Is Integrated Reporting truly Integrated?

Right on the heels of the GRI G4 Exposure Draft, which rightly avoided getting into any discussion of Integrated Reporting, despite an original intent to create a seamless harmony between these two streams, it looks as though the GRI and the IIRC are having a bit of a language problem. That is, neither is speaking the same one. GRI is talking material impacts. IIRC is talking value creation.

The IIRC recently published a Draft Framework Outline  which is written, I think, in English. This follows the IIRC Discussion Paper which was published in September 2011 and elicited over 200 responses. A summary of the responses can be downloaded here, or you can do as I did, and take a look at all the individual responses submitted by people and organizations here (including mine here). It's worth taking a peek at these. They are very interesting. And sometimes rather amusing!

The purpose of the Integrated Reporting Draft Framework is to keep stakeholders informed. The Draft for Public Consultation will not be issued until 2013, with a Version 1.0 for implementation by end 2013.

The Integrated Reporting Draft Framework describes the elements that the Framework is expected to contain when it is actually a Framework and not a Draft. It has two parts: the concepts that are likely to be included in the Integrated Reporting approach,  and the expected elements contained in the route to preparing one.

The Draft framework refers to a "principles-based approach rather than focusing on specific KPIs or rules for measurement or disclosure of individual matters". While the IIRC threatens to issue KPI's or rules for disclosure (in GRI language: Performance Indicators and Profile Disclosures) at some future date, the emphasis is clearly on companies using their own judgment to sort out what's important and what to measure. In this way, the Draft Framework does have some similarity to the elective elements contained in the new G4 Exposure Draft which proposes a more rigorous process to define material issues and disclosures relating to those issues only.

Creating and Preserving Value is a key theme in Integrated Reporting. While one might argue that value is determined by considering all stakeholders, the focus on value rather than impacts moves Integrated Reporting further away from the accountability focus that has been, in my view, a pivotal factor in the development of sustainability reporting.  I think this positioning - value creation versus accountability - is one of the basic differences in perception between financial reporting and sustainability reporting.  The Draft Framework expects to include a definition of value, just to make it clear for everyone - and the implication is that by using the capitals system (see below), the definition of value will be broadened to include value for all stakeholders rather than purely financial value for shareholders. But what I am not sure about is whether there is a loophole that assumes you can create value without being accountable? If Integrated Reporting focuses on value creation, who focuses on accountability?  

 

The IIRC calls resources and relationships "capitals" of which there are six: financial, manufactured, human, intellectual, natural and social. I don't really identify with this. Why call them capitals when they are actually resources? Almost any definition of capital you look at makes the connection between capital and creating money. If all that the new approach to Integrated Reporting is doing is changing the words we use to refer to creating money, I am not sure we haven't lost the plot.

The Framework is likely to include a set of  guiding principles which should be used to prepare the report.

• Strategic focus
• Connectivity of information
• Future orientation
• Responsiveness and stakeholder inclusiveness
• Conciseness, reliability and materiality.

These principles make sense, as I have said before. The aspects of connectivity and future orientation are often very lacking in our current forms of sustainability reports.

The Framework  is likely to prescribe six content elements relating to business model, operating context, strategic objectives, governance, performance, and future outlook. So far, so good. These are the elements that were introduced in the Discussion Paper that was published last year and seem to be the right sort of questions that a company should address.

To what extent this Draft Outline Framework actually moves us further down the track of Integrated Reporting. What exactly is integrated here?

 

Claudia Kruse writes on the IIRC Blog: "There is still much confusion about the distinction between sustainability reporting and integrated reporting. From an investors’ perspective it is absolutely critical that integrated reporting is positioned firmly within the realm of value creation and in a manner that speaks to the boards and financial (reporting) departments of companies". How integrated is that? I understand the need for investors to seek ESG information. I understand that the financial community is looking for another way to safeguard their cash. So what is this distinction that Claudia Kruse refers to? If all we are doing is moving from Financial Reporting to Value Reporting by adding in a few more ESG context-related content areas, then there is no new distinction. There will be Integrated Reporting and Sustainability Reporting. Just like now. Annual Reporting and Sustainability Reporting.

The state-owned energy Company from South Africa, Eskom, has delivered an Integrated Report which, for the first time, claims to align with the principles of the IIRC Discussion paper, stating,

"Eskom has combined sustainability and financial reporting for a number of years, but this is the first integrated report that aligns with the principles contained in discussion papers published by the International Integrated Report Council and the Integrated Reporting Committee of South Africa. Integrated reporting is a new international initiative that has emerged in response to the shortcomings of traditional reporting, which emphasises financial results without taking account of the broader context in which companies operate, and fails to weave together different reporting strands. Integrated reporting allows for reporting on financial results, governance, sustainability and other material factors in an interdependent manner. It addresses the challenges that companies face, the advantages they enjoy, the external factors that influence them and the way they in turn influence the external environment."

The report appears to present both financial and sustainability information in a comprehensive way. There is a degree of integration in the narrative of social and environmental context.  Eskom lists a set of material issues throughout the value chain. These are typically the sort of issues we might see in a Materiality Matrix of the type that many companies include in Sustainability Reports today. It is certainly a good thing to see this in an Integrated Report and Eskom has made a great pioneering attempt to present a full view of the organization in this 166 page report (of which around 60 pages are pure financials).  

Using Eskom as my test-case, I was interested to see how the principles of connectivity of information and future orientation are reflected in this report. I looked at the material issue Becoming a High Performance Organization which relates to safety as a key issue.  

25 people were killed in the course of duty in Eskom in 2011. The same number as 2010. Eight more people than in 2009. Despite declarations of the unacceptability of this safety record, and several programs in place to improve safety awareness, the fact remains that for three years, the situation has not improved, it has worsened. According to the new report, Sustainability Practices 2012 Edition, the average total annual fatalities in the Bloomberg 3000 for companies in the energy sector globally is 3. Eskom is about 8 times worse.

While Eskom expresses regret, and names the employees who died individually and sympathizes with the families, which shows respect and concern, as an investor, I would be interested to know a few more things:

• What impact does this level of fatalities have on  business continuity?
• What is the cost of this safety record (insurance premiums, employee morale, litigation, recruitment potential, work delays etc)?
• What level of investment is required to improve employee practices?
• What are the implications for creating and preserving value?  

In the context of future orientation, I would be interested to know more precisely what Eskom will be doing differently to prevent 25 more people being killed in 2012. Eskom describes activities and general frameworks relating to safety management, but a very detailed action plan to prevent fatalities is not included.

In a typical Financial Report, I would not necessarily expect to see these analyses.

In a Sustainability Report, I would expect to see what Eskom has included in this current report - details of the issue, an expression of sympathy and an intent (with a plan) to improve.  

In an Integrated Report, I would expect to see an analysis of the financial (as well as social) impact of this material issue and its connectivity to business performance, continuity and value, together with a detailed future plan (not just a target).

I think the Integrated Reporting discussion still has a long way to go. If it is to be something just more than a Financial Report which contains ESG information, the entire quality of thinking needs to change. If it is to be a tool for investors, then companies need to get better about understanding, measuring and reporting on the impacts of sustainability performance in financial terms. Otherwise, how will investment analysts be able to use this additional information to inform their decisions and calculate long-term risk? If the Integrated Report is to satisfy non-financial stakeholders, it needs to ensure that social and environmental impacts, not just value creation, are transparently disclosed, demonstrating accountability. Finally, if the Integrated Report is to become a document which is of any use to anyone, it needs to be more .. well.. integrated.

 

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz  (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

Learning CSR Lessons in Romania

Following my posts on the Value of Case Studies and the Ukraine Case Study contest, the third in this Case Study Trilogy is set against the backdrop of the Transylvanian Mountains and Count Dracula, who could probably have written several Case Studies but not necessarily about sustainability. This post takes us to Bucharest, home to 2.2 million people and the center of Romania's growing economy. It is also home to Dragos Dehelean, Managing Partner of Selenis, a PR  and Communications firm and CEO of ResponsabilitateSociala, a comprehensive portal for all things CSR in Romania. ResponsabilitateSociala is the driving force behind a two day annual event, presenting European CSR Lessons, or Case Studies, for the benefit of the local CSR practitioners, professionals, academics and NGO's. While I was unable to attend on Day One, I had a fabulous time on Day Two (16th May 2012).

The first part of the day was devoted to a panel discussion on community development with speakers from Petrom, Erste Bank Serbia, GlaxoSmithKline Romania, Raiffeisen Bank, and Fundatia Vodafone. All presented fascinating examples of the way they had developed their programs, and spoke frankly about the challenges, dilemmas and choices along the way. An audience of some hundred participants was highly engaged, and each presentation was met with several questions.

Mona Nicolici from Petrom described how  Petrom developed a new strategy which started with educating employees in Sustainability and forming ten action teams throughout the company's operations to support community empowerment programs.  Andrea Brbaklić from Erste Bank in Serbia described her company's program, called Centrifuge, to promote cultural decentralization, youth activism and prevent deviant behavior. Andreia Cucu of GlaxoSmithKline Romania talked about the company's  'The health of kids in the Danube Delta,' program, together with the Association Save the Danube and the Delta by which 80 percent of the kids in this poor and isolated area of Romania benefited from a free medical examination and a health campaign. Corina Vasile of Raiffeisen Bank described the bank's program of donating funds to NGO using social media tools. Finally, in this fascinating session, Elena Serban of the Vodafone Foundation explained how the global foundation provides grants for six-month professional volunteering opportunities, with fifteen people from Romania taking part this year.

The afternoon session was devoted to stakeholder engagement and ways in which companies interact with stakeholders. In this session, I presented a case study from my client comme il faut, an Israeli fashion house, and the way this company engages with different stakeholder groups and also leverages a much broader dialog in society to advance the position of women.

Here is my presentation:

Europe CSR Lessons: Lipstick, Food, Fashion and Prostitution

View more presentations from elaine cohen.

What impressed me most about the day, however, was not only the high quality presentations and generosity of the presenters in sharing their approaches, but also the intense engagement of the audience who fully involved themselves in the debates that arose. Overall, there is a fine sustainability movement building momentum in Romania, and this is a pleasure to see. Kudos to Dragos Dehelean for making a formidable contribution.

As for me, I will be back in Bucharest next week, working with a client on their first Sustainability Report. Hope they haven't run out of ice cream.

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices   Contact me via www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz (Beyond Business, an inspired CSR consulting and Sustainability Reporting firm)

Case Studies Work for Good in Ukraine

Following my introductory post about the Value of Case Studies (here), now it is time to share how this works in Ukraine.

I was fortunate to attend the launch of the fourth National Case Study Contest in Kiev, Ukraine on 14th May.

Actually, my story with this contest started a while back, in my capacity as a judge in the third year of the contest. The contest is hosted by the Center for CSR Development in Ukraine, led by the ever-energetic Maryna Saprykina, the dynamo of the CSR scene in Ukraine.

Over the three years of this program, over 110 case studies have been submitted. The contest is generously sponsored by Ernst and Young in Kiev, where the passionate Victor Kovalenko, Climate Change and Sustainability Services practice manager, Ernst and Young, has a strong personal involvement.

 

The case studies that were submitted last year covered a wide spectrum of topics ranging from road safety, employee engagement, educational programs and more, and were all of impressive quality, clearly stating the issue addressed, the activity and the outcomes.

The winning Case Study in 2011 was from System Capital Management (SCM) a professional investor and the managing company of a financial and industrial group of Ukraine, the SCM Group, which comprises over 100 companies in Ukraine and internationally, employing around 200,000 people. The case study showed SCM's significant contribution to education. "Reforming Ukraine's education system has been an increasingly important issue on the national agenda as far as for the country's successful development and its ability to compete in the modern economy depend on the quality of education of its citizens. Starting from 2008, we have been implementing our social programme “Contemporary Education”, based on concrete steps to ensure that the quality of training of Ukrainian university graduates corresponds to the demands of the real economy sector. The programme has 4 key components aimed and driving the education reform agenda. We believe that by investing in education and raising the quality and standards today we are investing in successful development of Ukraine in the future." In this program, 234 universities took part in a Compass Ranking in 2008-2011, creating awareness for educational possibilities and over 2,000 students from different universities attended master classes delivered by SCM executives in 2010-2011.

The second place went to Turbatoam,  one of the world's largest turbine construction enterprise that implements full production cycle: design, manufacture, supply, installation and adjusting, firm maintenance of turbine equipment for all types of power plants. The issue at Turbatoam was a poor image and difficulty in recruiting young appropriately qualified professionals. The company established a comprehensive Human Resources management program to ensure attraction and retention. The program covered salary restructuring, a full social policy, education, training and career development, and results-based incentives. This resulted in a more balanced age profile in the company and more effective attraction and recruitment of young professionals.

The third place went to ViDi Group, a leader in the automotive and logistics market in Ukraine. In 2009 the Company established the first in Ukraine City of Cars "ViDi AutoCity", which includes authorized dealerships of leading international car brands. The ViDi case study also related to people management, inspired by the need to cope with rapid organizational growth, through creating a staff loyalty program, based on employee dialogue and responses to needs. Turnover reduced by 4% and 16% of staff achieved promotion in 2010 and many other benefits were realized. 

Other interesting studies included:

Auchan, a hypermarket retailer, which developed a program to address the spread of AIDS. The speed of AIDS development in Ukraine is one of the highest in the world with up to 148,000 people infected with the AIDS virus and over 8,000 children hospitalized due to this disease.  Auchan developed a fabulous program to raise awareness and support AIDS prevention.

The Lafarge Group developed a program to address road safety.  The Lafarge Group had over 30 road fatalities in 2010 and early 2011. Therefore, in 2011 the topic of road safety was made a priority and several effective programs implemented for employees and the local community.

Obolon, a large brewery, developed a case study to support environmental protection and recycling of plastic bottles, a major issue in Ukraine.

I expect that the fourth contest, which will give preference to Sustainability Reporting, will be just as fascinating! To introduce the theme, I made a presentation on Trends and Best Practices in Sustainability Reporting (which I will cover in another post!) .

Still on the theme of Sustainability Reporting, I enjoyed a most interesting panel moderated by Pavlo Sheremeta, a partner at Inspira  with panelists Viktoria Grib, Sustainability Manager, DTEK, Viktoria Mykhno, Head of PR at Platinum Bank and Victor Kovalenko of Ernst and Young mentioned above. Aside from the fact that the panel was only for people with names beginning with V, one of the most interesting themes of this discussion was the element of fear which stops companies taking that first step toward transparency.

Both DTEK and Platinum Bank overcame all fears and reservations and are pioneers in the Ukraine market. DTEK published their first Sustainability Report covering 2007 and report every two years with a UNGC COP every year. DTEK's most recent Sustainability Report is here. Their journey has been progressive with each successive report more transparent than the previous one. The process of external verification has also been of value, helping management understand the issues that are important for the company to address in the report and its impacts on society. Platinum Bank published a first report in 2010,  a GRI based report at level C,  and as far as I can tell, the first bank in Ukraine to publish a Sustainability Report. Viktoria Mykhno shared her learnings from the process of developing this report, which included a wise piece of advice: "Be concise and meaningful - cut out what's not material - it's like cutting out your heart, but do it anyway!"

But back to case studies and the fabulous program in Ukraine. It's a way to share, learn, engage and build a body of best practice. I am looking forward to seeing the new submissions later this year. And more Ukranian companies reporting on their sustainability impacts.

Photo Credits to the Center for CSR Development. see  more here.

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via www.twitter.com/elainecohen on Twitter or via my business website www.b-yond.biz  (Beyond Business, an inspired CSR consulting and Sustainability Reporting firm)

The Case for Sustainability Case Studies

How can you use Case Studies to galvanize markets? I have two fine examples from my personal experience this week in Eastern Europe. The first: Ukraine. The second: Romania.

On Monday 14th May, I was pleased to attend the launch of the Fourth Annual National Case Study Contest in Kiev, Ukraine. On Wednesday 16th May, I was also pleased to attend the second day of the European CSR Lessons Conference in Bucharest, Romania. Both events show how the development of Case Studies are contributing to increasing awareness, recognition and sharing of best practice as a platform for market development in these two fabulous and energetic markets where CSR is emerging with the help of committed and dynamic leaders.

What is the value  of a Sustainability Case Study?

A Case Study helps develop Internal Dialogue and Learning: In order to develop a full Case Study, which offers much more depth than a short paragraph on a website or in a Sustainability Report, a comprehensive dialogue must be held within an organization to establish the background, full story of activities conducted, description of outcomes and aggregation of learnings. This cannot be done by one person alone. A great Case Study is the result of internal collaboration which engenders dialogue and teamwork and expands learning for entire teams and companies.

A Case Study helps Focus on Outcomes: By its very nature, a Case Study is not complete without a description, quantitative as well as qualitative, of the outcomes of activity. By its very nature, a Case Study cannot be written until an activity or a process is complete and has delivered a change in the status quo. Far too often, especially in Sustainabiltiy Reporting, or even in internal decision making processes, the focus is on "doing" rather than "delivering an outcome". A Case Study, well-written, encompasses both, and helps link what is done to what has changed as a result. In terms of sustainability, this is of course key. It is unfathomable that we have thousands of companies "doing" sustainability without being able to explain the noticeable impacts of such activity.

A Case Study is an Organizational Story: Often a Case Study will tell the story of an organization's culture and showcase the way things get done. This becomes an organizational story, which can be told and retold in order to inspire additional sustainability activities in the company and reinforce a culture of sustainability and responsible practices. Moreover, a Case Study is one of the few platforms where company can tell its own story in full. There is little media coverage of individual, successful sustainability interventions. Case Studies can fill that gap.

A Case Study is a Learning Tool: Because a Case Study of necessity contains detail of all the stages of an initiative, the Case Study becomes a learning tool for an organization and for external stakeholders. By developing a Case Study, an organization contributes to the body of knowledge in the field, which is important, given the relatively limited knowledge about what is actually happening in companies today. There are many headlines, Press Releases and  short references to Sustainability practices available via different channels. The depth of a good Case Study creates not only awareness but also knowledge of what can be done, and how and what works best.

A Case  Study is a  Tool to Engage Stakeholders: Beyond the internal learning and dialogue, a Case Study can be used to engage external stakeholders either in the preparation of a Case Study in which they were involved or were impacted, and/or in the discussion of case studies completed. This both enlightens stakeholders about the sustainability activities of the company and also involves them in evaluating the sustainability initiatives. The insights of external stakeholders about possible reapplication, extension or development of a concept could be valuable for a company in determining future goals.

A Case Study is a Platform for Building Reputation: While Case Studies alone cannot build trust, and they are best in combination with existing, transparent, sustainability communications on a broader level, Case Studies can contribute to building reputation by showing how companies identified a risk or an opportunity, addressed either or both, and delivered focused action. This confirms the sustainability capabilities of a company and demonstates their commitment, which has positive reputational value.

Case Studies build Transparency Muscles: Many companies which are not ready to deliver a full, transparent Sustainability Report can develop their transparency muscles through publishing Case Studies. Often, this carries little risk because Case Studies tend to focus on successful examples of practice. The publication of a Case Study is a way to create awareness for corporate sustainability activities without the necessary rigor of producing a GRI-based or UNCG or other form of report, which demands much higher resources and much greater transparency. In the absence of broader sustainability communications, a Case Study becomes a pilot for transparency, and starts getting those muscles into shape.

Case Studies build Discipline: Finally, the development of a Case Study requires discipline and rigor. Used as a leadership exercise, this can help build management and communication skills, and teamworking, within an organization.

Events framed around the development of Case Studies are attractive propositions. The development of a single Case Study is usually not a massive organizational resource burden. Participation in such events often accessible to companies where more extensive disclosure requirements might exclude many from participating. In Ukraine and Romania, this is well understood and both are using the Case Study concept as a way to drive sustainability and awareness  in their nascent markets.

To read more about the Ukraine Case Study experience, go to this post:

To read more about the European CSR Lessons Case Study conference, go to this post.

For ice cream, go to your local ice cream parlor or get yourself one of these (a kind gift from my friend, Paul Scott, MD of CorporateRegister.com)

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices Contact me via www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

The P.R.I.C.E. of CSR

A few weeks back, I participated in a panel on the theme of CSR: The Way Forward at World CSR Day in India. The panel was headed up by one of the most prominent pro-CSR thought-leaders in India, Dr. Bhaskar Chatterjee, Director – General & CEO, Indian Institute of Corporate Affairs. Dr Chatterjee has a long and illustrious career, having held several positions of importance in the Indian government, and as Secretary in the Department of Public Enterprises (DPE), he led game-changing reform and change among Indian State Owned Enterprises laying special emphasis on Corporate Governance, revitalization of the MOU system, Human Resource Management, Sustainable Development and CSR.

The DPE released CSR Guidelines for Public Sector Enterprises and run workshops to assist companies in implementation, which includes an allocation of net profit of up to 5% for small companies and 2% for larger companies. Although CSR in this context refers to "CSR activities" which "may be planned in parallel to the business plan, looking at every possible opportunity to link and integrate business plans with the need based social and environmental concerns", rather than a more integrative model whereby CSR becomes the way of doing business, the heightened awareness and contribution to sustainability is important in this fast-growing economy and no doubt has a positive impact.

In the few minutes I had to present my own views on CSR: The Way Forward, I listed five key points: (you might call this The P.R.I.C.E. of CSR :-))

P is for Partnerships: The world's problems extend beyond the capabilities of any single company to solve. Supporting global or regional solutions to sustainability issues is important for businesses which wish to thrive for the long term. Partnership across sectors, and within industry sectors, offers a collective way forward which benefits companies and their stakeholders. The level of partnership activity is increasing - and this will continue.

R is for Reporting: Paul Scott, MD of CorporateRegister.com expects, after all the 2011 reports are logged, to see between 6,000 and 6,500 CSR/Sustainability Reports covering the year 2011 on a global basis. This doesn't include reports written in non-latin languages, of which there are also many (Chinese, Japanese reports etc), so, in reality, there are far more reports. Several countries are including sustainability disclosure in regulation (such as Denmark)  and Stock Exchanges are starting to demand disclosure as a condition of listing (such as South Africa JEC). Reporting - business transparency - is here to stay and will become even more important as part of the way forward. While there numerous Indian companies now  reporting on sustainability performance (watch out for the India Transparency Index 2012 - coming soon!), reporting as a way of life for Indian corporations will need to move into a higher gear.

I is for Integrate: CSR can no longer be a "project" based activity. It is no longer about philanthropy. CSR means creating sustainable business strategy in which CSR is embedded as part of the organizational culture and drives all activities. CSR is relating to the needs and aspirations of stakeholders and identifying business risks and opportunities in a holistic and fully integrated way. Indian business needs to make this shift as part of its way forward.

C is for Creating Shared Value: While the now ubitquitous notion of CSV is gaining ground - some say, too much ground, (see Dr Sustainability's opinion on  CSV), because the concept is being diluted to mean almost anything that a corporation sells that people want to buy, CSV can offer win-win's for business and society. Kevin Moss of BT wrote an interesting piece about what CSV is and what it is not. However, CSV at its core is an outcome of integration of CSR principles into business strategy, and offers a positive prism through which to drive sustainable business practices. Take a look at the Nestle CSV case study website for practical examples.

E is (of course) for Employees: With employee engagement in sustainability having gone viral, and for good reason, corporations today must understand that CSR begins at home. Companies which invest in the compensation, safety, diversity and inclusion, wellbeing, development, environmental awareness and community  involvement  of their employees are winning the War for Talent, the War on Climate Change and the War for Long Term Sustainable Growth and Profit. As they win, we all benefit. CSR is not just about being good to employees; it's the development and systematic adoption of Human Resources policies and practices which lead to the transformation of corporate impacts ON employees to the sustainability impacts OF employees on all stakeholders. Read more about this at CSRforHR.com.

So that's The P.R.I.C.E of CSR. However, it's not a one-way road. A corporation that pays the P.R.I.C.E. of CSR delivers many dividends - and not only for the corporation. In fact, the P.R.I.C.E. of CSR has positive returns beyond standard investment ROI approaches. An article in Marketing Week quotes Marks and Spencer as having contributed an additional GBP 50 million to profit  in 2010 as a result of Plan A, while Coca Cola made $100 million savings due to packaging reductions. 

CSR: The Way Forward also includes attention to many other important aspects of doing business sustainably - such as good governance, the use of technology, especially in the race to a low-carbon economy, implications of regulation, investor demands, supply chain outsourcing, disaster and emergency relief and even the way CSR is managed in organizations. The fascinating presentations by my co-panelists and ensuing discussion highlighted many of these issues.

World CSR Day  in Mumbai was a welcome opportunity to continue spreading the message. I get the feeling that with people like Dr. Baskhar Chatterjee, and Dr R.L. Bhatia, founder of World CSR Day, at the helm, India may just be finding The Way Forward.

 

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via www.twitter.com/elainecohen   on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

20 Questions to ask your Sustainability Reporting Manager

You are the CEO of a company that has been publishing a Sustainability Report for the past few years. On balance, you enjoy the report and find that it is a good reflection of your sustainability performance. You haven't received any awards but you have received some positive feedback from your Board, some customers, suppliers and your own management team. After a few years on the reporting cycle, you have some questions about the costs of producing the report, the time and resources involved, the presentation of the report and the impact the report has on stakeholders. Usually, you are pretty hands-off and leave people to get on with things. However, you feel it's time to understand the Sustainaibility Reporting process a little more closely. You have invited your Sustainability Reporting Manager (SRM) for a little chat. Well, actually, an interview. Because you want answers. Here are the 20 questions you should plan to ask your SRM. You might not want to ask ALL of them in one session!

How are you?

This is as good a question as any to start an interview with. Ask genuinely and listen to the answer. You never know what might emerge that's worth your knowing.

What's new?

Many many moons ago, I attended a Leadership Program which included a strategy session run by the inspiring Ram Charan. One of the things he talked about as a feature of great leadership, which has always stuck in my mind, was the fact that a leader is always asking questions and eager to listen to the answer. Just as a simple question such as: How are you? can be a real floodgate opener, so can the question: What's new? be an opportunty to learn lots about what's top-of-mind in your business and also about the person you are asking. Anyone who answers the question What's new? with the answer: Nothing much has obviously checked out of life for a while, because in life, work and in sustainability reporting, there is always something new.

What aspect of our last Sustainability Report are you most proud of ?

A positive and open ended question for a gentle introduction to the subject. The SRM should be able to talk with enthusiasm about the sustainability report and in response to this question is free to select the things that personally gave her the most safisfaction. Whether these things are the same as those which are important to you, the CEO, or to the business, will give you an idea as to how well your SRM is aligned with the business and with your aspirations. The response may also enlighten you about things you may not have realized were such a big deal  as you read the Sustainability Report.

What specific objectives were established for the Sustainability Report and how were they met?

There are many different types of possible objectives for Sustainability Reports. These may relate to the collaborative process of developing the report, the cost, the adherence to an agreed timetable without a last minute rush, the amount of time invested, the quality of the output (which may be the report content, design or presentation) or objectives might also refer to the range of feedback received after publication of the report. Of course, we are assuming that your SRM did actually establish objectives. If not, that begs another question.

Was the Sustainability Report prepared in accordance with an action plan and clear timetable and to what extent did performance align with these plans?

The reporting process is no less important than the product of the process. Quality process usually means quality report. Also, the reporting process can often be an example of how of other cross-functional projects are managed in the organization. Any reporter who begins without an action plan, timetable and allocation of roles and responsibilities (usually a Steering Team for the report is preferable) is heading for a last-minute scramble, headaches and much conflict before the report is finally published. As CEO, you should be interested in embedding good process in your business, as well as delivering a good report.

How many work-hours of our company employees were invested in the production of our last report?

The report budget often does not include the woman/man/hours of company employees engaged in the reporting process. It includes consulting, design, PR, marketing, printing and all other accociated and easily quantifiable costs. However, doesn't employee time also cost money? As a consultant, I log all my hours and can tell you exactly how much time (and therefore money) I have spent on anything from a major client project right down to this blog post or volunteering work. Knowing the time and cost of your reporting process is half the way to managing it more efficiently.

How much of our Sustainability Reporting budget was spent on external consultants?

Of course, I am biased, being a Sustainability Reporting consultant:) but it is always worth having some external help when writing your Sustainability Report. However, you should know how much it is consuming of your total reporting budget.  

Was the Sustainability Report produced in line with budget? If not, what was different?

Sustainability Reports have a talent for coming in over budget. The SRM is a business manager and must know how to manage budgets. This question is more about understanding if your SRM has it covered than understanding the gory details of what was spent where.

How many of our employees have read the report and how many have provided feedback?

Aha. This is a great question. If your Sustainability Report is not reaching your employees (supported by a proactive process of dialogue) then you are probably not gaining all the potential benefits of reporting. How can employees reflect the company's Sustainability Performance to external stakeholders if they are not familiar with the report? Your SRM should be in close collaboration with the HR function to ensure that the internal organizational processes include engagement with the Sustainability Report.

How many new recruits read our Sustainability Report and did this infuence them in accepting a job with our company?

Everyone likes to quote figures about how potential new recruits (including the zillions of Green MBA and Net Impact grads that join the job market each year) seek socially responsible employers. But once and for all it might make sense to check whether those who joined your company were actually influenced to do so by your sustainability performance.

How many Managers have used the report in discussions/presentations/meetings with external stakeholders?

Your Managers are your sustainability ambassadors and the Sustainability Report is a key tool in their arsenal, whatever their role in the company. If they are not using your Sustainability Report, your SRM is not engaging them effectively. Your SRM should have her finger on the pulse of how your Sustainability Report is being used in the organization.

What insights have you gained from the last Sustainability Report that will be helpful in producing the next report?

Every report is a learning process. How does your SRM learn from experience? How does your SRM value continous improvement? This question will enlighten you.

What did we choose not to report on and why not?

Almost all reports are trade-offs. Legal, marketing, finance, HR team members almost always have something they prefer not to disclose for different reasons. In many cases, these "Secrets" may not be critical to the report's integrity but in some cases, they might be quite telling about the organization's challenges. As CEO, you would probably want to know what your people are fearful about disclosing and why.

What were your disappointments in producing your last Sustainability Report?

Maybe there weren't any. Maybe the report turned out exactly as your SRM envisioned. Maybe not. Understanding how your SRM measured up to her own expectations may tell you a little about the organizational issues your SRM faces in driving sustainability processes. These are the issues where a helping hand from the CEO might just be what is needed.

Who were your greatest allies in the company in producing the Sustainability Report?

Yes, here is the list of people to give fat bonuses to at the end of the year:)

Whose support did you need but did not get?

This sounds a bit like a whistleblowing question, but that's OK, occasionally. I think the CEO should know who is blocking the process. If sustainability is important to you as CEO, and reporting is a key part of that, you need to have set your expectations clear. If your people are blocking progress, you might want to consider how this should affect their performance review, bonus or career development prospects. As a minimum, you might want to talk to them to find out what prevented them from being collaborative.

Why should we continue to produce a Sustainability Report?

This is a fundamental question that every company should ask itself before re-embarking on the process another year around. The answer may not be the exactly the same each year and its worth taking a few minutes to articulate specific hopes for this cycle of the reporting process. NB: The response, "because we reported last year" is not really quite good enough.

What are your objectives for the next report and how will you measure success?

Following on from the existential "why are we doing this" question, the obvious next thing to ask is "how will we know if we have done it well".  As a minimum, you should expect to hear  quantitative targets such as adherence to budget and on-time publication, but equally, qualitative targets about the process of reporting should not be overlooked. Does your SRM intend to get feedback on the process of developing the report? Did your SRM run an effective Reporting Steering Team in which people have had the opportunity to influence? If your report is the single-handed work of your SRM and a consultant, you can bet there's something essential missing.

What help do you need from me in the next reporting cycle?

Asking the question doesn't commit you to providing all the help requested, but it does give you an idea of the state of mind of your SRM. The SRM should be pleased to receive help and support from the CEO and I can think of hundreds of ways the CEO could support the reporting process. An SRM who responds "nothing, really" to this question is probably not doing the best possible job.

Fancy some ice cream ?

How can you have a conversation about Sustainability Reporting without ice cream?

When should we have another little chat?

Be prepared for a non committal response :)

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

Dr Sustainability is back!

Doctor Sustainability is a busy woman. She spends her time trotting the globe (carbon neutrally of course) offering advice to the CEO's of global corporations, senior government officials and movers and shakers in major organizations such as the United Nations, United Biscuits and United Manchester .. err.. Manchester United. You can imagine how delighted I was when Dr. Sustainability agreed to answer, once again, readers' questions on the CSR Reporting blog. You will all recall Dr Sustainability's sound advice last year.

*******

Dear Doctor Sustainability: I have been hearing more and more about Creating Shared Value. What does this mean ? 

Dear Ponderer: Creating Shared Value is another way of saying that sustainability must make money. This is not to be confused with Creating Shareholder Value. The latter is about making rich people richer. The former is about making everybody rich. Of course, there are no guarantees. Except for the latter.

Dear Doctor Sustainability: I was in the middle of reading an online sustainability report and suddenly I felt a migraine coming on. Actually, I have noticed that this often happens when I read sustainability reports. Can you recommend a treatment for this ?

Dear Sufferer: I have treated many people with a similar complaint. Basically, the only thing that can be done is to take a three week daily dose of an antibiotic, ant-depressant, anti-histamine and anti-suicidal drug which can be supplied at your local pharmacy. But don't worry, it comes in Chunky Monkey flavor.

Dear Doctor Sustainability: I have decided to reduce my energy consumption to zero. What would you recommend ?

Dear Energized: Die.

Dear Doctor Sustainability: Surely women can't be good Chief Sustainability Officers ? Isn't sustainability a man's thing ?

Dear Chauvinist: Of course women can be great CSO's. Female leadership skills such as listening, caring, sharing, smiling, collaboration, inclusiveness, appreciation and a sharp analytical as well as creative mind will always give the female CSO  an edge over her male counterpart. Unfortunately this cannot be proven because, with the exception of a very few, all CSO's are male. But don't despair, if you are an aspiring female CSO, your time will come. But you might have to wait for a giant black hole to rip a star apart. 

Dear Doctor Sustainability: I want to write an Integrated Report. But I am not sure quite how to integrate what and where. Should I start off with an Annual Report and include a sustainability paragraph on every alternate page, or should I start off with a Sustainability Report and add reams of financials at the end ?

Dear Integrated: This is quite a dilemma which most Integrated Reporters have not yet resolved effectively. The best way is to rewire your processes to create an integrated approach to business. You can then produce a fully integrated report which includes all the relevant information jumbled up together so that all stakeholders will not be able to find exactly what they are looking for. When you realize this doesn't work, you can split it into two reports to keep everyone happy.

  

Dear Doctor Sustainability: I really don't know what to call my next report. CSR report ? Sustainability Report ? Corporate Citizenship Report ? Positive Impact Report ? Shared Value Report ? Corporate Responsibility Report ? Accountability Report ? Sustainability Review ? Triple Bottom Line Report ? What would you recommend ?

Dear Reporter: How you call your report is a reflection of how you approach sustainability strategy. Sounds to me that you haven't quite got it together. In that case, my recommendation would be to call it a CSR Sustainability Corporate Citizenship Positive Impact Shared Value Corporate Responsibility Accountability Triple Bottom Line Review Report. Nothing like covering all bases.

Dear Doctor Sustainability: No-one reads my Sustainability Report. How can I get people to read it ?

Dear Unread: Kidnap them, bribe them, coerce them, whip them, point a gun at them, torture them. If all that doesn't work, add some pictures of children holding up a globe or saplings blowing in the wind. If you still have no luck, you might try calling it News of the World. 

Dear Doctor Sustainability: My company has decided to use a celebrity to promote our sustainability reporting efforts. Right now the choice is between Susan Sarandon, Bette Midler, Woody Allen and Ben Stiller. Who do you think would be most appropriate ?

Dear Stargazer: I do believe celeb endorsements of sustainability reports is the Next Big Thing in sustainability communications so well done for getting ahead on this. As for which celeb to select, use one who can talk coherently about global sustainability issues such as climate change, water scarcity, poverty, the digital divide, a low carbon economy and human rights abuses in supply chains. (Hint:  It's ok if you decide to drop this idea). 

Dear Doctor Sustainability: I want to write our Sustainability Report for last year, but we had a massive environmental disaster in our business which caused several deaths, destroyed much wildlife and many natural habitats, created a major hole in our market capitalization and seriously damaged our reputation. Do you think I should mention any of that ?

Dear Reporter: Of course. But express it all in a way which makes it sound really really really positive.    

elaine cohen, CSR consultant, Sustainability Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices   Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

The TBL business model. Clear as mud.

My brain often makes its limitations clear to me. There are some things I just don't understand. I have puzzled over a comparison between a traditional and a triple-bottom-line costing model now for quite a few minutes, and I can't work out whether I am just dumb or it doesn't make sense (or both).

It all started when a PR notice about Bascom's community outreach dropped into my inbox. It just happened to be one that missed the delete button before I had a chance to react, so I ended up reading it. It starts off like this:

"With over 90 apartment communities across the country participating, the Bascom Group raises $19,000 for the US Fund for UNICEF"

It goes on to describe that range of activities Bascom leveraged "in 95 communities across the nation" to generate $19,000  (that's $200 per community). Whilst I appreciate the efforts this company is making to help others donate money, $19,000 didn't sound like an awful lot to me, and nothing was mentioned about how much Bascom actually donated, if anything, so I read further to check Bascom out. It's a private equity firm in California which buys up properties resulting from foreclosure or bankruptcy, refurbishes them and resells them, as far as I can tell. The Company has completed transactions worth over $6 billion. $19,000 versus $6 billion. I was still curious. Delving deeper, I noticed something that looked quite positive. The community outreach programs that Bascom engages in include free rent for teachers and police officers in return for services to the community, free financial education workshops for all in their residential communities, free ESL (English as a Second Language) lessons, job fairs and more. All of these services are designed to strengthen the quality of life for those who live in Bascom properties. It's a good core-business CSR approach. Well done Bascom.  

The thing that flummoxed me was Bascom's Triple Bottom Line approach.  Bascom offers a detailed cost calculation comparison versus a "traditional model" and a "community outreach" model. The latter results in social value of $486 (net operating income differential) whilst the traditional model delivers $0 value. I worked through each line, and aside from the fact that the community model generates a higher revenue and has higher marketing costs, I for the life of me cannot fathom out how this calculation proves the TBL business case.

If anyone has any suggestions, please do enlighten me.

elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices  Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

The Big CSR Debate : Elvis rules!!

So, the BIG CSR debate has come and gone. Did we learn anything new? Well, frankly, the only thing that was new to me was the total extent of the disconnect between the views of Dr Aneel Karnani and Chrystia Freeland and today's external reality. At some point, the only way both could feel comfortable about CSR was by calling it simply "good management" or even better "acting in self-interest to make a profit by observing the law". If that is what CSR is all about, then, as Aron Cramer put it, there is a problem. Karnani let himself neatly off the hook by saying that there is no definition for CSR. In fact, this debate might have been called a "dialogue de sourds", where 5 out of 7 people were talking coherently, and two were throwing out a whole series of "wobblies" (a great term used by a former boss of mine), not many of which were accurate, relevant or even interesting. I missed the first part of the debate, so I don't know if it actually started out with an agreement of a definition of what people were going to talk about. In fact, 5 people were talking about one thing, and two people were talking about something else. And there was no middle ground.

At the point at which I hooked in, Chrystia Freeland of Thomson Reuters was referring to "CSR rhetoric", "milk and motherhood and apple pie", and "feel-good win-win Kumbaya language". This might have been relevant about 10 years, ago, but her needle has clearly stuck in that groove. Today, CSR is about strategy, shared value, business opportunity and addressing global challenges. Karnani lives in a world where governments everywhere are icons, where they regulate for every possible impact of business, and enforce every regulation with such perfect finesse that no corporate anywhere is ever able to do any harm to society or environment in any capacity whatsoever. Aron Cramer says this exists only in North Korea, a model which he does not recommend for the entire developed and developing world. Guess we can understand why.

Ultimately, the CSR anti's were putting up smoke screens – the very smoke screens they accuse responsible business of wielding to mask their irresponsible practices and the "deceptive dangers" of CSR. Chrystia Freeland kept harping on about the fallen-halo of " Beyond Petroleum" when in reality, everyone stopped believing that slogan many moons ago, and no educated business person would consider that as part of the current CSR Kumbaya. Another needle, another goove. Chrystia then turned her sights to Microsoft who has just been accused of collaboration with the Russian Government to crack down on outspoken advocacy groups and opposition newspapers. Yep, not a nice story. But Microsoft have issued a full and frank explanation and confirm that "to prevent non-government organizations from falling victim to nefarious actions taken in the guise of anti-piracy enforcement, Microsoft will create a new unilateral software license for NGOs that will ensure they have free, legal copies of our products." Such is the world of CSR. No corporate is perfect. Georg Kell of the Global Compact made this point well. He said "we have to recognize that most big dilemmas are not so easy to solve - climate, poverty and other global issues do not follow a clean simple path, commitment to a non-financial issues is uneven progress, it is very hard to be on top performance in all domains all the time. We have to accept the dynamics of regulatory changes and what business can contribute. Private solutions spill over to the regulatory machine. Where there is a conflict you have to tackle the conflict and work out where you stand." This rings true. The multiple touch-points of any large corporation which impact on so many aspects of our lives are continually being discovered and addressed. The fact that companies haven’t yet buttoned everything down in a nice neat package for every aspect of their business everywhere cannot be an argument for the failure of CSR. Real CSR is that they are willing to try.

Dave Stangis, who told Campbells Soup's Board when they hired him, that he is not a treehugger, but a capitalist who believes in helping them make more money (but in a way which creates positive social impact), says that this state of EITHER – OR makes him crazy. I identify with that, though Karnani and Freeland seem to have problems with the concept of co (co as in shared, together, participative, partnership, working together, interconnectedness, leveraging joint strengths, engaging). The possibility that there is an overlap between the contribution of business and the role of governments in contributing to global sustainability is off their radar. Bob Corcoran gave an example of how GE supported Transparency International in establishing a framework for anti-corruption. But this was dismissed by Chrystia as self interest on behalf of GE, because, she said, apparently GE is apparently not so good at corruption and their competitors are better, so leveling the playing field had to be about regaining competitive leverage for GE. Come on. Is this drivel or is this drivel?

Matthew Bishop, of the Economist, was an eloquent contributor to this debate and got to the crux of things quite effectively. He made the point, which I also subscribe to, that the problem with stock market capitalism is that it overly focuses on short term measures of performance. He says that visionary business leaders are on the side of preparing themselves to be doing things which move the business forward in a sustainable way. Karnani had an answer to this, of course. He says " Shareholders should demand that business be long term. It's a governance problem" . Perhaps Dr Karnani would like governments to regulate that shareholders may only invest in businesses whose governance allows only for a long term shareholder return? Yup. That would work. Not. Bishop again: "How effective regulation can actually be? There is a huge problem of corporate money in America, lack of transparency in corporate lobbying, a lot of our institutions are not being held to account properly" Nail on the head.

Chrystia, continuing in the self-interest groove, raised the issue of Pepsi who on the one hand, sells a product which has "no redeeming value to society" whilst engaging in all sorts of great CSR activities. She calls soft drinks the next "tobacco", pointing out that Pepsi lobbied hard against a soft drinks tax. Hmm. Matthew Bishop wasn’t having any of that. He says that when companies make a claim such as the Pepsico "Performance with Purpose", they are held to account. He says that Indra Nooyi's performance in this respect should be judged by the media and all stakeholders on those promises "Where's the beef, Indra? everyone should ask. He says that this is going to be the defining issue of her career.

Rounding off on this short summary of this long debate, the likelihood is that the camp you started out rooting for is the camp you remained in. And that camp won. If you believe that CSR is a smoke-screen to mask corporate self-interest which is in conflict with the public good, and that the only bodies that corporations should be held accountable to are governments, then you can shake hands with the Karnani-Freeland double act. If you believe that CSR has a valid role to play in improving society and planet whilst enabling businesses to deliver long term shareholder and stakeholder value, in a way which is core to business strategy, then you have many more hands to shake.

If you are undecided, as Aron Cramer says, 50,000,000 Elvis Fans can't be wrong. Go with the majority!

Kudos to Susan McPherson and Fenton for organizing this session and to Christine Arena for skillfully navigating the lion's den. And as it is the start of Yom Kippur, haha, I ask forgiveness for having no patience for arguments that hold back progress.

elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)

Will Karnani respond?

Sent to Professor Aneel Karnani at his email address at Michigan: akarnani@umich.edu  


" Dear Professor Karnani
 
Your op ed in the Wall Street Journal was incomprehensible to most, saddening to many and ridiculous to several. It generated much comment.

You may have seen a range of responses :

My own response:  http://bit.ly/dwvaOc

Aman Singh : http://www.vault.com/wps/portal/usa/blogs/entry-detail/?blog_id=1462&entry_id=11749

James Epstein Reeves on Forbes : http://blogs.forbes.com/csr/2010/08/24/an-open-letter-to-the-journal-why-csr-is-good-for-shareholders-and-society/  :

Perry Goldschein: http://sdialogue.com/csr/the-case-against-csr-not-four-csr-myths-debunked/

The New York Observer : http://www.observer.com/2010/daily-transom/wsj-be-evil

The Inspired Economist : http://inspiredeconomist.com/2010/08/24/wsj-the-illusion-of-csr/  

Ashley Hamilton http://blog.ashleyhamilton.ca/2010/08/csr-is-not-dead.html#more

Leon Kaye http://www.triplepundit.com/2010/08/the-case-against-csr-aneel-karnani-government-regulation/?utm

Mag Shapiro http://www.socialcapitalsa.com/sustainablemags/csr-is-business/

Nathan Sherdoff http://www.triplepundit.com/2010/08/the-case-for-corporate-social-responsibility-aneel-karnani/

Aron Cramer: http://blog.bsr.org/2010/08/wsj-takes-aim-atcorporate.html

Dave Douglas: http://www.greenbiz.com/blog/2010/08/24/perils-oversimplifying-csr

Nathan Bomey: http://www.annarbor.com/business-review/university-of-michigan-professors-case-against-corporate-responsibility-in-wsj-is-incomprehensible-e/

to name but a few.

I was wondering if you would be kind enough to publish a response to all these critics of your position. As a Professor in a respected business school, your voice has the potential to be of great influence.

I will publish your response, if you reply directly to me, otherwise I, and many others, would be happy to see your response on the WSJ or elsewhere.

Many thanks, elaine cohen"


Now that Aneel Karnani is famous, will he respond ?

elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Contact me via www.twitter.com/elainecohen  on Twitter or via my business website www.b-yond.biz/en  (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)