In many ways, a corporate social responsibility (CSR) report has become a tool for companies to tell their story. And, with increasing stakeholder expectations and tightening regulatory frameworks in areas such as climate change, the pressure for businesses to develop and report on non-financial performance is increasing.
“In order to build trust with organizations and individuals, companies must have open and transparent communications," says Mel Wilson, a former associate partner with PwC's Sustainability practice.
A CSR report can also help a company gain additional investors and diversify its shareholder base. This is particularly important for companies in Canada where many large pension fund managers, such as the Canada Pension Plan Investment Board and the Ontario Teachers' Pension Plan, have policies in place to make socially responsible investments.
Today, many companies are coming to grips with the increasing expectations of stakeholders – customers, investors and employees – that they operate responsibly. Strengthening a company’s environmental stewardship often acts as the impetus to begin adopting and reporting on sustainable business practices. Many organizations are realizing that the concept of sustainability is complex and has implications across their entire organization. Sustainability, therefore, is moving to the forefront of corporate policy and many organizations are embedding such practices into the heart of their corporate strategy.
Communicating commitments in this area to employees is also becoming increasingly important as companies are quickly discovering that new recruits or existing staff want to work for companies that put sustainability at the top of the corporate value set. In a marketplace where attracting skilled labour is a top priority, the companies that currently have CSR reports are finding that having set goals and tracking performance are key to employees becoming agents of change and creating a workplace that is distinguished by continuous improvement.
"That by itself makes people pay a bit more attention to it, to try a little harder in terms of meeting their goals so that at the end of the year you'll actually see performance improve," he explains. "It's the act of measuring it that drives the improvement at the end of the day."
As the number of reporting organizations increases, so too does the number of best practices for creating a high-quality corporate social responsibility reports. CSR reporting best practices fall under a few main categories according to Wilson. For companies just embarking on reporting on non-financial performance, there are many decisions to make but fortunately standards and best practices have been in development for the past 20 years since sustainability began hitting government and corporate agendas.
First, companies should follow a set of guidelines for measuring and reporting information to provide consistency year-over-year. The Global Reporting Initiative (GRI) guidelines, for example, are widely recognized and serve as a reporting framework for companies to use. By adopting recognized standards, companies are able to set benchmarks for their own performance while also helping to create comparability across industry. This is particularly important to those companies that see sustainability as a market differentiator and, more importantly, are seeking to become leaders in this area.
The second area of focus when looking at reporting requirements is the amount of information provided in a report, not only what constitutes core metrics but the amount of commentary provided.
"If there’s one area where I believe companies have probably gone too far is that they try and cram too much information into these reports," he says. "There is an opportunity to make these sustainability reports more specific to the issues relevant to their operations and to their stakeholders."
The dissemination and presentation of performance measurements constitute the third category of reporting considerations. Initially, a CSR report was a hard copy, similar to a company's traditional annual report. Using the web helps to streamline reporting and increase the reach to stakeholders beyond a company's shareholder and employee base.
Reports are more likely to be found online, and typically only the high-level information that’s more of an executive-summary nature goes into hard copy reports. And because most of the data now resides on the web, those interested in the quantitative information can download it and run their own analysis.
Companies should also dedicate time and resources to ensure the reported information is correct. This can be done using internal audit staff, or can be done by engaging a qualified assurance firm. This heightens the credibility and transparency to stakeholders. This has become a best practice amongst the leading reporting companies.
Although many organizations are taking steps to build sustainability into the core of their business, a remaining obstacle to CSR reporting is the fact that it is still voluntary. And during an economic downturn, voluntary programs are often more scrutinized, postponed or cancelled outright. However, says Wilson, despite the recent economic dowturn, most Canadian companies have kept up their sustainability reporting, and in fact there is an increasing level of reporting by companies generally.
"Organizations have figured out that linking sustainability reporting to their operational and financial performance will actually work to create business advantage, “he says. “There are several payoffs for organizations that see sustainability broadly and seek to embed these practices across their entire organizations. Reporting has to be a key part of that overall approach."