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The Responsible Business Summit 2014

19/05/2014 - 20/05/2014, London, UK

Make sustainable innovation add to your bottom line. 15+ CEOs and C-Suite from leading multinationals plus heads of CSR will discuss the future of sustainability

Sustainability reporting - The dog that didn’t bark

That companies are making false sustainability claims isn’t the scandal – it’s that nobody noticed, says Mallen Baker

Can reporting guidelines be un-muzzled?

Recent research into companies producing reports in line with the Global Reporting Initiative has found some fairly dramatic results. In short, it appears that companies are massively over-claiming when they state some of their key indicators to be in compliance with what GRI says they should be reporting.

According to Elaine Cohen, a regular report reviewer for Ethical Corporation, who reported the results of the Vienna University research on her blog, 86% of companies declared disclosure against the top workforce indicators, but only a meagre 11% actually met the full terms of those indicators. For human rights indicators, 62% of companies similarly declared against top indicators, but only 20% really met the terms. One assumes that the areas outside the scope of that research might well follow the same pattern.

There is an obvious response to this revelation, and it is summed up in the title of Cohen’s blog post: False Claims in Sustainability Reports.

Companies have been gaming the system. Although the GRI “A+ rating” (to be dropped in the next generation for exactly this reason) is not supposed to be a mark of sustainability performance, companies continue to believe it to be so, and therefore are doing whatever it takes to get the gold star.

You may think this is a problem that is already fixed. GRI is responding to the fact that people took the A+ rating system on face value and removing the incentive. Job done, right?

That is to miss the point, and to neglect the bigger challenge that the research uncovers. As Sherlock Holmes might have said, this is about the dog that didn’t bark.

Since such an overwhelming majority of these companies had not been providing the full information on so many of these key indicators, isn’t it worth noting that no stakeholders had called them out on this before the fact was uncovered by academic researchers?

Nobody was so keen for this information that they had complained they weren’t getting what they wanted. Frankly, nobody had much noticed. Even, presumably, GRI itself.

If what these companies had been doing constituted false claims, then they were claims to something that nobody cared enough to check. And it is that we should be focusing on.

The truth is that a good 50% of the information that is put into standard sustainability reports is of no interest to anyone. That is the truth we keep hiding from.

And the presence of all that information makes it harder to get to the stuff that people genuinely do find relevant and interesting.

Over disclosure

GRI completeness is a concept for box-tickers who feel on principle that all this information should be disclosed. But that principle is highly questionable if none of the box-tickers themselves actually use that information, or notice when it is not provided.

There is a myth that GRI is, to quote Cohen again, “found to be universally relevant to a representative range of stakeholders … if it’s in there, it must be relevant and someone wants to know.”

If that were the case, you would not need academics to highlight the fact that companies are not following what GRI specifies.

It is more likely that GRI represents the comprehensive wish-list that could be brainstormed by a dozen sub-committees of the sorts of stakeholders for whom the principle that as much should be disclosed as possible is important, even though they don’t have an immediate need for this information themselves.

Companies want a framework, but they ignore all the things that are too onerous, too intrusive and at the same time don’t really seem to add much value in terms of what the information tells you. They do it because they think the framework, although it is the only framework and they have to use it, isn’t as good as people think it is.

And then when they do this, nobody notices. Which rather reinforces the point that this is not information that “is relevant and someone wants to know”.

This is why the next evolution of reporting is not tied to the next iteration of GRI.

The next evolution of reporting is about genuinely connecting with audiences. Providing the information they will respond to. Finding ways to engage and seduce them to even care in the first place.

Yes, there is still a role for reporting as accountability, where a number of the genuinely important performance measures are there and people who have the skill to interpret the numbers can do their thing.

But that is not where the innovation needs to take place. That is not where the excitement is.

And when it comes to finding reasons for companies to report, once you’ve abolished the absurd A+ rating, it’s not where the strongest business case lies either.

Mallen Baker is managing director of Daisywheel Interactive and a contributing editor to Ethical Corporation.

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This year's Ethical Corporation Awards include a category dedicated entirely to CR reporting best practice - for a chance to be shortlisted for/winning the award for Best Sustainability Report, visit http://events.ethicalcorp.com/awards

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Comments

Certification and Context

The two answers for me are properly regulated certification (3rd party) and provision of context. I don't know what the typical practice and expectation is within the GRI for the former but it would certainly do a better job of requiring companies to report properly and meaningfully rather than "cherry pick".
In regards the latter, the GRI has already been challenged to start a debate about context - that is how to make all this information meaningful:
http://www.sustainablebrands.com/news_and_views/new-metrics/66-experts-t...

Guarding Guards

Quis custodiet custodies??

No Assurance Statement or Verification in GRIs own report - tut, tut!

Hrm...To be fair...

No reporting framework (or report) is perfect. It's easy to blame GRI for the lots of things in the reporting world, but I believe the organisation has in fact made a lot of difference to reporting and measurement. Being a multi-stakeholder organisation thrashing out a new path through the forest is no easy task. On balance, I for one would rather have had the GRI doing its work for the past 10 years, than not - and no alternative has yet come along to beat it, although the Integrated Reporting framework is a welcome development (inspired of course in part by the work and debates created through the GRI).
The GRI has already tried to answer your questions: If you really want to know more about the GRI, how it has defined its impacts and the challenges in measuring its impacts, you should check out their own GRI report - it's here:
https://www.globalreporting.org/resourcelibrary/GRI-Annual-Report-2011-2...

Good reporting is not about engaging and seducing

You say that "the truth is that a good 50% of the information that is put into standard sustainability reports is of no interest to anyone". This may be true, but there are several reasons why.

You say that to make reports relevant, they should "engage and seduce" their audiences. While this may be relevant for customers and employees, I don't think it applies to investors, academics, policy makers and large NGOs. My belief is that the key reason reports are not useful for the 'professional' reader is that the data provided is (a) often not robust (b) not contextualised, specifically in terms of its materiality and (c) not comparable with other companies, industry averages, etc.

If a retail company has a P/E ratio of 14 and an EBITDA margin of 20%, professional investors will know immediately the relevance of the information. However, if I disclose that my carbon emissions per employee are 8 tCO2e/employee, then no one knows how to make use of this information. Is the answer to stop disclosing it? Not necessarily. Would this information be material to the business and stakeholders (given the right level of understanding)? If so, what needs to happen to make this information useful - in terms of how it is disclosed and explained, and what needs to happen on an industry-wide basis to agree common standards of disclosure that allow comparability.

sustainability claims by companies

Exaggerated sustainability claims

Integrated Reporting

The worth of a corporate report should not be measured by the number of key performance indicators it contains but rather whether it communicates relevant information for stakeholders. Mallen Baker makes the point that “the next evolution of reporting is about genuinely connecting with audiences” and I totally agree. I believe that Integrated Reporting offers the opportunity for reporting to evolve in this way.

An Integrated Report has been described as a ‘concise communication of value’ and these are all important words: Concise - relevant information is clearly presented; Communication – the report engages stakeholders; Value – not just the financial value to the company but also value created or eroded from a societal point of view.

is itself still developing; at the present time over 80 organisations from around the world are trialing the principles published in draft form in 2011 by the International Integrated Reporting Council. The Chartered Institute of Management Accountants is one of these organisations and I am eagerly looking forward to the publication of our 2012 Report which will be our first annual report specifically founded on principles.

As the principles of an effective Integrated Report are evolving so is the need to ensure that information in the report is reliable. The framework envisages some form of external verification but emphasises that the responsibility for only including relevant and reliable in an Integrated Report starts ‘at home’, so to speak. Ethical behaviour of those involved in the information supply chain, matched with appropriate internal controls, is a pre-requisite that cannot be replaced by external assurance.

Smoke and Mirrors

Absolutely spot on Mallen [and Elaine] - surely so called 'material e.g. useful and actionable - information is what is needed to truly advance performance versus the GRI 'can't see the woods for the trees' approach.

Isn't it time the GRI took the mote out of their own eyes before worrying about the straw in others? If we all examine our practices supposedly contributing to better protecting life on this planet how well would GRI fare in such an examination? What difference have they made? How could we tell? How do they judge their own impacts and how do they define their responsibilties and adhere to them? A change of attitude, a dose of humility and some real measurement science would do their own cause a lot of good.

Woods, trees
Kitchen Sinks
and Emperors clothes all come to mind

Keep keeping us all on our toes!

re Responsible Business disclosure

Good points being raised. I work for a company which recently achieved the highest independent verification for national Responsible Business Standards, assessed by the Organisation for Responsible Businesses. I nominated the business into a local Responsible Business Award programme submitting the 20 page independent Standards report as factual evidence. However the local Awards organisers published no competency criteria and the winners were a business whose published accounts were loss-making. The judging company also happened to win an award in the same programme. Caveat Emptor!

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