Resource

Corporate Reporting

May 1, 2005

The Big Picture

A wide range of stakeholders — including investors, consumers, activists, and employees — are asking companies, especially larger ones, to provide “warts and all” information about environmental and social impacts. As this trend for increased accountability and transparency spreads throughout the globe, corporate reporting aids businesses in assessing and improving performance and involving and gaining the trust of stakeholders.

The Context

Corporate reporting goes by a variety of names: “environmental, health, and safety” reports or, simply, “sustainability” reports. Other companies create “corporate citizenship” or “corporate social responsibility” reports, which address social impacts as well as environmental ones. Under any title, the practice of corporate reporting allows corporations to communicate information to a variety of stakeholders.

Corporate reporting began in the late 1980s with simple brochures and booklets describing companies’ environmental commitments, along with examples of related initiatives. As corporate reporting has grown, the reports have evolved rapidly — in some cases, to full-fledged publications that attempt to measure and assess the full scope of a company’s environmental and social impacts, as well as to inform the public of exactly what the company is doing to address these impacts. Smaller companies — and those in cleaner, less-regulated industries — may find their reporting goals better served by presenting this information via meetings or by adding a brief section to an annual report.

Although the contents of environmental reports still tend to vary widely, a growing number of companies are conforming to the standards of the nonprofit Global Reporting Initiative. Established benchmarks for corporate reporting allow readers to compare performance across companies, sectors, and borders. Expect standards for corporate reporting to continue to evolve — especially as online reports include routinely updated data and opportunities for readers to respond.

Key Players

Major companies, especially those in heavily regulated industries, are releasing annual reports that review environmental performance and demonstrate a proactive commitment to environmental and social responsibility.
Standards organizations, such as the Global Reporting Initiative, are working to set international standards for corporate reporting.
Regulatory agencies are looking to corporate reporting as a way to identify companies committed to improving environmental and social performance.
Employees are gathering information about job safety and taking pride in their employers’ environmental and social efforts. Job seekers, especially business students, read corporate reports to determine which organizations might be good places to work (or which ones to avoid).
Investors are asking questions about the effects of environmental and social initiatives on immediate and long-term financial performance.
Community members are seeking reassurances about the health and environmental impacts of business operations outside company walls, as well as evidence of donations, volunteer efforts, and other indications that companies are “giving back” to host communities.
Consumers are considering the overall environmental and social performance of the companies that produce the products they purchase — and how that may affect product quality, cost, and safety.
Activists are demanding tangible corporate commitments to environmental and social performance that can be tracked and measured.

Getting Down to Business

More than 600 international companies have produced at least one environmental report, according to SustainAbility, a British management consultancy and think tank.
The financial sector represents 28% of the 100 Fortune 500 companies included in the 2001 Benchmark Survey of the State of Global Environmental and Social Reporting. Other sectors represented included: automotives, consumer products, electronics, merchandising, oil and chemicals, telecommunications, trading, and utilities.
The Body Shop was recognized by Britain’s SustainAbility for its comprehensive reporting on social and environmental impacts — and the company’s efforts to address these issues.
General Motors used the Global Reporting Initiative’s guidelines to develop an innovative and dynamic online report that is routinely updated.

The Upside

Reporting allows companies to evaluate management practices and corporate strategy.
Voluntary disclosure garners more flexible treatment by regulators, including faster permitting.
Promoting environmental and social initiatives fosters employee satisfaction and attracts job seekers.
Publicly demonstrating corporate responsibility alleviates pressure from activist groups.
Setting precedents provides a competitive advantage and helps companies emerge as industry leaders.

Reality Check

Complexity: Obtaining the data for environmental reports can be challenging. Many companies that begin reporting find there are not systems in place for understanding the impacts of operations.
Resources: A thorough review of a company’s management systems can be time-consuming and expensive, especially for smaller companies that lack dedicated staff for evaluations.
Credibility: Reports can call more attention to a company’s shortcomings than its successes.
Bias: From a public perspective, the reliability of corporate reporting is unclear.
Lack of Effectiveness: Reports may fail to receive attention from the mainstream investment community or from consumers.

Action Plan

Determine whether your company needs an environmental report: Before dedicating time and resources to developing a report, make sure you’ll have an audience — and that a report is the best way to reach it. Get a sense of the size, scope, and format that would work best for your company’s report.
Target your audience: Different stakeholders will look for very different information in a report. Pinpoint which groups you aim to address.
Learn from others’ examples: Decide what you like and what you don’t. (Visit GreenBiz.com’s Corporate Web Sites for direct access to the environmental pages of hundreds of companies.)
Consider an online report: Publishing electronically obviously saves money and natural resources, but it also allows companies to routinely update information — and to avoid the problem of holding publication dates until data are available.
Gather and analyze the data: Ask managers and department heads for data to measure, track, and analyze trends in environmental performance. Provide context and explanations where appropriate. For example, if emissions are up but at a slower rate than overall sales, point that out.
Design for both browsers and analyzers: A detailed report can lack readability, while a shorter report may lack credibility. An effective report should employ simple graphics and highlighted information within detailed narratives and data presentations.
Get feedback: An environmental report is an exercise in continual improvement. Use e-mail addresses, toll-free telephone numbers, or postage-paid reply cards to encourage questions and comments.

Leads

Sustainability Reporting Guidelines on Economic, Environmental, and Social Performance includes suggestions on report content from the Global Reporting Initiative.
Six Keys to Creating a Winning Environmental Report offers insight and step-by-step guidance on making a report successful.
Sustainability Report provides instructions on measuring critical trends to determine sustainability performance.
GreenBiz Corporate Web Sites grants direct access to the environmental Web pages of hundreds of companies; many of the sites include online or downloadable environmental and sustainability reports.

The Bottom Line

As the business community faces increasing pressure to account for its environmental and social impacts, corporate reporting will help companies to assess performance and make improvements, while meeting the disclosure demands of investors, consumers, and activists.