A waste of paper

Ethical business campaigner Helen Middleton asks some hard questions about the worth of Corporate Social Responsibility reports

The growing number of Corporate Social Responsibility (CSR) reports produced by well known, multinational companies suggests that the business world is taking seriously its responsibility to society and to the environment.

True, the advent of CSR reporting has indeed raised the profile of sustainable and ethical issues within business. Unfortunately, and to the chagrin of ethical investors, researchers and analysts, the content of the majority of CSR reports remains pretty opaque and meaningless.

If we look at the FTSE 100 index as an example, 98 of the companies listed feature CSR information on their website; 81 actually supply a full CSR report. However, only 17% of these companies state measurable improvement targets and are verified independently – a disturbingly low number when one considers their wide-ranging societal and environmental global impacts.

Reporting improvements

Ten years ago when CSR reporting was still in its infancy, CSR report content was universally poor – comprising mainly self-inflationary promotional spin on flagship projects. On a more positive note, the reporting concept did raise the profile of CSR. It encouraged some organisations to consider the issue, even if business practice on the whole changed little.

Some years later, pushed by campaigning and research groups like the Ethical Consumer Research Association (ECRA) and the ethical investment community, higher standards and benchmarks were set. Good corporate CSR pioneers, by disclosing their negative impacts and proving that the world needn’t necessarily crash in around them, persuaded others to follow suit.

In the very early days of CSR reporting, organisations such as ECRA would have rated positively any company with a CSR report, against companies that didn’t possess one at all. Now, in order to achieve ECRA’s best positive rating for good environmental reporting, companies must state measurable targets and deadlines – and be independently verified.

When ECRA began rating smaller companies it demanded lower standards from them compared with the larger organisations. As these ethical organisations grow in size and profitability, however, the same stringent standards and benchmarks come to be applied.

The relatively slow progress in producing meaningful CSR reports indicates that some of the UK’s leading quoted companies will need to do a lot more to satisfy the guidelines laid out in the Government’s new Operating and Financial Review (OFR) reporting regulation. In this, the UK’s quoted companies are encouraged to report on all the substantial impacts of their business. CEOs must decide if unreported issues are material to the business and explain the reasons for their omission.

Lengthy 200-page documents of glossy CSR speak, documents that say little and fail to address the key criticisms and impacts of a business, fall short of these new regulations.

No pain, no gain

Anglo-American plc receives full marks from ECRA for an environmental report. Unfortunately, this has resulted in ethical criticisms of the company, including genetic-engineering developments and workers’ rights problems. Such an array and severity of criticism means that Anglo-American are awarded a poor Ethiscore of 5.5 out of a possible 15 (Ethiscore being ECRA’s unique numerical rating system to help differentiate companies which have attracted significant levels of criticism from those which have attracted less attention). This kind of information fails to appear at all in most corporate CSR reports – suggesting the need for a more independent analysis.

So what does the future hold? Well, unfortunately, it’s unlikely that companies will have the impetus to report until the OFR becomes fully mandatory. Voluntary schemes are adopted half-heartedly. This has been clearly demonstrated by the lack of meaningful CSR reporting.

OFR raises many risks for the management of any company. However, the greatest risk lies in failing to respond adequately. Reputational risk, investor and public trust and market positioning are all potential victims of limited and ’empty’ CSR reporting.

So what should stakeholders do? The clear advice is to look for measurable targets and independent verification, and to monitor the improvements of corporate behaviour year-on-year. The whole concept of ethical business has come a long way; the fact that business and consumers are alert to the issue indicates significant progress.

Unfortunately, it will only be through continued pressure from consumers and government, the will of forward-thinking corporations and the influence of NGOs that corporations will come to take complete responsibility for their business activities and impacts.

Only then will the real cost of business be counted.

Helen Middleton is Business Development Director of Ethical Consumer Information Systems Limited

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