Leading companies are assessing the impacts of their business and reporting on them. As a result they are significantly improving their corporate responsibility reports in the process, writes Peter Davis
I have a confession. I find corporate responsibility reports tedious. Not as boring perhaps as annual reports, which have all the literary attraction of a telephone directory, but tedious nonetheless.
As someone who has worked in this field for more than a decade and a half I ought to relish reading about companies’ latest developments in their CR programmes, and enjoy following the improvements evidenced by their data streams.
But I don’t.
Moreover, I’m not the only one. A 2006 paper produced by the Global Public Policy Institute for the UN Environment Programme on trends in non-financial reporting concluded that “there are very few people who actually read and use [non-financial] reports”.
The central problem is to understand what the story is that the vast quantities of information in these reports is trying to tell me. Crucially, how can I be sure, just looking at tabular data, that real managers, in real situations on the ground are genuinely taking account of the social, environmental and ethical impacts of their businesses in the decisions they take?
I can’t be.
A new reporting style
As Ethical Corporation’s new report “Social and economic impact: measurement, evaluation and reporting” makes clear, it is evident that many companies realise this, and are beginning to explore new ways of understanding and reporting on their impacts on the world around them.
Perhaps the best known tool is Anglo American’s socio-economic assessment toolbox (SEAT) designed to enable site managers to understand and manage relationships with communities local to their facilities.
The formal output of this tool is a plan for each site to manage its relationships with local people. However, arguably even more valuable is the process itself, which seeks to develop a detailed understanding of the relationship between the company and its environment.
Anyone genuinely interested in understanding companies’ wider impacts, but who (like me) finds traditional CR reports dull should really read the studies that Unilever commissioned into its socio-economic impacts in Indonesia and South Africa. They are fascinating.
They are light in terms of tabular data – the Oxfam-authored report on Indonesia has fewer than five pages of data tables in report of more than 120 pages. But some of the figures are striking. The Insead professor who conducted the study in South Africa concluded that Unilever creates 0.9% of all jobs in the country.
However what is more compelling is the story these reports tell of the company’s impact and that of its value-chain – its suppliers, distributors and retailers – on the host countries.
Heineken too has put a great deal into understanding how their company fits into the weft and warp of the local society and economy. Working with a number of Dutch NGOs the company has developed a methodology to understand how its operations impact on food-poor people in the countries where it operates.
Again, some of the statistics are striking. For example in Rwanda, Heineken’s local subsidiary provides livelihoods for 35,000 families. However, as with the Unilever studies, what is most fascinating is the insight into the detail of the many different ways the company interacts with, impacts on, and is affected by individuals, families and communities.
Both of these examples demonstrate how much the corporate sector has to learn from the development community.
Cause and effect
Donor agencies and NGOs have, for much longer than companies, been trying to understand and measure their impact on societies in developing countries, and their practice is well advanced.
The Donor Committee for Enterprise Development, for example, has developed a results measurement standard based on what development professionals call the results chain. This approach seeks to establish the logical cause and effect of aid projects on target communities.
The same approach could usefully be adopted by companies in understanding their impacts where they operate.
What we are seeing is a slow migration away from corporate responsibility reports that are heavy on quantitative data but really give no degree of insight about how companies are managing socio-economic impact at an operational level. These reports are not going to go away, but the focus seems to be shifting towards approaches that really try to get into the granular detail of the company’s interaction with the world around it.
This shift is still in its early days, but it is a hugely welcome one. Big fat CR reports were the result of companies’ perceived need to defend themselves from the activist onslaught. This developing approach is seeing companies genuinely trying to understand, and to manage, their social, ethical and environmental impacts.