CSR: Convincing the sceptics

To counter apathy, how can firms ensure CSR reports are useful documents? Maja Pawinska finds out.

Fat corporate social responsibility reports landing with a thump on the desks of City analysts and business journalists are more likely to be met with a sigh than a cheer. According to a recent survey conducted by Mattison PR, none of the 30 sell-side Thomson Extel-rated analysts interviewed listed CSR among the non-financial areas on which they needed more information from companies (PRWeek, 18 June). Does this mean there is a need to re-evaluate why reports are being produced, who they are for, what they include and how they are presented?

According to statistics from Corporate Register, the database of CSR reports run by Next Step Consulting, 81 per cent of FTSE 100 companies now produce a standalone CSR report. The total number of reports produced, as hard copy and PDFs, has grown from 26 in 1992 to 1,791 in 2003.

Understanding objectives

With the Government's Operating Financial Review (OFR) requiring listed companies to include information about social and environmental risks to the business in their financial reports by next year, there is a timely opportunity for those overseeing CSR in corporations and in specialist consultancies to review how far the discipline of CSR reporting has come, and how it now needs to develop.

The first step is to understand what a CSR report is for. 'A lot of people confuse CSR with community activities, such as giving to charity or schools,' says CSR specialist consultancy Context director Peter Knight.

'These are an important way of integrating as a corporate citizen, but they are not essential for the success of the business. CSR is an integral part of the business, and is about how a firm deals with risks and opportunities that will affect its future success,' he adds.

Next Step Consulting director Paul Scott says companies also need to overcome a certain amount of apathy from analysts and journalists who are sent the reports, since they are now so familiar. 'It's always good to see a solid report from a new entrant, but because there are so many landing on people's desks, it can be a case of "oh, here's another one".

The challenge is to make reports readable, and to get away from a worthy and wordy report to a genuinely useful business document.'

Nicky Amos, former head of corporate responsibility at The Body Shop, has just joined CSR specialist Corporate Culture as project director, and believes there are a number of challenges of reporting CSR initiatives.

'All the time that CSR is portrayed as a separate entity, the more companies are perpetuating the myth that it is on the margins of the business,' she says.

'Although most reports include a look back over the year, how the company has performed and forward-looking targets, there is rarely much vision.

CSR is not static - it is dynamic and has momentum, and reports can be very dry and compliance-driven, which doesn't make for a compelling read.'

Flag designs and produces CSR reports, and director Rob Cameron says that there is a need for firms to report to demonstrate transparency, in line with the growing emphasis on corporate governance post-Enron.

He also believes that reports are valuable internal documents, as companies rarely make progress unless they are setting out performance benchmarks and, in many cases, the compiling of the CSR report may be the first time that this data has been pulled together.

But, he adds, most CSR reports don't meet basic communications rules of being clear, knowing who the audience is and ensuring the content is what they need to see: 'There are so many audiences for CSR reports, from regulators and government to NGOs and shareholders, how can a firm possibly produce one document that meets the needs of all these diverse groups?'

CSR reports are generally only of interest to a very small but important group of people, mainly analysts who specialise in the enormous growth area of socially responsible investment (SRI). They are interested because the powerful pension funds have recognised the need to ensure they are investing in responsible firms as a way of minimising long-term risk.

Reports may also be of interest to competitors and other opinion leaders, including select academics and journalists.

Reports themselves now rarely make news, partly because they are mostly full of 'good' news, which does not make headlines, and partly because they refer to activities that may have happened up to a year ago. And surely journalists would want to understand the complexities and dilemmas of managing a company in a responsible way, underlining where that fits in the organisation?

Greg Moore, an associate at Four Communications specialising in CSR, adds that companies can't assume that journalists don't pay attention to reports: they will be quick to pick up on any perceived inconsistency between the platitudes of a report and what a company is actually doing.

Scott, too, underlines how crucial the credibility of reports is: 'For reporting to be taken seriously, it needs to include bad news as well as good news, and to show that the company has asked stakeholders what they think. Reports also need to be externally audited in the same way as financial reports - in the UK, only around 40 per cent of reports are externally verified.'

The content of CSR reports varies widely, and there is no universally accepted set of guidelines to what should be covered. But there are two standards that can provide a framework for reporting: AA1000 and its companion assurance standard, AA100AS, developed by AccountAbility (www.accountability.org.uk) and the Global Reporting Initiative (www.globalreporting.org).

Companies also need to think about how they present reports: the tone and style; whether to produce hard copy or only make the report accessible via the internet. Ideally, a CSR report should be no longer than a 16 to 24-page summary document that can be scanned quickly, with details of where readers can find more information on the internet.

'There needs to be better automation of the process so data can be put in the public domain more easily and quickly,' says Cameron, who has developed a new product called CRedit to help firms, including the John Lewis Partnership and Ford, do just this.

CSR reports are here to stay, and firms are already starting to forgo the annual 120-page blockbuster for shorter and more relevant reports, and are making better use of the internet and technology to compile and publish data.

CSR specialists take heart from the Government's keenness on integrating CSR with financial reporting, but firms still have a way to go before CSR is truly at the heart of the business.

BRITISH AMERICAN TOBACCO: BACKING CSR

BAT published its third Social Report in June this year, demonstrating it continues to regard CSR highly, despite apathy from some quarters.

Head of corporate, social and regulatory affairs Adrian Payne says: 'It's very important to deliver something tangible that covers stakeholder dialogue, which is central to our CSR programme. We've tried to be as transparent as possible. The main thrust is in reporting on the activities of the 18 core beliefs in our statement of business principles, which were laid out in last year's Social Report.

'We report on comments from stakeholders, and we make it clear what our policies and viewpoints are. We publish the report as a pdf download on our website so we can also direct readers to other relevant parts of the website.

'Our audience is all our stakeholders and other CSR practitioners. We haven't had the same reaction to this third report as the first one, when we were the first tobacco company to issue a social report, and there was a lot of publicity. I think it's positive that there hasn't been a reaction from the media, as it's an indication that it's no longer seen as unusual for us to issue a report.

'The report is more important and fundamental than just being about PR, and isn't a glossy brochure. It's about the principles of the business, and effective communication is key to enable stakeholders to form their own judgment. It's refreshing that when people hear about what we are doing and are provided with facts about the company, they are often surprised.'

WHAT THE PUNDITS SAY

ISIS ASSET MANAGEMENT SENIOR ANALYST CLAUDIA KRUSE

'The quality of CSR reports varies widely. Some are really good, but with others you can clearly see that they haven't invested too much thought into what will be useful for stakeholders. Reports can be a good indication of the firm's commitment to CSR, and a tool for us to hold them to account.

The good ones are a great help to us, as they usually include an overview of how CSR has been integrated into the firm, and show whether it is improving year on year.'

ENVIRONMENT MAGAZINE GREEN FUTURES EDITOR-IN-CHIEF MARTIN WRIGHT

'It's excellent that companies report, but a lot of them don't work as communication tools. There is often a lack of clarity as to who the audience is, and readers are swamped with data. Reports can represent the worst excesses of PR puff. The best reports have a sense of proportion, and acknowledge that the reader knows that the firm can't make everything all right, as well as telling some human interest stories.'

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