When done well, it can offer many business benefits and opportunities.
One of the expert voices in the field of sustainability strategy and reporting, Elaine Cohen, Managing Partner Beyond Business, has supported almost 100 client CSR and sustainability reports in recent years, mostly working with global companies. Since 2005, Elaine provides strategic consulting and sustainability reporting services.
She is a regular writer on her CSR & Sustainability Reporting Blog, a frequent speaker at events and the author of 3 books on sustainability. Elaine was named as one of Trust Across America’s top 100 Thought Leaders of Trustworthy Business in 2017 and as a Lifetime Achievement honouree. In 2018 Elaine was named by Onalytica as one of the top sustainability professionals in the world (Top 20).
1. You have been consulting companies for their CSR/Sustainability reports for many years now, at an international level. Could you summarize the main benefits of reporting in terms of management, risks and opportunities and corporate communication?
That’s a short question with a very long answer: because the benefits of reporting are multiple and far-reaching, both in the short and the long term. I often quote a leading practitioner in this field, Rowland Hill of Marks and Spencer, whom I once heard say: “Most of the benefits of reporting are achieved before the report is even published”. So, that’s the first thing we need to remember: reporting is much more than a document or mini-site, it’s an entire process that adds value at every stage.
There are many references to the benefits of sustainability reporting. A quick online search will bring up many results, but the consensus seems to be in these key ways:
Reputational benefits. The purpose of reporting, alongside being a formal disclosure document, is to build trust among individuals and groups who interact with the company. Trust is a fundamental component of successful business. There has been research that shows that people who read a sustainability report tend to increase their level of trust in the company. Even if the report is not perfect, transparency creates familiarity and credibility. By publicly disclosing in a balanced way, a company aims to show that it can be trusted, and trust builds reputation.
Management benefits. Sustainability reporting is a tool for managing an organization’s impacts in ways that are typically overlooked by traditional management accounting and other processes. For example, operational management may wish to reduce energy consumption for efficiency reasons and, therefore, tracks cost of energy. Concerned with a company’s impact on the planet, in sustainability, we track carbon footprint. Both are interrelated, but they have different points of focus, and offer distinct opportunities for performance monitoring. By tracking sustainability-related parameters of the business, from an impact perspective, companies can improve management control and performance in many areas.
Employee engagement. It is often quoted that people today want to work for a company that makes a positive difference in the world, not one that focuses solely on making money. Reporting serves to engage employees – first, through their participation in the report development (in a large company, tens or even hundreds of employees may be involved in providing stories or data for the report) and second, through reading the report. Often, employees may read about positive company initiatives in the report, or about colleagues, and this is a source of pride and motivation.
Stakeholder relationships. The process of preparing and publishing a sustainability report provides many additional benefits which we can possibly sum up as “stakeholder relationships”. This can be with financial institutions who provide access to capital, local communities who grant a social license to operate, customers who remain loyal to your brand or offering, and a host of relationships that are important for the business and people. Disclosure is a basis for dialogue that can help identify risks and opportunities early on, and assist in dealing with crises as they happen.
2. Could you give us a few examples of top sustainability reports around the world and the reasons you recommend them?
That’s probably one of the hardest questions I often get asked. Which are the best sustainability reports or my single favourite? It is always so hard to answer because, looking at reports more holistically, not just as words in a document, you realize that every report has value and merit and represents an achievement for an organization and the people involved in developing the report. Each report must be seen in context – some large global companies have been reporting for more than 20 years and their reporting is polished, extensive and professional.
Other companies – those reporting for the first time, smaller enterprises etc., face different reporting challenges and their reports can be fascinating and, in some cases, very creative.
I can never actually pinpoint reports that I would describe as “top” reports, because that would be too much of a generalization.
If you ask which are some of the reports that I tend to look at year after year (I exclude reports of my clients, as I am obviously biased), then I would cite companies such as Intel, Tiffany & Co, IKEA, Lego, Marks and Spencer, Ford Motor Company, Westpac Bank, Nestle, City Developments Ltd, Larsen & Toubro, Merck KGaA, BT, Hang Lung Properties, HEINEKEN, Marimekko, Heathrow Airport and many more.
3. Why do you think some companies are still considering whether to write a report or not? What can we do, as a CSR community, to encourage them to report?
There are many reasons for which companies choose not to report. Some believe it’s not necessary, some do not have the basic building blocks, some are nervous of disclosure, some say it’s a resource or cost burden.
But, the fact is that reporting sustainability metrics is becoming increasingly regulated in many jurisdictions – in Europe, for example, the European Non-Financial Disclosure Directive has been adopted into national law by EU members for several years now, and many other countries have some form of disclosure requirement. Beyond regulation, sustainability disclosure is often required as a prerequisite for business tenders or supplier status.
We will find that more companies will report in the future, because they have no choice if they want to stay in business. But, the unfortunate fact is that companies are not gaining the true value of reporting. Reporting is an empowering process, when done well, offering many business benefits and opportunities.
As a CSR community, we can help companies see not only their obligation to be transparent as a risk management process, but also the positive outcomes of investing in reporting. We can do this by paying attention to what companies are reporting, providing feedback, establishing learning forums and providing tools and guidance for companies to share their reports more widely with stakeholders (including internally), in order to spark their interest and engagement.
4. What is the difference between ESG Reporting and Sustainability/ CSR Reporting, in your opinion?
Great question, and the answer sort of depends upon whom you ask. Currently, CSR reporting is seen as more about contribution to society, while ESG is seen as more as data-based performance reporting for investors.
ESG has become the term of choice for investors, and more and more, we are seeing companies targeting investors as a prime audience for sustainability reporting. This is a trend that concerns me, as sustainability reporting was always intended to be about the impact on people’s lives, not simply a tool for investors to evaluate financial risk.
Today, to attract the investor community, we are seeing companies renaming their sustainability reports “ESG Reports”. In some cases, it’s a cosmetic change – the content is exactly the same as in their former CSR Reports. In other cases, companies are using this as a rationale for reducing their reporting to a collection of metrics with little insight into the company’s culture or practice.
The preferred approach, from my perspective, is to report on CSR (sustainability) for a wide range of stakeholders and produce a short summary of primarily data and metrics for investors.
5. In terms of community investment, what do you consider some top tools or standards that companies can use to improve their performance?
One thing I often wonder when I see companies contributing millions of dollars or thousands of hours of employee time in volunteering is how they know that their investment is making the difference they intended. If they were to invest millions in a marketing campaign or a new piece of manufacturing equipment, they would know exactly how to calculate the return on their investment. There are tools today to calculate Social Return on Investment (SROI) and there is the LBG methodology for calculating community performance.
But it’s not entirely necessary to use sophisticated tools. The main thing is to think strategically about where you want to make a difference in your community/communities and develop a program in partnership with relevant non-profit(s), with clear objectives to deliver certain results and outcomes. When you know what you want to achieve, it’s then simple to select relevant metrics that you can measure.
I think it is important for companies to demonstrate not only what they did – amount of money, time, resources invested, training provided etc., but also what difference they made – e.g. people who found jobs as a result, people who improved their health, livelihoods etc.
6. Kindly tell us more about the books you have written so far, dedicated to sustainability.
I have written three books, written or collaborated on several book chapters and published academic papers. I also write the longest-standing blog focused on sustainability reporting, since 2008, which has quite a strong following. I love writing and my biggest frustration is that I am not able to make the time to do more, because I am also committed to working with clients and supporting their strategy and sustainability reporting. I have a list of books I want to write; the field of reporting, and the areas of sustainability I am specifically passionate about are so rich and dynamic, that there is always so much to share. If only there were 48 hours in every day!
But, you asked about the books, so here goes:
“CSR for HR: a necessary partnership for advancing responsible business practices” (Greenleaf, 2010) was my first book and covers the role of Human Resources Management (HRM) in embedding corporate responsibility in their approach to HRM, going beyond the boundaries of the more traditional recruitment, development and reward. It was the first book ever written on this specific topic. Since then, this topic has become much more popular, although, I believe, the HRM function still lags behind.
“Understanding G4: The Concise Guide to Next Generation Sustainability Reporting” (DoSustainability, 2013). My second book was a plain-language explanation of the Global Reporting Initiative (GRI) sustainability reporting framework. Written for professionals who wanted to quickly understand the new reporting standards that were introduced by GRI in that year, without having to trawl through hundreds of pages of technical content, the feedback was that it was a very useful companion for sustainability reporting companies and consultants. Now, of course, G4 has been superseded by the GRI Standards. Maybe it’s time for an update!
“Sustainability Reporting for SMEs: Competitive Advantage through Transparency” (DoSustainability, 2017). This book covered another area where CSR was starting to become relevant and not many tools were out there for small businesses for whom full-scale sustainability reporting was rather daunting. My approach is always pragmatic. The book provided a grounding in what’s important and some simple tools and frameworks for resource-constrained SMEs to get going.
7. Some companies are preparing their reports with the 2019 results at this period of the year. There is this one question that everybody is asking: should we also include our response to the current pandemic?
Absolutely. I wrote recently on my blog about this. It’s inconceivable, given the major scale of the crisis and change, that reports published in 2020 would not reference the ways the company is responding to the biggest threat to people, health and economies this century.
Even if the report is intended to cover performance in 2019, it should reflect such a major issue that occurs at the time it’s being prepared and published. Leadership is expected from companies at this time, and the sustainability report is a key communication vehicle.
As I wrote in my blog: Business is not currently ”as usual”. Sustainability Reports published in 2020 should also not be ”as usual”.