Sunday, November 9, 2014

Reporting is seriously undervalued

This past week, I was privileged to attend as a guest speaker the World Business Council for Sustainable Development (WBCSD) 2014 Annual Council Meeting in Atlanta. This will be the first of a few posts reporting from the field about the sessions where I was involved in Atlanta and highlighting the work of the WBCSD, which I found to be compelling, engaging and very leading-edge. For a quick look at what WBCSD is all about, check out the website or take a look at this post.

The first of the three sessions I took part in was the presentation of the 2014 (second annual) edition of Reporting Matters.  Reporting Matters is the bible of reporting effectiveness, using reports of WBCSD members as the basis for an analysis against 18 criteria (a "reliability" criterion was added in 2014). The new report showcases best practice examples selected from 162 sustainability and integrated reports analyzed across all criteria. This is a tremendous resource for any reporter. The Reporting Matters team from WBCSD and Radley Yeldar have done a great job in pulling this all together. What's more, overall, reports show an improvement over 2013 with 25% of reporting companies showing better materiality disclosure. 86% of reporters use GRI guidelines (up from 75% in 2013)  with 25% of reporters already having transitioned to G4. This year again, GRI reporters tended to score better than non-GRI users.

Reporting Matters 2014 was unveiled in Atlanta by the Redefining Value team. Redefining Value is one of the WBCSD's priority work areas to help deliver its Vision2050 which proposes that a "business should be measured by its ‘True Value’ and should use ‘True Costs’ and ‘True Profits’ in its internal and external reporting." This means including the costs and benefits of externalities and reporting in a way that links profit and loss, performance and value creation in the context of longer-term environmental and social impacts.

After presentation of the report and other insights from the Future Leaders development program (more about this in a future post), I was asked to share some insights about reporting. Below is the gist of what I said (including the bits I skipped over for lack of time)(I get carried away talking about reporting)(Did you notice?)

"

I have studied the new Reporting Matters report and find it very valuable for any company to learn and improve. Sustainability reports are meant to be used. To be used, they must be effective. Peter Bakker (WBCSD President and CEO) states in the introduction to Reporting Matters 2014 : "The end goal [of reporting] is concise corporate disclosure that brings together financial, environmental and social performance to reflect improved risk and performance management within companies, as well as to drive more accurate valuation of companies and improved allocation of capital market investments." Improving performance. Improving allocation of investments. That means change. Reporting both reflects and DRIVES change. 

Here is the key message I want to share with you today.

Reporting is seriously undervalued – the failure to capture the power of the reporting process to drive performance, engagement and empowerment is probably one of the biggest failures of business over the past 10 years. Let's face it. Whenever anyone talks about reporting, all you hear is groans and sighs. All people do is moan that their reports don't get read. Everyone talks about the cost and resources required for reporting but very few people actually refer to it as an investment. No-one smiles when they talk about reporting. Quite the opposite in fact. Mention sustainability report and people's jaws drop to the floor or they go into a deep coma. Hardly anyone actually says: "Wow, we derive real benefit from our sustainability reporting. It's a fantastic and fun activity. It's really worth our time and effort.

So, how did that happen? How did we turn sustainability reporting into everyone's biggest headache? How is it that companies who are expert at squeezing every cent out of a capital investment get barely a quarter of the value from their report? Let me tell you why. It's because reporting is, sadly, very misunderstood. And who misunderstands reporting the most? Yes, you guessed it. Pretty much everyone. CEOs. Investor Relations folks. Managers. And, don't fall off your seat… Chief Sustainability Officers. Yes. Quote me on that. Chief Sustainability Officers don't understand reporting. Haha. I'll probably never work in this industry again, but what the heck. I can prove it. Just go back home to your workplace and see how many managers and employees know about your sustainability report and have actually taken an interest in any part of it. Call up any of your key suppliers and ask them if they have noticed your report. Talk to a few customers. See what they say. Ask your Sustainability Officers how many conversations they have had about their latest report with just about anybody. I am prepared to guarantee that, for most of you, the responses won't be very encouraging. 

So let me present another perspective. Sustainability Reporting has business value, it engages internal and external stakeholders, it empowers people and it's fun. Notice that I talk about reporting, not just reports. Because the PROCESS is just as important as the OUTPUT. What you do with the output is also part of the process. A Sustainability Report is made up of three parts: the preparation process, the publication and the engagement process following publication. Most people undervalue the first part, minimize the second part and completely ignore the third part. 

Sustainability Reporting has business value, it engages internal and external stakeholders, it empowers people and it's fun. 

Business value: The minute you follow a reporting framework, you are forced to think about issues in a different way. If you take a framework such as the GRI G4 framework, you are asked to give deep consideration to material impacts and the focus of your sustainability activities. The minute you publicly declare what's material, your paradigm of what you are doing, measuring and reporting changes. And when it does, you start to create a different kind of business value and business commitment. But only if you do this as a serious activity. If you just go through the motions, all you get is motions.

Engagement: The reporting process is a fantastic platform to engage internal and external stakeholders on what's important to them and their expectations of you. You may think you know. Maybe you do. But asking the questions creates ownership, partnership, commitment, motivation. Talking in a different way to stakeholders will deliver you a different kind of stakeholder relationship. 

Empowerment: I say that everyone engaged in the reporting process is empowered by it. Sustainability reporting is a way to bring people out of their regular activities, allow them to tell their stories, shine a little. With so many online platforms for reporting, employees are now even becoming movie stars .. reporting videos featuring employees are becoming much more popular. Take a CEO. CEOs have almost no involvement, I might say, even no ownership, for the reporting process. Most of them probably hardly even read their own opening statements. Yet, look what happens to a CEO when she has a great sustainability report to share … suddenly the CEO can join a conversation about sustainability, can showcase her organization on world stages, is seen as progressive or at least, legitimate. It's highly empowering for a CEO to be able to demonstrate – through a Sustainability Report – that her company is behaving in a sustainable manner. 

Don't let the technobabbling frameworks misguide you. Part of the headache around sustainability reporting is that we all think it's so complicated. GRI, SASB, CDP, Integrated Reporting… finding your way through a labyrinth of conflicting and disconnected guidance documents written in language that you need to be a professor of law to understand doesn’t really help anyone. But it's not that tough. Don’t let all these technobabblers derail you. It really is quite simple. Work out what your unique contribution to the world is. Define how you are materially impacting stakeholders. Prioritize. Act. Measure. Report. Engage. Voila. Don't let the framework builders define what's important for you. You have to do that yourself. Don't let SASB tell you biodiversity is important. Let your stakeholders tell you. Don’t let the Integrated Reporting framework scrunch up your brain with so many different capitals if they don't have meaning for you. Since when was a person "HUMAN CAPITAL"? How weird is that? Sustainability reporting in its simplest essence about the way your company impacts the world, how it measures and accounts for doing so. Doing it well adds value to your business, it's engaging, empowering and fun. 

Put comparability back in its box. One of the big dilemmas of course is how to tell who is better than the rest. We are all obsessed with ranking and ratings, and yes, wait for it, the Holy Grail of Comparability. Companies are competitive and sustainability is a competitive differentiator. GRI was set up with a goal (among others) of establishing comparability. It never worked. Even CDP, where the focus is on a single set of KPIs, I suggest, does not achieve true comparability. So you know that Company X has lower GHG emissions than Company Y. That single data-point is connected to so many other data-points that it's just not enough as a basis for making an informed decision about investing, buying from or working for that company, or allowing it into your neighborhood. I say comparability is a diversion. What we should be looking for is good process that delivers intended results and consistency over time that enables us to see how a company does better than itself. 

Consistency is the differentiator. Some of the best companies in this space are most respected because they demonstrate consistency over time. A single report is a drop in the ocean. Sustainability credibility is a series of action and reporting cycles over several years, where progress can be demonstrated. M&S and Plan A, Kingfisher and Net Positive, Patagonia and the Footprint Chronicles, Pepsico and Performance with Purpose, Nestle and Creating Shared Value, Unilever and the Sustainable Living Plan, Skanska and Deep Green, H&M and Conscious Fashion. The value in this program branding is its consistency year after year of delivering sustainability results. All these companies set multi-year targets and follow through, coming clean about where they are not delivering. 

Don't force it (all). I am often asked about mandatory reporting. Should all companies of a certain size be FORCED to report and FORCED to report the same things? There is no doubt that voluntary reporting has not evolved as a universally accepted norm in a consistent way. There is also no doubt that legislation changes the way companies behave. The Denmark report or explain experience caused more companies to report and some to actually derive benefit from it. In an ideal world, companies would want to use reporting to derive the value it brings for their companies. However, there's something else. If we believe that reporting has value and is a catalyst for performance improvement, why would governments not be more interested in having companies do things that will help them create performance improvement? It's in the economic, social and environmental interest of governments to have more companies report, and use the output to drive allocation of resources and plan future infrastructure. I therefore believe that governments should mandate sustainability reporting of policy, process and a  set of core indicators that should be disclosed by all companies. Exactly what and how companies report this and more can be discretionary. Those companies who, as now, see it as valuable will invest more and derive more value from it. Those who want to tick the box will do the minimum and get the minimum in return. But as a minimum, governments are also accountable for corporate impacts and should legislate to know what they are dealing with. 

Reports are people. Legislation alone is not going to make the transformation here. Companies are. CEOs are. People are. Stakeholders are. Sustainability reporting is one of the tools that can help this transformation. Rounding off, my message is that Sustainability Reporting has business value, it engages internal and external stakeholders, it empowers people and it's fun. If you approach reporting with this mindset, you will be amazed at what reporting can do for your business and for your stakeholders. You might even find it raises a smile. Or two.

"



elaine cohen, CSR consultant, 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 via Twitter (@elainecohen)  or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm).  Check out our G4 Report Expert Analysis Service - for published G4 reports or pre-publication - write to Elaine at info@b-yond.biz to help make your G4 reporting  even better.   

1 comment:

eatehort said...

Hi Elaine,

Love the post. Maybe the best of the year for me. You should have a context of the best post at the end of the year!!!

Related Posts with Thumbnails