The Guardian: Companies' ethical reports branded ineffective: “Jeroem van der Veer, Shell's new chief executive, has no qualms about the current failings of most CSR reporting: "I still see too little willingness to talk about failures and too little input from credible, and sometimes critical, third parties". It's a moot point, and one that van der Veer is well placed to make after his company's oil reserves crisis earlier this year.” (ShellNews.net)

Oliver Balch

Posted 3 November 2004

Companies are investing more and more every year in corporate social responsibility (CSR) reports, but the vast majority are still failing to get their message across, a new survey has found this week.

"Most companies fail to give any real insight into what they are reporting on and why they are doing so," reads the damning conclusion of the Global Reporters 2004 Survey, the third in a series of best practice studies by consultancy firm SustainAbility.

The findings of the study will probably not surprise the handful of people - mostly employees, plus a few ethical investors and special interest groups - who have actually read an example of this latest trend in corporate reporting.

"The vast majority of CSR reports out there are ineffective as pieces of communication - they are trying to be all things to all people and failing to meets the needs of anyone," admits Kate Crawford of Flag, a specialist CSR communications firm.

While Judy Kuszewski, co-author of the survey, notes a reduction in the length of the average CSR report (though still a hefty read at 72 pages), she agrees that companies need to adopt a much more tailored approach to their ethical communications.

"We have to get a lot closer to the point at which they [readers] are going to be using this information. It could be at point of sale, or investor briefings, or mainstream marketing or advertising," Ms Kuszewski said.

The increase in online reporting demonstrates how leading corporate reporters are beginning to follow her advice. Online reports allow for considerable more specialised information and appeal particularly to 'data-miners' from the investment community. Six of the top 50 reporters identified in the survey now solely publish web-based reports, of which BAA and Rio Tinto are rated among the best.

Yet, even if corporate reporters succeed in getting their CSR messages heard, they still face a massive credibility gap with most stakeholders.

"There is a notable tendency for such reports to read like public relations polemic rather than risk assessment reports," says George Dallas, managing director of Standard & Poor's, the US-based rating agency and co-sponsor of the survey.

Little will shake such scepticism until companies show a willingness to balance their characteristic 'good news' messaging with frank admissions of poor performance and honesty about how complex the CSR agenda is to manage.

Jeroem van der Veer, Shell's new chief executive, has no qualms about the current failings of most CSR reporting: "I still see too little willingness to talk about failures and too little input from credible, and sometimes critical, third parties".

It's a moot point, and one that van der Veer is well placed to make after his company's oil reserves crisis earlier this year. Still, the consistent inclusion of negative third-party comment in Shell's ethical reporting over the last seven years may explain why the embattled oil major still ranks a surprisingly high eighth place in the Global Reporters survey. A notable exception of corporate transparency comes in Gap's 2003 report, in which the US retailer openly admits to two incidents of child labour and frequent health and safety violations - although not so openly, sceptics will note, as to land the clothing firm in court.

But can the public even trust what companies write in these reports? More than before, the survey concludes, noting the increase in companies submitting their non-financial reports for independent assessment. Over three-quarters of the survey's Top 50 ethical reports include a discussion of external verification.

"Without robust assurance, sustainability reporting will be neither credible nor useful, either for the reporting companies or for their stakeholders," argues Dr Simon Zadek, chief executive of assurance experts AccountAbility.

Better assurance, according to Zadek, can also help resolve what is perhaps the biggest sticking point for most ethical reports: namely, do they disclose the material ethical issues that users actually need to know about?

Most reports do not, the survey concludes. The majority of companies either remain silent on critical risks facing their industry or pursue a 'carpet-bombing' approach that fails to distinguish relevant information from the irrelevant. Typical is DaimlerChrysler's report, in which the survey's authors accuse of devoting "more space to photographs of handshakes than discussions on climate change".

The problem owes more to management oversight than intentional evasion, Ms Kuszewski believes. Few reports give any indication of the process by which environmental and social issues are prioritised and managed, she argues. "It makes it hard for a reader who doesn't have a very deep knowledge of the company and its sector to be able to say with any confidence that the issues presented in this report are the right ones".

Not all ethical reports avoid the cliched elephant in the bedroom. Examples highlighted in the survey include BP's description of the impact of its products on climate change, Unilever's treatment of nutrition and obesity, and SABMiller's coverage of responsible drinking.

The French multinational Lafarge is also singled out in the report for its discussion on public policy activities in relation to climate change. "The global cement company's stance may not be to everyone's liking, but at least it is clear what it is". At last, something that sounds worth reading.

Top CSR reporters

Co-operative Financial Services Novo Nordisk BP British American Tobacco BT Group BAA Rabobank Rio Tinto Royal Dutch/Shell Group HP Unilever

Oliver Balch is managing editor of the CSR journal, Corporate Citizenship Briefing

http://www.guardian.co.uk/ethicalbusiness/story/0,,1341673,00.html