The Commoditization of Materiality Feedback

A popular post of a while back related to us poor cheapskate consultants not accepting to do work for free. I got a lot of feedback on that post, all of it positive and supportive. This time, I want to refer to a different challenge, as while some of the symptoms generally show up in the same form, this is rather different.

Let's start with a case in point. I recently received the following email - representative of several of those I receive on an every increasingly frequent basis.

Dear Ms. Cohen, We are undertaking a review of our most material corporate responsibility (CR) issues and would greatly appreciate benefiting from your expertise and perspectives. XXXXXXX has commissioned sustainability consultancy XXXXXXXXX to undertake half hour telephone interviews and facilitate the materiality analysis. The Interviews will be between XXXXXX 10th and XXXXXX 28th. The topics covered in the interview are: • What do you consider to be the most important CR issues relevant to XXXXXX? • Which areas do you see as current XXXXXXXX strengths and weaknesses related to CR? • Do you have any expectations or suggestions for XXXXXX future CR focus? In appreciation of your participation, we will make a $100 donation in your honor to XXXXXXXX, which helps to reforest communities devastated by natural disasters. Please let me know by this XXXXX 7th if you are interested in participating and we will follow up to schedule a 30 minute phone call at your convenience. 

And this was my response (to which I have received no reply:)):

Many thanks for your invitation. I believe XXXXXXXX has shown significant leadership in sustainability matters and in general, I have a high level of admiration for your work. However, I will respectfully decline to participate in your stakeholder interview session. As a consultant in the sustainability and CR space, I assume you approach me for my professional opinion, rather than just any person who might use XXXXXXX services. The issues I could mention "off the cuff" from my general knowledge of the sector are probably fairly obvious and similar to those which other stakeholders will raise and therefore wouldn't add much value. Therefore, providing a professional response would require specific research and preparation on my part for which I charge a fee. If you are interested in a professional consultation, I could provide you an offer for such services. However, I do not feel I can meaningfully contribute in a 30 minute conversation without proper preparation. Thanks for your understanding and good luck with your process  

Now, the point there is not that I am being asked, again, to give professional opinion for free, but the way in which companies are going about obtaining input for their materiality processes. These bulk approaches to anyone and everyone are anything but focused and designed to deliver a result which, in my view, will be of rather limited relevance to the companies involved.

I call this the commmoditization of materiality feedback. Instead of being knowledgeable, focused, relevant, and driven by both a level of expertise in the subject matter and a knowledge of the company in question, and also some basis of relationship with the company involved as an interested stakeholder of the company, materiality input is becoming broad-scale, technical, hit-and-miss and reminiscent of the days when we all ticked boxes in order to demonstrate sustainability progress. Ticking the materiality feedback box is apparently the activity du jour. Cast your net wide and you catch some fish, but let's not forget, all fish were not created equal.

In the case of the above company, I would barely call myself a stakeholder, beyond the fact that, as a citizen of the world, I am a stakeholder of every company in the world that has an impact on anything in the world. But that's taking the concept of stakeholder to unmanageable proportions.

GRI defines stakeholder as (my highlights):

"Stakeholders are defined as entities or individuals that can reasonably be expected to be significantly affected by the organization’s activities, products, and services; and whose actions can reasonably be expected to affect the ability of the organization to successfully implement its strategies and achieve its objectives. This includes entities or individuals whose rights under law or international conventions provide them with legitimate claims vis-à-vis the organization. Stakeholders can include those who are invested in the organization (such as employees, shareholders, suppliers) as well as those who have other relationships to the organization (such as vulnerable groups within local communities, civil society)."

As a consultant and critic of reporting, I may refer to this company's report on the CSR Reporting Blog or other reviews I publish. But I still don't think this meets the definition of stakeholder as it's doubtful that my writings can reasonably be deemed to affect the organization etc.

I suspect we will be seeing many more companies attempt to engage us all in their new we-have-seen-the-light materiality investigations. This is a good thing. Materiality is becoming part of the new sustainability awareness of corporations. Companies are wanting to get focused. That's fabulous. But moving in a new direction requires a new mode of transport. Trying to get to a different place using the same behaviors that landed you here ain't gonna cut it. You just end up in another wrong place.

The objective of the stakeholder material engagement process is not to reach out to as many voices as possible. The objective is to reach out to the voices that count. Voices count because they belong to meaningful stakeholders, who have some form of relationship with the company, or who are leading external expert voices in matters relating to a company's sector and have, or can develop, enough specific knowledge to provide focused and useful input. In my view, it is far better to have conversations with a few relevant people that engage at a deeper level than to consult the masses and get input which is so broad and varied that it is of no use in making decisions. With great respect for James Suroweicki whose book I tremendously enjoyed, I fear that stakeholder engagement is not a case for the "wisdom of crowds". It's a case for widsom. Period.

In this sense, company XXXXX above was moving in the right direction - by asking to have a telephone conversation rather than send me a SurveyMonkey link. However, in selecting me, a stranger to their company and one who is not known for expertise in their industry sector, it indicates to me that the approach to materiality analysis is off track. It's like me asking a train driver if she thinks I should buy a new refrigerator. The train driver might have an opinion but well, unless she is a former refrigerator saleswoman, is her input really of so much value? (PS. I don't need a new refrigerator at present, but if anyone has any suggestions just in case .... )

The new drive for focused materiality is causing companies to rethink the way they develop sustainability strategy and report on performance. I am genuinely seeing companies wanting to change and leading processes to help them define material issues. It is happening. It's actually really encouraging. It's also engendering a phase of materiality experimentation. That's also good. Many roads lead to materiality, as someone wise once said. I think.

But let's not ignore the dangers. Tickboxing is a bad habit in terms of sustainability. Whether this is tickboxing a number of stakeholders we interviewed or sent a questionnaire to, or tickboxing a list of material issues that appears in a SASB standard or in the newly-published 10 GRI G4 Sector Disclosures without having done the analysis and engagement work, it's bad. Stakeholder engagement and dialog is not something you can commoditize. It always has to be targeted, relevant, meaningful and supportive of processes which have decisions at the end of them.

A respected colleague-consultant, Dwayne Baraka, recently published a guide to materiality, and it might be relevant for the companies that are currently grappling with defining or validating materiality ... including XXXXXXXXXX ... to read it.

In the meantime, anyone who has invented a questionnaire-fatigue antidote stands to make millions over the next few years.  

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 www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

The Mystery of the 50 Angolan Sustainability Reports

KPMG published its 2013 Survey of Corporate Responsibility Reporting recently. For a reporting geek like me, that's like getting five helpings of ice-cream all at once. A positive feast of information all about reports. I love it.

I am still working through the entire thing (gotta do a little work once in a while) but there is something that struck me as rather mentionworthy.

Angola.

How many Sustainability Reports get published in Angola?  In the GRI reports database, there is not a single report from Angola since the start of the database. I looked in the CorporateRegister.com database, and there are 10 reports from 3 companies in Angola published between 2007 and 2011. Nothing in 2012 or 2013. Even the UN Global Compact has no participants from Angola. 

So how is it that, in the KPMG survey, 50% of the top 100 companies in Angola are noted as reporting on CSR?

That's a higher rate than 6 other countries: South Korea, New Zealand, Greece, UAE, Kazakhstan and Israel.

Not only that, in the KPMG survey, Angola is way up there with the GRI-based reporting leader companies, with over 80% of these mystery Angolan reports being GRI-based.

In the CorporateRegister.com database, I can find 16 reports from Kazakhstan, and as many as 585 reports from South Korea, with the other countries in between. So, how come Angola has achieved a 50% reporting rate? There is no stock exchange in Angola, as this is scheduled for 2016.

The KPMG methodology looks at the top 100 national companies in each country. A 50% reporting rate means that 50 of the top 100 companies in Angola have publicly disclosed their corporate responsibility performance in some form of corporate responsibility or sustainability report.

So where are all these reports? This is a mystery. I love mysteries. Just call me Agatha.

I realized that I know very little about Angola, so I am going to make this post a little Angola discovery journey.

Angola has a population of just over 18 million people living in an area of 1.2 million sq. km. Portuguese is the official language and Luanda is the capital. Angola's main claim to fame is its oil, with an OPEC quota of 1.65 million barrels per day. GDP per capita is $6,500 which ranks 144 in the world league table. There are only 9.4 million mobile telephones in use, so that's an opportunity for the telco sector, and only 0.6 million internet users, an even bigger opportunity. Human trafficking, drugs and forced labor in agriculture are mentioned as some of the transnational issues that Angola must address. The country has some spectacular sights and Kalandula Falls seems like it should be on everybody's visit-here-some-day list.

Doing business in Angola according to the World Bank Group is not a piece of cake, and Angola ranks low on the easy-peasy scale. In fact, Forbes recently gave Angola the big thumbs down as one of the worst 5 countries in the world to do business in. This is a great opportunity, therefore, for CSR and sustainability. 

However, when checking out the ice-cream scene in Angola, all I came up with was a list of ice-cream parlors in Angola, IN, which last time I checked, was in the U.S.  Maybe that's the Angola that's in the KPMG survey? 

But I am still wondering, where are those 50 reports? Now, now, Agatha, don't give up just yet.

I tried to find a reliable list of the largest 100 companies in Angola. Wikipedia lists a few notable companies in Angola. 36 companies to be exact. Are these the companies in the KPMG N100 list? Where are the remaining 64?

I shot off an email to the folks at KPMG to see if they could shed any light on the Angola mystery, and I am awaiting a response. In the meantime, I confess to being stumped. OK. You can stop calling me Agatha now. 

UPDATE (Dec 18): I just heard back from the folks at KPMG (thanks, KPMG) who say as follows: "Angolese companies included in the research in many cases are subsidiaries of large global companies that issue CR reporting in other countries (for example, Total, who publishes a group report in France). As all subsidiaries are included in such group reports, they count at the local (Angola) level as well, including the reference to the GRI."

Mystery solved. Sort of. Apparently Angola's reporting rate of 50% is entirely made up of global companies operating a subsidiary in that country. Ditto for other countries. No wonder the N100 global reporting rate is 71%. I wonder what it would be if KPMG took out the reports that were not written by companies headquartered in the countries surveyed. Any guesses?   

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 www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

CSR: Time for some perspective

We all have perspectives. Sustainability Reporting is something that tends to give rise to many different perspectives - my last post being a case in point.  Some perspectives are more important than others. And some perspectives lack perspective. A new report from CorporateRegister.com now reveals many perspectives. My perspective on that is positive. 

CorporateRegister.com, who hosts and manages the global online directory of corporate responsibility (CR) reports, today launched the CR Perspectives report, combining data, insight and opinion to reveal how global CSR reporting has developed to date and where it might be headed. Available as a free download from www.corporateregister.com (login required),  the report CR Perspectives 2013 - Global CR Reporting Trends and Stakeholder Views looks at global CR reporting based on statistics deriving from the world’s largest CR reporting database (52,000 reports) and stakeholder views based on the  CR Perspectives online survey.

The report is structured into four sections looking at the Context, Content, Communications and Credibility of CR reporting. The online survey conducted in early 2013 received 300 responses from corporate CSR professionals (40%), CSR consultants (18%), academics and students (16%), and even investors (3%), as well as other stakeholder groups. 71% of respondents were from Europe and the U.S., with the remainder from pretty much everywhere else.

The Context of CR reporting 
While sustainability reporting continues to expand, it is doing so at a slower rate, according to CorporateRegister.com. Part of the reason for the slowing of this growth is the fact that, for the past 2 years, 2011 and 2012, there have been fewer first time reports than previously, breaking a pattern of year-on-year increase of first time reports every year since the year 2000. This is a big disappointment. I LOVE first time reports. Still, in 2012, 800 first-timers made their first foray into the transparency jungle, so that's about as many reports as I can reasonably read in a couple of months, so I guess things are not too bad.

Source: CR Perspectives Global CR Reporting Trends and Stakeholder Views 2013 p5

Survey respondents largely feel that CSR reports are an effective tool for building trust, and that reporting quality has improved over the past ten years. Surprisingly, perhaps, very few think that CSR reports are just PR. I could point them in the direction of a few choice reports to help prove otherwise, but gladly, I concur that today, while PR is always an element of almost every report, we are seeing more substance and more serious attention to important issues in sustainability reporting today.

Another perspective is that almost all survey respondents think that all publicly traded companies ought to be required to report on sustainability matters. A few think that even SMEs should be required to report. If you work from the premise that sustainability reporting is a highly useful internal management tool, then this makes sense. Perhaps CSR reporting finally moving out from under the shroud of illegitimacy?

The Content of CR reporting 
According to CorporateRegister.com statistics, integrated reports are increasing, but are not yet as widespread as generally assumed. They are still less than 10% of the total reports published, around 600 integrateds in 2012. However, integrated reports are not all born equal. Many of them are just an expanded financial report with a section on issues related to sustainability and no linkage between the sustainability-type information and the business-type information. The IIRC is piloting use of the new IIRC framework, with a wide range of respected and experienced reporting companies. In fact, the IIRC includes several examples of integrated reports in the Emerging Integrated Reporting Database which hosts integrated pioneer flagship reports. I took a look at one of them - the Gold Fields 2012 Integrated Report, which came top in Ernst and Young's Excellence in Integrated Reporting Awards for 2013. At 212 pages, it's an easy read :). There is a very extensive section on assurance which is as comprehensive as I have seen in any sustainability report. The report is not GRI based. There is no materiality matrix of list of material issues presented, although assurance statements indicate that the report complies with the principle of materiality - probably because of the inclusion of a risk matrix which includes both business and sustainability-type issues.

What I wondered, though, is how this report expresses the linkage between business sustainability (and risk) and sustainability performance. For example, the report contains a very detailed disclosure on human resources - as part of the "employer of choice" strategy. This covers everything from the "war for talent" and approaches to win the war, skills and leadership development, investment in operational training, increasing HDSAs (Historically disadvantaged South Africans) in the workforce, health and wellbeing, labor relations and illegal strikes, and safety and security. A very detailed disclosure by all accounts.

But as this is an integrated report, I would have expected to see some correlation of the degree of investment in employee development to the business outcomes - both in terms of the incremental costs of extensive human resources activity and the expected benefits. Employee turnover has reduced significantly over a five year period; is this the result of these efforts? How does this benefit the bottom line? What about absenteeism which I can't find mention of? Recruitment costs and effectiveness? And many other aspects of business performance affected by the company's approach to human resources.

In other words, in an integrated report, I would expect to find sustainability issues addressed from a more holistic standpoint - both in terms of impacts on people and society and/or the environment, and in terms of business growth, profitability and/or achievement of critical business objectives. If I understand this correctly, this is the principle of connectivity which the IIRC framework describes as follows: "An integrated report should show, as a comprehensive value creation story, the combination, inter-relatedness and dependencies between the components that are material to the organization’s ability to create value over time." Perhaps there is room for Gold Fields and other integrated reporters to make these connections more explicitly, as a demonstration of their "integrated thinking". It seems to me that, at present, integrated reporting is still very relative: relatively integrated, relatively more integrated, relatively not integrated, relatively kind of integrated. What appears to be generally the case, is that relatively integrated almost always means relatively very-long.

Another interesting result from this survey relates to use of reporting frameworks. GRI and CDP come out on top with sector frameworks remaining in high focus. Thumbs down for UN Global Compact, however, despite its attempt in recent years to make reporting more prescriptive and comprehensive. Relatively.

The Communication of CR Reporting
The CR Perspectives survey results suggest that stakeholders who are not as close to the direct operations of the organization are less important to the reporting organization. Employees are seen as the single most important report audience, and the general public comes bottom of a long list. A majority of respondents believe that large global companies should report at different levels which could be country level or even site level.

The Credibility of CR Reporting
Aha, the best bit comes at the end. After all has been said and done, can you really believe what's in sustainability reports? And it may not surprise any of you to know that almost all respondents listed BAD NEWS as the main thing that adds to the credibility of a sustainability report. A few failure stories, missed targets, operational spills or discussion of a major screw-up is going to make your report stand out from the crowd in terms of credibility. Everyone wants bad news. If you don't have any, you may find yourself in a real sustainability reporting hole. But what company has no bad news? ) Be careful, though, you don't want to add too much bad news..... don't give your stakeholders too much of a good thing :)

Other things that support credibility are provision of data and specific targets and using a known reporting framework. An external assurance statement is the fourth element which contributes to delivering credibility. Interesting that this is in fourth place, as improving credibility is the prime purpose of assurance. Perhaps, in general, the poor quality of assurance statements we have been seeing to date, not a small number of which, in my experience, have a de-assurance effect, is the reason they are not seen to be delivering their purpose.


There are many more perspectives in the CR Perspectives survey, and perspectively-speaking, it's useful to understand the perspectives at play in our sustainability landscape. My perspective on all of this is that you should take a look at CR Perspectives. Maybe you also have a perspective you would like to offer a perspective on?

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 via www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm

Would you work for free?

At some level, it's extremely flattering to be asked to speak at many events, conferences, congresses and provide expert input to large corporations for their stakeholder engagement efforts. It's really great to be considered an expert that people want to hear. Developing detailed expertise in specialist fields such as Sustainability Reporting, CSR for HR, the new G4 GRI Guidelines, Sustainability Strategy, SME Reporting, Stakeholder Engagement and CSR and Social Media, things which I am generally known for, takes time, money and consistent effort. But feeling flattered does not pay the bills. People don't become experts by chance. They work at it. Fortunately for me, the things I work at becoming expert in are the things I am most passionate about in my life, but nonetheless, I spend hours upon hours building my own knowledge in many different ways, including those which cost money such as attending expensive conferences or training programs. I am sure other consultants do the same. Building expertise is a major investment. It's great when people recognize that you are an expert.

 

I am often approached (several times a week) by many different companies, organizations, groups or individuals to use my expertise to help them. Some want my input to their stakeholder engagement process, some want me to go lecture at a meeting or conference, some want me to review their sustainability reports, or blog about them, some want me to provide advice for a paper or thesis they are writing, some want me to run a training session .. etc... the number and range of requests are endless. When it's students of CSR or Sustainability, I always try to help as much as I can. If it's an academic institution or an NGO, I do my best to help. It's when for-profit companies or corporations ask me to use my time and expertise to help them, expecting I will do so for free, because it gives me exposure or provides me with a way to contribute to the greater good, I draw the line.

 

A recent post by Toby Webb, of Ethical Corporation, resonated with me. He was coming from a different angle. In a post entitled "How not to engage stakeholders by email" , he makes the point that the new way of engaging stakeholders by sending bulk emails to a range of people and asking for input is not effective. He calls it the tick-box way of stakeholder engagement. While there is some place for online surveys in any company's arsenal of communications tools and channels, there is something that rings true about this. However, my point here is not so much about the effectiveness of this approach, but about the expectation that individuals will be prepared to invest time, effort and expertise with no compensation. 

 

A couple of cases in point (out of several) from this last week.
 

First: Large global company conducting a stakeholder engagement exercise. I didn't respond to the first request (time, time, time) and I got second request by email which went like this:

Early last week you have received below email from xxxxxx, Head of Corporate Responsibility (CR) at  xxxxxx, inviting you to take part in the company’s CR materiality analysis. As you are a critical stakeholder, xxxxxxx would like to seek your opinion through an online survey (see link below) followed by a short phone discussion (approx. 1 hour, to be scheduled once survey is filled in).

The request is to complete the survey (I did, it took about 10 minutes) AND then spend one hour on the phone.

Second: Commercial training company running a summit which costs over $2000 per delegate for three days. I was invited to be a guest speaker on one of the panels. I asked for travel reimbursement and of course a fee for speaking. This was the response.

"We wont be able to cover any of the associated expenses, since you do represent the service providers sector. We have identified you very relevant to the topic, and are happy to offer you participation on a complimentary basis, hoping the event would offer you the value in return."

Would you work for free? I raised this question in a Facebook Group for CSR people in Israel, and the unequivocal advice was NO... as a professional expert, you should ask a fee for your professional input and services, even if the overall purpose is to help save the planet. One member of the group, Rei Dishon, pointed me to a fabulous decision tree flowchart which says it quite well (you have to click to enlarge and read it).

Basically, I have learned the hard way that participation free at events with the promise of "exposure" and "value" almost never brings either. I also learned that if big corporations want the expertise I work so hard to develop, they should pay for it. I give a lot of expertise away free... via my blogs, and to NGOs and academic institutions and to many many students who ask me for advice and help. Corporations should expect to pay. It's the ethical way.

In this new age of stakeholder engagement, and possibly with greater focus on process in the development of materiality analysis with the new G4 guidelines, and the ease of pushing out online surveys and accessibility of us all through email, we can possibly expect that more and more corporations will be turning to us all, "critical" stakeholders, to provide input. This is progress, Toby's effectiveness argument notwithstanding. However, such input has value. And in seeking it, companies should understand the value that stakeholders want in return. It's not enough to promise to be a better or more sustainable company. Different stakeholders will want different things. Some may not want financial remuneration. Some may. But stakeholder engagement has a price and may start to be one of the new currencies of our complex evolving world of sustainability. Companies will need to start factoring in the costs of more extensive interaction. They will also need to know that their online requests for input competes with several other similar requests, and at some point, becomes a turn-off for the very stakeholders they address as "critical". Differentiation, targeted selection of which stakeholders to approach, and how, and consideration of stakeholder needs, in this area too, will become skills companies will need to develop. 

Here's another example from this week.

xxxx is working to better communicate about our corporate citizenship programs. We value your feedback so we can best describe xxxxx's commitment to responsible operations as well as investments and involvement in our communities. Thank you for sharing your perspective by clicking on this link and answering the survey's seven questions (which we estimate will take only 2-3 minutes of your time). Many thanks and kind regards
 

I found this approach reasonable. Short survey. Nicely worded request. But it's a global company whose products I do not use (to my knowledge) and with whom I have never had any interaction. How did I get on their list? Nonetheless, I'm inclined to do it. For nothing in return. I hope they use the input. But, if I get ten of these in the same week, I won't respond to all of them.

 

Anyone who offers to compensate me with ice cream, of course, has a great chance of getting a positive response :)

elaine cohen, CSR consultant, winning (CRRA'12) Sustainability Reporter, HR Professional, Ice Cream Addict. Author of Understanding G4: A 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 www.twitter.com/elainecohen   or via my business website www.b-yond.biz   (Beyond Business Ltd, an inspired CSR consulting and Sustainability Reporting firm)

Is reporting bad news?

As mentioned in my previous post, the annual  CR Reporting Awards CRRA '13 Winners were announced during a special, one-day, by-invitation-only CR Perspectives conference hosted by CorporateRegister.com in late April. The conference shared the results of the CR Perspectives survey, which was completed by hundreds of people around the world and yielded some very interesting results. A full analysis of the results will be published and made freely available by the end of May on CorporateRegister.com.

I chaired the CR  Perspectives conference, which gave me the opportunity to hear and share CR Perspectives with a full-house of fascinating people from all over the world, including China. 

Paul Scott, MD of CorporateRegister.com, a fully-fledged Sustainability Reporting authority and celebrity, told me: “As CR reporting continues to evolve, CorporateRegister was very pleased to offer a forum where recent developments and the direction of reporting could be debated by an informed audience of practitioners. CR reporting developed organically, and as it matures we find various organisations attempting to steer it one way or the other. What our CR Perspectives survey has shown is that people involved in reporting make up their own minds, and we could be in for some surprises.”

CR Perspectives opened up with  Richard Howitt, MEP and European Parliament's spokesperson on Corporate Social Responsibility who spoke about the recent non-financial reporting directive which has been proposed by the European Commission, which, if adopted, will require companies of 500 employees and more to disclose information on "policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the Boards of Directors." Richard is optimistic that this will go through all the necessary approvals to become law within the next six months or so - resulting in another 18,000 companies delivering sustainability reports - integrated or standalone- a big increase from the 2,500 that Richard says make some form of disclosure today. Richard talked about ethics and trust  in business as being part of the economic crisis we find ourselves in today, and that these are not only part of the crisis, but the route out of the crisis. He believes the European Directive will help Europe to catch up with progress made in other countries such as South Africa, Denmark, Brazil and more, where non-financial reporting has already been advanced in some form. Interestingly, Richard said that non-financial reporting should not be a big financial burden on companies. He quoted a figure of GBP 4,200 additional cost for each company to produce this information, less for smaller businesses. I am not quite sure how this was calculated but I wouldn't bet my last ice-cream on that one. However, Richard Howitt's perspectives were a great starter for what turned out to be a fascinating, packed day of discussion and ... well.. perspectives.

 

Paul Scott shared the results of the CR Perspectives survey and I can't resist providing a glimpse of a few of the initial results, pending the full and final version later this month. For example:

• Over 95% of respondents agreed that CR Reporting builds trust. Great news!
• Mandatory reporting or disclosure was the thing that the highest number of people agreed would lead to better uptake of reporting (I proposed that reporters receive free ice-cream, but I don't think that gained too much ground). 
• Over half of the survey respondents agreed that improved standardization would lead to better quality reporting.
• 92% of respondents believe that an annual form of reporting is the way to go, with much less support for continuous updates throughout the year
• A whopping 63% of reporters supported country-specific reporting, as opposed to regional or global. This is validation for multinationals who commendably invest so much effort in producing local reports.
• Almost all respondents believe that all stakeholders are important audiences for CR reporting, which continues to make the reporting task a complex one, trying to meet the demands of multiple stakeholder groups.
• When asked what would make reporting more credible, the highest number of respondents said: bad news! Quantified data, assurance and use of a known reporting standard also came in with quite some support.

During the day, we heard from a range of CR practitioners and experts, including Jo Franses of Coca Cola Enterprises, Rupert Thomas of Royal Dutch Shell, Verity Lawson of BAT, Shannon Shoul of Nike, Core Olsen from Novo Nordisk, Sophie Guillou of La Poste, Joss Tantram of Terrafiniti  and Lois Guthrie, of the Climate Standards Disclosure Board, who is always an interesting contributor.

 

We debated with passion some of the big issues of the day, from the level of understanding that companies have of the value of reporting in a "survival"" context, to the use of reporting to drive corporate value. Of course, the concept of box-ticking came up, as it always does when people talk about reporting, and while a certain amount of that is always required, especially if we move to more standardized formats, the focus on materiality may well drive companies to think more deeply about what really matters rather than what boxes are available to tick.  

 

On credibility, given that the most significant credibility builder is apparently bad news, the one thing that companies don't want to report, I asked the panel what bad news they include in their reports and what they consider bad news to actually mean. The consensus seemed to be that bad news includes: failure to meet targets, failure to address material issues due to significant challenges, and worsening of performance such as in the area of safety or GHG emissions. For bad news to be noticed, it also should not be hidden way and minimized to the point that it's unrecognizable as bad news. This also gave me the opportunity to tell the story of the work I did with GSK Romania in helping to prepare their first, local, CR Report, called Valuing your Trust. In my first meeting with the General Manager, Pascal Prigent, I asked: "What can we not report? What do you not want to include in this CR Report?" Pascal looked me, puzzled, as if this was a rather odd question. His response: "Nothing. You can include in the report anything that is relevant to telling our full, honest and authentic CR performance in all the necessary areas." I didn't actually find too much bad news to disclose at GSK Romania, after interviewing all the management team and tens of others, and reviewing mounds of data and information, but the open approach of leadership and willingness to be fully transparent in the interests of building trust and credibility is something that more reporters would do well to emulate.

 

Now that we have established that bad news works, perhaps we can expect to be reading lots more bad news in future reports. This may be totally depressing but at least we will trust everybody:).

 

Watch this space for more bad news!

 

 

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

What's your perspective on reporting?

What's your perspective on:

• The current state of sustainability reporting?
• The number of material issues that a company should report on?
• The quality of assurance processes?
• The credibility of sustainability reporting?
• The way reporting has evolved over the past few years?
• Voluntary versus mandatory reporting?
• Global versus local reporting?
• Whether the GRI is a good reporting framework?
• Whether G4 will make things better or worse?
• Integrated reporting?
• The target audience for sustainability reports?
• The frequency of reporting and ESG disclosure?
• Who should provide sustainability report assurance services?
• And more...

Have you got perspectives on all of the above? Because, if you haven't, the new global CR Perspectives survey brought to you by CorporateRegister.com will help you develop some. And not only that, after presentation of the survey at a big-splash event on 29th April in London, at which time the results of CRRA '13 will be announced, you will be able to  get a free copy of the entire survey results. And by that time, if you haven't developed some perspectives of your own, you can borrow someone else's!

CR Perspectives is a global survey about my favorite subject: sustainability reporting. And it's happening just at the right time, as sustainability reporting is in a state of flux and promises to be even more flux-ish during 2013. The survey is structured around three recurring themes of  the CorporateRegister.com approach: Content, Communications, Credibility.

The planned launch of the new generation GRI Framework "G4" in May has raised some heated debate, based on the exposure draft which was published last summer. There are those who say it's going to frighten off reporters. "Unfortunately, in our estimation, if the G4 Guidelines were implemented as currently drafted, undue complexity and reporting burden would be the order of the day." That's a quote from Aleksandra Dobkowski-Joy, a voice which counts in the world of sustainability. On the other hand, Dwayne Baraka, of the influential BITC in the UK, says, "I think that on balance the changes are a step in the right direction."   And summary discussions from G4 workshops in Australia gave the following perspective: "The overall impression was that the proposed changes to the reporting framework were ambitious, optimistic and a leadership challenge for organisations. It was also perceived that the changes represented considerable barriers for smaller organisations ...." With just two months to go until all is revealed, what's your perspective?

Integrated Reporting is also chugging along and is a concept which splits the reporting world.  You can provide your input to the IIRC Consultation Draft until mid July this year and take a look at some examples of how companies are approaching Integrated Reporting.  There are some who say it's all a big puff of hot air and it will make very little difference to the way we evaluate and respond to corporations. See this comment from Lorraine Smith of SustainAbility: "If the desired effect of reporting is to enable change, then, it would seem the jury is still out as to whether integrated reporting will accelerate change or merely rephrase the degree to which change has (or hasn’t) taken place." On the other hand, there are those who say integrated is the only way to go. Read this, from the Global Accounting Alliance. "When authentically implemented, integrated reporting offers measurable bottom line returns and ‘future-proofs’ companies."  Ahemmm. Please wait till I pick myself up from the floor. What's your perspective?

I believe the jury is still out on whether assurance has helped assure stakeholders of reporting credibility. First, the uptake of assurance is still low, and the quality of assurance varies. Many of the false claims in sustainability reports are actually found in reports that have been assured by an independent third party. Is it time to abandon assurance in favor of a new system? At UPS, they love assurance. But that's mainly for its internal benefits. Joss Tantram goes even further, saying: "I have tended to believe that a report without an independent assurance statement is not worth the paper that it is printed on." Ahemmmm. Picking myself up from the floor once again. Does assurance assure? I am not so convinced. What's your perspective?

Then there is the whole debate about single one-document reports (either printed or downloadable as a PDF) versus web-based reports which get updated more frequently than once a year. Should companies move to quarterly reporting a la Timberland? Or is more frequent reporting "inherently unsustainable" .. a "hamster wheel which never stops spinning"... at the prominent CSR commentator Mallen Baker argues. Well, I have a perspective on that. Hint. If sustainability is a long term thing, why would I get all excited about quarterly reporting? What's your perspective?

What is the best framework for Sustainability Reporting? ISO26000, although not a reporting framework, and not a certification standard, is now being adapted to provide structure for sustainability reports. BT indexes its Better Future Reporting against the ISO26000 framework. The UN Global Compact has been ramping up its Communication on Progress frameworks over the past few years, providing differentiation and proprietary criteria for reporting against the UNGC Leadership Blueprint.  While there are attempts at alignment, there are substantial differences in approach. What framework really offers best value for stakeholders? Or do we need to go back to the drawing board and, with the benefit of hindsight, start all over again? What's your perspective?

Anyway, that's just a taster. I am very interested to see everyone's perspectives, so I welcome this survey, which I have already completed, adding my perspective, and I hope there will be a massive response so that we get a collective perspective which may help influence how reporting continues to evolve.

Help create a balanced perspective. Add YOUR perspective! Complete the survey here.

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

Sustainability: What the Numbers Tell You

Sustainability is not only about numbers. When all is said and done, sustainability is about people, community, society, collective responsibility and action, stories and interventions. But, sometimes, the numbers form a picture, and pictures can help us develop new insights and change our paradigms. And this can lead to new action. So,  when the The Conference Board, a non-profit organization which creates and disseminates knowledge about management and the marketplace to help executives make the right strategic decisions,  published a deep-dive study - perhaps the most comprehensive study available - of Sustainability Practices of thousands of companies around the world, containing more numbers about Sustainability Practices than I suspect you have ever seen in one place, you have to sit up and take notice. Ready?

The study is called Sustainability Practices 2012 Edition and is a 176 page epic, containing more data than anyone can absorb in one sitting and a wealth of relevant information for anyone interested in sustainability numbers, trends, areas of focus by sector and by subject, and opportunities to make a difference. The report was prepared in collaboration with Bloomberg, who runs one of the most extensive real-time financial and non-financial information networks to hundreds of thousands of subscribers, and with the GRI - no introduction necessary.

Sustainability Practices 2012 Edition is based on a global sample of 3000 business organizations tracked by Bloomberg's Environmental, Social, and Governance (ESG) database and covers 72 environmental and social practices including: atmospheric emissions, water consumption, biodiversity policies, labor standards, human rights practices, and charitable and political contributions. For benchmarking purposes, Bloomberg ESG data is compared with the S&P 500 (large capitalization U.S. companies) and the Russell 1000 (market cap-weighted index of U.S. companies), and further analyzed across 11 business sectors, using the CIGS code, and four revenue groups (under $1 billion, $10 billion, $100 billion and over $100 billion). The findings of the report are split into three broad areas: Disclosure Practices, Environment Practices and Social Practices.

Now for the numbers. Sitting up and taking notice?

19%

This is the overall social and environmental disclosure rate for companies in the global Bloomberg ESG 3000 Index, which is made up of largely non-U.S. companies. Does that surprise you? Only 574 companies out of a total 3,000 disclose on the full spectrum of 72 sustainability practices analyzed. This compares with 15% in the S&P 500 and 10% in the Russell 1000, showing that U.S. companies are lagging when it comes to overall sustainability disclosure. Match this with the next number:

25%

This is the number of companies in the Bloomberg ESG 3000 Index which released Sustainability Reports - 747 companies. More companies are reporting than disclosing. What does that tell us? That Sustainability Reporting is not delivering full transparency. In other words, just because it's called a Sustainability Report doesn't mean that it's transparent. By comparison, in the U.S., 45%  of the S&P 500 and 24% of the Russell 1000 publish reports. However, these indices are smaller and include large-cap, often global, companies, headquartered in the U.S., versus the Bloomberg Index which includes only 510 U.S. companies, 17% of the total 3000 sample. Overall the Bloomberg 3000 is weighted towards Japanese companies who have 27% of the sample, and with strong representation from India, China and the UK, and a host of other countries.  So Sustainability Reporting is more widespread globally than it is in the U.S. But that's not news. Match this with this next number:

80%

This is the rate of Sustainability Reporting for companies with more than $100 billion in annual revenues. Not surprising, perhaps, that this is a high figure. The larger the company, the greater its impacts, the more extensive its resources, the greater its risk exposure, the higher the expectations from stakeholders. However, 20% of these mega-corps are still resisting the reporting opportunity. The rate of Sustainability Reporting drops to 63% for companies over $10 billion, 25% for companies below $10 billion and only 4% for companies below $1 billion. $1 billion is still a heck of a company size and has potential for some serious impact. Who is chasing the other 96%? Match this with this next number:

46%

This is the rate of companies in the telecommunications services sector which publish Sustainability Reports. This is the highest reporting sector in the Bloomberg 3000. Contrary to the long-held view (and data) that financial services companies and energy companies have been leading the fray in sustainability reporting, only 20% and 25% respectively in these two sectors are publishing reports at a global level.

 Great work by telcos. What's driving this industry's reporting prowess? Match that with this number:

48%

This is the rate of telcos which use the GRI guidelines to report. Again, this is the highest rate of all sectors, with an overall average being 30%, generally lower than the hype would suggest. Consumer Discretionary and Information Technology companies have the lowest uptake rate of the GRI guidelines, at 27%.  Again, we find that the highest revenue companies are more likely to use GRI guidelines (66% - 23 companies) versus the lowest revenue companies (10% - 109 companies). The picture in the telecommunications sector is both of high disclosure and high use of the GRI guidelines. Telcos also have the highest rate of report verification and assurance at 26% (versus an overall average of 13%).  Match that with this number:

24%

telcos. No wonder it's so expensive to connect.  But take a look at these numbers:

54% - 43%

The numbers of women employed in the workforce and the numbers of women in management in the telco sector. Hah! One of my favorite indicators.  Not so rosy in the IT sector, where women make up 13% of the workforce and only 9% of management. Across all sectors, the lowest revenue group of companies has the highest proportion of women in management - 24%. Telcos stand out for positive diversity in other respects too - with 26% disabled employees, and 7% of minorities in management. Apparently, if you are a disabled woman from a minority group,  you stand the best chances of advancing your career in a telco. If you are a man, the materials sector is for you. A median 86% of managers are male, and 85% of the total workforce. Match that with this number:

7%

This is the proportion of companies reporting employee fatalities in the Bloomberg 3000. Only 197 companies out of 3000 disclose this figure (even less in the U.S. large company Russell 1000, where only 36 companies disclose). The average rate of fatalities across all those companies reporting is 2, but the Information Technology Sector inflates this average with a total of 6 fatalities. Conclusion: don't go into IT if you value your life. Match that with this number:

59%

This is the proportion of companies that disclose their Health and Safety Policy. This includes 58% of Information Technology companies where six people died. Just think how things might improve if 100% of companies had a Health and Safety Policy. Would things get worse, or better? Match that with this number:

1,367

This is the average number of workforce accidents reported by the 12% (364) companies who disclose this information. I calculate this to be a total of  almost half a million accidents in this small sample. Only 5% of companies report how many lost workhours result from these accidents, reporting an average 56,111 lost hours across only 137 companies, but this is much higher than the average in large U.S. companies, which report an average of 36,121 hours (13 companies) in the Russell 1000. This might indicate that it is safer to work in the U.S.  Or that you have your accident, and get back to work pronto. Even so, the Russell 1000 indicates the lost-time equivalent of 18 employees per year per company that do not come to work as a result of an accident. Rather shocking, don't you think? The impact on families and communities of such safety issues can be quite significant. Match that with this number:

36%

This is the proportion of companies which disclose their charitable giving. I would have expected this number to be higher. Companies like to tell their good news. Match that with this number:

$161,522,597

This is the average community spending reported in the energy sector in the Bloomberg 3000. This is by far the highest rate of charitable giving, comparing with an average across all companies which disclosed of almost $28 million. The healthcare sector is the second largest giver with an average of $98 million reported by 47 companies. Industrial sector companies have not been bitten by the bug to this extent, apparently, with the giving average at a mere $10 million reported by 232 companies. Match that with this number:

$66,800,000

This is the median total corporate giving reported for 21 companies with in the highest revenue group - over $100 billion. If ya got it, share it. Seems to work for them. Companies with under $1 billion revenues give a median of $88,552. Yes, that's thousands, not millions. Match that with this number:

$1,000,353

This is the average utilities sector spend on political lobbying, more than double that of any other sector in this study. Overall, in the Bloomberg 3000, the average amount spent on lobbying is $226,065 per company (though only 14% of companies disclose this information). Interestingly, in the U.S. alone, the amount spent is three times that much. The politicization of business in the U.S. is quite some investment, it seems, if you are a utilities company. Wonder if it's worth it?

I am going to stop here for now, while I continue to study this report. You can read a great review of key findings and  broader conclusions of this report  in the Conference Board's Press Release. Or you can wait for my next post, as I will definitely have more to say about this in the coming week, after getting to the rest of the numbers that I have not looked at yet in detail. 

In the meantime, you might now like a little light relief, by watching the Sustainability Practices 2012 Edition authors, Matteo Tonello, Director of Corporate Leadership at the Conference Board and  Thomas Singer, Conference Board Research Associate, talk about the importance and relevance of this study and what this means. It's short and to the point and contains no numbers.

Thomas Singer rounds off with this perspective: "To a large extent, sustainability is about long-term risk management. It's about making sure that, if you are a company that is dependent on finite resources, you make sure that those resources are available, that they are clean and that you have access to them in the long haul. However there is a very important second part to sustainability which is ensuring innovation and new products, new markets. It is those companies that actually go beyond seeing sustainability as a risk strategy and more of an innovation strategy, those are the companies that really become sustainability leaders in the long term"

Final Tip: ice cream is a great remedy, if your eyes are getting a little fatigued from figures and percentages. Any flavor will do.

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)

The GRI Report Survey Report

You will all recall the GRI Readers's Choice Awards last year and the reporting survey that formed part of the competition. Some of you may recall how the Brazilians cleaned up, winning six first place awards out of a total of six first place awards (see the awards brochure here).

Well, now you can read what went on behind the scenes. The Reporting Change : Readers and Reporters Survey 2010 has just been published by Futerra, KPMG and Sustainability. The key thing about the survey was its simultaneous focus both on the readers of reports and those who write them, to assess whether there is an expectation match and a mutual alignment of needs. Three great sustainability minded firms have analysed the results. Here are their conclusions:

The first conclusion is that the future of  reporting is global. This is immediately followed by a revelation that over 70% of the (5,227) respondents were from Brazil (73% actually, with 10% from India, 5% from the USA and 12% form the rest of the world). Maybe the future of reporting is Brazilian? However, the report makes the point that the emerging strong presence of BRIC countries in the reporting arena shows that "appreciating cultural differences vitally important in reporting".

The second conclusion is that purpose of reporting is performance. "Reporting is driving performance worldwide .....Above any other business case for reporting, making real progress on sustainability is the priority". This is a very important assertion, putting to bed once and for all the cry that "No-one reads reports" as an excuse for not writing them. Reporting, as I too have always maintained, is a catalyst for performance and for engaging employees and others in the sustainability effort. 

The third conclusion is that reporting isn't stakeholder engagement. Reporters apparently, see reports as an engagement tool, but readers do not. Of course, if reporters do nothing to proactively engage stakeholders around the report, and just dump it on their website for people to (maybe) find, then this mismatch is understandable. 

The fourth conclusion is that reporting is trusted. But then, the report goes on to say, less that 10% of readers believe that reporting presents a complete picture. So readers believe what they read, but think it's selective. Partial trust, I guess, is better than none.  

The fifth conclusion is that standards have value. This means that the GRI framework improves comparability and transparency. This is true, up to a point.

The sixth conclusion is that all assurance is not equal. Aarrrgh.. Don't get me started on assurance. This is the understatement of understatements. Assurance quality is more diverse than the biodiversity in the tropical forests of Panama.

The seventh conclusion is that readers influence each other. Stakeholders share information with each other. Some even blog about reports. Like me. Though they didn't mention that in the Reporting Change Report.

The eigth conclusion is that reporting changes behaviour. Hear this: "Readers are investing, seeking employment and buying Reporters’ products and services based on sustainability reports. One-third of Readers are also inspired by reports to take further actions that contribute to the broad sustainability agenda." I also believe that the reporting process changes the internal behaviour of people in the business. More about that in coming months.

The ninth conclusion is that ... haha .. gotcha... there were only eight conclusions. Though I do wonder why ice cream didn't figure in any of them.  

Overall, this is a nice overview and presents the positive aspects of Sustainability Reporting from an audience which is already tuned in. There are no real "dissenting voices" in this survey, with the exception of about 10% of American readers who say that reports don't influence them at all. The survey really didn't ask any tough questions such as "Is sustainability reporting really worth the effort?" or "Can you really survive another reporting cycle without a nervous breakdown?".  

Notwithstanding (love that word), we can all be encouraged by the survey results which show that "60% of Readers claim their commitment and connection to an organisation is positively influenced by reading a sustainability report." That's a nice piece of quotable data if you are trying to convince your CEO to make the move towards reporting. Especially if she lives in Brazil.

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)