find some little x's ? Fast forward to page 14. Oy! What a disappointment. Loads and loads of ticks and only one little x. "Did not achieve required returns due to overall reduction in forecast bundled (green and black) prices and delay in La Higuera tunnel rectification works." I thought that that might be our bad news over and done with in this report but then I came across a good bad report about the noise from wind farms and families who complained. Apparently wind farms create noise - but did you know that they create inaudible noise? Isn't that an oxymoron? "While complaints differ across the three families, they include concerns about audible and inaudible noise, vibration, and health."  Well done to Pacific Hydro for reporting this sort-of bad news.

Royal BAM Group's report leaves nothing to chance. It includes a section entitled: "Where we can improve". It cites safety, carbon emissions and waste as key areas of focus, and these are all top-right quadrant material issues. Detail about how Royal BAM plans to improve are included in the relevant report sections. That's great. Now we don't have to read the entire report looking for bad news. All the credibility has been established up front in a very clear way. Way to go, BAM.

Smithfield Foods' report starts with bad news. A "forward-looking information" statement, half a page long, which I suppose only lawyers understand. My point is, if I don't understand it, and it's full of legalese, then it must be bad news. However, this is probably due to the report's integrated approach. Pages 1 - 54 are the Integrated-Sustainability Report, pages 55 to 191 are the company's Form 10K. I didn't look at the latter but the former is a sound and informative read, well-written, using the Integrated Reporting value creation framework rather than the G4 material-impact approach. Every section has a good-news piece about how much value Smithfield is creating for different stakeholders. The bad news in all of this is the recall of 216,238 lbs of portobello mushroom-flavored pork loins that may have contained an undeclared allergen. Fairly mild bad news, I guess. Unless you're allergic.

STMicroelectonics uses the by now familiar little x approach to tell us their bad news. There are actually quite a lot of little x's. Is that good news or bad news? Fortunately a new set of objectives has been established for 2013-2015, so that probably turns this into good news. The degree of data transparency is very high in this report, covering all levels of performance over a 5 year period, and that's good news even if it contains bad news.  

This post leaves me contemplating why people focus on bad news as a credibility builder? I don't find that this is the only thing, or even the main thing, that makes a report credible. Let's be realistic. A sustainability report is not a confessional where companies request to be absolved of their sins. It's not something companies put out there so that you can hang them with it. However, as no company is perfect, I guess it's somewhat of an affront to our intelligence to present us with a report that gives us only the perfect picture. And that's why bad news is so important in sustainability reporting. It respects our intelligence. In return, we appreciate the honesty. 

I haven't deliberately tried to influence the outcome of the voting in CRRA '14 Openness and Honesty Category - none of the above reporters are my clients (yet, haha), so any influence you picked up is entirely your responsibility. However, I would like to influence you to vote. Voting in CRRA '14 is open through to end January and prizes are offered for voting. Here's your chance to both win a prize and vote for the best bad news. Go for it!

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: the Concise guide to Next Generation Sustainability Reporting  AND  Sustainability Reporting for SMEs: Competitive Advantage Through Transparency AND CSR for HR: A necessary partnership for advancing responsible business practices . Contact me at   or via my business website   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

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