Capitalising on conscience: Companies are finding an appreciative audience among stakeholders, the media and even critics for a new generation of social reports. Nick Purdom reports

The practice of social reporting was once considered the domain of a few fringe organisations, concerned more with issues such as animal welfare than shareholder wealth.

The practice of social reporting was once considered the domain of

a few fringe organisations, concerned more with issues such as animal

welfare than shareholder wealth.



But a new generation of inclusive reports, assessing an organisation’s

relationships with its customers, employees, suppliers, investors and

local community is emerging. These reports, which use the complex

process of social auditing to disclose social, financial and

environmental performance, are partly a response to consumer concerns

with the ethics of the organisations from which they purchase goods and

services.



Revelations that a well-known branded product is being manufactured in a

Third World sweatshop can have devastating effects on long-term

corporate reputation. ’People want to know if organisations are going to

be able to sustain their performance in the future and what their

licence to operate in the community is like,’ says Mark Goyder, director

of the Centre for Tomorrow’s Company.



This year has already seen a trickle of social reports from companies

including Shell, BP and The Co-operative Bank (see case study). Robert

Beckett, development director at the Institute of Social and Ethical

Accountability, believes many more can now be expected. ’Social

reporting has only just started. A lot of companies are now gearing up,

and this is the start of a very large wave,’ he says.



The Institute was set up in 1996 with a remit to broaden understanding

of corporate responsibility and develop the debate about how this can be

measured. It now numbers 30 major corporations and 250 smaller

organisations and individuals among its members. Beckett says there are

important benefits to be gained from social and ethical auditing and

reporting.



’First of all it positions an organisation and helps develop

perceptions, it orders an organisation’s own systems, and it hopefully

improves performance through the evaluation of areas that were not

previously evaluated,’ he says.



The key to the success or failure of social reports lies in how

rigorously data is collected and how honestly bad, as well as good,

performance is reported. ’The public will only believe them if they are

verified externally and made widely available,’ says Beckett.



Goyder says: ’I’ve been talking to stakeholder groups recently and their

initial reaction is a degree of scepticism. If they think a company has

been polluting for years they are not going to change their attitude

because of a glossy report. What is really significant and will change

public opinion is if they demonstrate they are really involved in a

dialogue that results in a change in their practice.’



Producing a believable, and effective, social report is hard work.

Hilary Sutcliffe, joint managing director of Addition Public Relations,

which has been involved in the area of social reporting for around five

years, says: ’We will probably see a lot more reports in a couple of

years’ time as people go through the procedures, which are fairly

onerous.’



BT is currently gathering information to produce its first social

report, which it expects to publish towards the end of the year. The

company has been following the model produced by the European Foundation

for Quality Management to assess the quality of management over and

above straight financial figures for the last few years and will use a

lot of the data collected for this in its social report.



’Our social report will bring together for the first time in the public

domain a lot of these statistics, supplemented with views and opinions

from stakeholder groups after focus group meetings,’ says BT’s

corporate, environmental and social programmes manager, Chris Tuppen. He

says the social report, which will appear at the same time as an

environmental report and a survey looking at BT’s technology in society,

will be a ’warts and all’ account. ’We are taking a very pragmatic

approach. We will identify where we need to fill in gaps and indicate

where we go from here,’ he says.



Tuppen is adamant that social reporting is a long-term commitment.

’Corporate responsibility and citizenship are part of the equation that

builds corporate reputation, and it takes a long time to build this,’ he

says. ’In the long term the bottom line will benefit through the company

having a leading, and well-recognised reputation.’



Mining company Rio Tinto has produced a health, safety and environment

(HSE) report for the last couple of years, and in 1998 produced a

document for internal consumption called ’The Way We Work’ as a possible

prelude to producing a social report next year. ’The Way We Work’ sets

out policy on HSE, communities, human rights, access to land, employees,

business integrity and political involvement, and gives statements of

intent on transparency, corporate governance and accountability.



Shaun Stewart, international and government affairs manager at Rio

Tinto, believes there are many benefits in producing HSE and social

reports.



’There are benefits internally because it ensures management has the

right checks and balances in place so data is collected efficiently. It

also helps in external relations with NGOs and others to have, in one

document, data that has been verified by an independent consultant.’



Because of the nature of its business, Rio Tinto inevitably has a number

of critics, such as Friends of the Earth. ’We’ve been criticised over

things like alleged human rights abuses and a beach project in

Madagascar,’ says Stewart. ’We are not producing these reports in

response to that, but they do help in the engagement of critics. They

allow us to say ’that’s what we stand for, let’s look at the way we are

performing’.’



As more companies become aware of the importance of social reporting, a

big opportunity is opening for PR practitioners. But Sutcliffe believes

it is an opportunity that many are not ready to grasp. ’I was at a

corporate citizen conference last month and I was the only PR person

there. People from really high quality companies were saying to me they

haven’t met a PR person yet who’s got their head around this,’ she

says.



Sutcliffe has now formed a corporate responsibility group at the IPR,

whose first meeting took place this week. ’A lot of PR companies are

involved in annual reports and increasingly they’re being asked to look

at different kinds of reports so they need to be abreast of the issues,’

says Sutcliffe.



’If they’re doing their job right, PR people should be saying how

companies can manage and measure their reputation and relationships

better. Very often companies are not used to hearing this from PR

agencies. We’ve got to get our act together otherwise management

consultants will be stealing our clients from us.’



While the practice has yet to become widespread, it is increasingly seen

as important in building corporate reputation. Adrian Wheeler, chairman

of the PRCA, agrees that social reporting offers real opportunities for

PR people.



’PR today is very much about helping to set company policy at the

highest level and telling people what has been done to discharge

environmental, social and ethical responsibility,’ says Wheeler.



’No-one else in a company has this as their primary responsibility, and

I see this as an area of huge scope for the better PR consultancy. Very

few companies can put their finger on corporate conscience, which is

where PR consultancies really do have something to offer.’



Robert Beckett says he is now working with many PR companies. ’There

will be specialist corporate and social responsibility units in the

larger agencies and they will develop programmes around this area, while

some will also get involved in methodology and auditing.’



’PR will be intimately concerned with corporate and social

responsibility, and the visionaries and entrepreneurs in PR will say

’this is going to be an enormous opportunity for us’.’



CO-OPERATIVE BANK: A PIONEERING APPROACH



In April, as it announced its annual results, The Co-operative Bank

published The Partnership Report, heralding it as a new ’warts and all’

approach to financial reporting. The report looks at how the bank

delivers value to seven groups which it has identified as partners in

its business, and also assesses whether these needs have been met in a

socially responsible and ecologically sustainable manner.



’We tested the philosophy and principle with customers, staff and

suppliers in November 1996, and they felt it was building on our ethical

stance and saw it as a logical step,’ says Co-operative Bank PR manager,

Bill Eyres. In May 1997 the bank’s approach was further endorsed when 97

per cent of customers who responded said they were in favour of a

Partnership report.



Existing customers may have been in favour of a balanced and open

report, but successfully its launch of the report to the media was

critical. ’There was a risk involved because we were not just releasing

positives but also negatives, and the crucial thing was that journalists

understood the philosophy behind the report so we carried out

face-to-face briefings with selected journalists,’ says Eyres.



The report certainly made a big impact on the media. The bank has

calculated it reached 9.1 million TV viewers, 2.7 million radio

listeners and 50 million newspaper readers. Not only this, but coverage

was overwhelmingly positive. ’Using our internal scoring system, the

score was 88 positive and two negative,’ says Eyres.



Lucy Kellaway of the Financial Times, who in the past had been critical

of the bank, said she found ’more to admire than mock’. And the issue of

social reporting was debated in primetime on Radio 4’s Today

programme.



The response of the public has also been encouraging. ’One customer

wrote to say that unlike other companies’ annual reports, about which he

was very cynical, this was a well written factual report with a lot of

genuine commitments,’ says Eyre. ’We have got a lot of feedback like

that from both customers and non-customers who are impressed by the

honesty and openness of the report.’



It seems The Co-operative Bank’s ethical stance is also having a

positive effect on performance. The bank has turned in four years of

record profits, including a rise of 21 per cent in 1997. ’Recent polling

showed our ethical approach is a significant factor in over half our

customers’ choice of bank,’ reports Eyres.



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