Corporate Social Responsibility
Linking business & society
¡ “Mark Carney wants to ensure that consumers don’t add to already swollen debt levels in an era of still-low interest rates and an unusually uncertain outlook. The Bank of Canada Governor’s harshest warning to date indicates policy makers are concerned that consumers who haven’t yet got the message will continue piling on debt if the central bank holds rates steady, after three increases, amid a sluggish recovery.” (Torobin & Grant, G&M, 1 Oct. 2010)
Reporting Political Interference?
¡ "It's striking that [CSR reports] have no information about companies' political or lobbying activities," notes Wayne Norman, a professor of business ethics at North Carolina's Duke University. Though the language of CSR is imbued with notions of corporate citizenship, the Canadian-born Norman adds, "it's a very depoliticized view of citizenship. If corporations are using this language to enhance their profile as members of the community, then it's only fair to use this language to shed light where they may not always want it. What we should be looking for is a parallel amount of transparency about [their] political activities.”(Yakabuski, G&M, 2008)
What is Money?
¡ Before the emergence of money, what was exchanged to undertake economic relations?
¡ An arbitrary object of exchange, which has no value save for the nominal assignment we give it…
¡ Radical: a unified and consistent system of creating and fixing value to a particular register
¡ Modify: finding equivalence between different things based on the measure of money
Going Quant
¡ “Are Metrics Blinding Our Perception?” (Giriharadas, NYT, 21 Nov 2009)
¡ “In the Age of Metrics, vocation after vocation is discovering numbers. Doctors are going quant with evidence-based medicine, which promises to improve care by quantifying different treatments’ probabilities of success. Wall Street has gone quant, with financial models automating trading — sometimes brilliantly, sometimes disastrously. Academia has gone quant, with once-humanistic fields like politics, on which I work at Harvard, studied in a more rigorous way, but at the price of having ever less to say about the world’s big questions. Even charity, built on the instinct of altruism, has gone quant… Philanthropists were once satisfied with a fuzzy feeling and, in the United States at least, tax benefits .Increasingly, though, they insist on precise metrics of their ‘social return on investment.’”
The Age of Metrics
Metrics as Narrative
¡ “In this world in which we are so centered on metrics, those things that are not measured get left off the agenda…You need a metric to fight a metric.” Nobel Laureate Economist Joseph Stiglitz(in Giridharadas)
Reporting: Talking Your Walk
¡ “...[T]ransparency is not the same as reporting: there is more to be transparent about than is typically reported and there are other ways to be transparent than reporting.”(Henriques, 2007, p. 66)
¡ “Transparency is not the same as truth...An attitude of authenticity is more important than an act of transparency.”(Wakefield & Walton, 2010, 882)
¡ We desire openness...Is the company disclosing what it’s actually doing?
¡ Assume a link between transparency & trust.
¡ Transparency does not enable credibility either.
Annual Reports in the Past
¡ Limited audience
¡ Very brief
¡ Facts and figures
¡ Canadian Institute of Chartered Accountants Corporate Reporting Awards
¡ 1951: Average report length, 8-9 pages
¡ 2008: PotashCorp Annual Report, 116 pages
Annual Reports
¡ Two-thirds of the portfolio managers and 54% of the security analysts surveyed stated that the annual report is the most important document prepared and disseminated to those outside the corporation.
¡ 8o% of portfolio managers and 75% of the security analysts say they use the annual report when making investment decisions.
Evolution of the Annual Report
Hudson’s Bay Company: 1670 – present
¡ Fiscal year-end: 31 May, 30 September, 31 January
¡ Annual Report to Shareholders
¡ Required by law
1821 format change:
¡ “Profit and Loss Account”
¡ Narrative account of year’s activities
Evolution: HBC AR
¡ Changes to form:
1930: Governor’s narrative recap changed to formal address of issues relevant to shareholders.
1939-45: Annual Report shortened.
1947: Single document, increasing use of graphic design principles
Types of Reports
¡ Annual Reports
¡ CSR/Sustainability Reports
Annual Reports
¡ Narrative section
§ Little regulation
§ Varying length, depth, content
§ May contextualize bad financial news
¡ Financial section
§ Heavily regulated in US (and US-trade partners)
¡ Both may be examined by auditors, but few guidelines exist for narrative portion. (Penrose)
¡ Narrative section
¡ Management Reports
¡ Letter from Primary Agent (CEO, Chairperson, etc.)
¡ Graphics and photographs
¡ The financial statement section: usually black and white.
¡ Audited and regulated.
¡ Include corresponding footnotes.
¡ Financial section
Income statement
Balance sheet
Statement of retained earnings
Statement of cash flow
Readable Narration
¡ Companies that are performing well tend to produce more readable reports, stronger writing style.
¡ Problems arise with multinational companies: difference in chairmen letters
¡ Women underrepresented
¡ Companies with good or favourable performance more likely to use graphs (Penrose).
Narrative Reports: Why?
¡ Qualitative vs. Quantative: Rhetoric and Persuasion
¡ Investors value supplementary information
¡ Top performers provide more information than average ones.
¡ “While financial information is obviously and critically important, it provides only one part of overall business performance, and has a built-in bias towards recording the short-term results of companies.”
¡ “Contextual narrative reporting helps to cult through the complexity and partial opacity of today’s financial reporting.”
¡ “A good understanding of performance by segment is fundamental for assessing which areas of business are most productive and where value is or is not being added.”
¡ “Narrative reporting exists to help explain the financial statements”
¡ Effective Communication
¡ Structure: Clear and logical organization helps readers retain more of the story and be convinced by it.
¡ Messaging: Focus on key points so that readers can’t miss them.
¡ Navigation: Helpful navigation ensures that readers will find the information that companies go to such trouble to collect, analyze, and publish.
Steps to the Report (PWC “Narrative”)
¡ A Cohesive Team: “Information Owners.”
¡ Meeting Needs: Readers
¡ Speaking the picture: Can you articulate the drivers of sustainable value?
¡ Information quality: Will it withstand public scrutiny?
¡ Structure and coherence: Does all the information support the story?
¡ Alignment and corporate consistency: Is the communication strategy fully integrated?
¡ Adopt the right mindset: seeking, ensuring, reporting information.
¡ Obtain Board sponsorship and buy-in: consensus on goals, expectations, ambitions.
¡ Develop picture of possible content: sources of information.
¡ Build a blueprint report: flexible.
¡ Benchmark the blueprint: Assess against competitors, norms.
¡ Identify the information gaps: quantity and quality.
¡ Assess adequacy of supporting systems and procedures: information access/quality, transparency, veracity.
¡ Determine level of accuracy and reliability: verifiable, internal/external sources.
¡ Create cohesion and clarity: format (conservative or innovative?)
¡ Design implementation plan: reaching the goals.
Why Graphics?
¡ Volume and detail of text may confuse reader or hamper comprehension.
¡ Graphics present overview, summary.
¡ Graphics may enhance communication of financial data, illuminate trends, enable greater understanding.
¡ Poor design and construction can render potentially helpful graphical communications ineffective and misleading (CICA, 1993).
¡ Graphics can highlight and clarify relationships, filter and summarize data.
¡ Reports tend to feature graphics to depict financial more often than non-financial information.
¡ Graphics can simplify complex information, enable communication across language barriers.
Graphic Problems
Graphics
¡ Accuracy or appeal?
¡ Potential for manipulation
¡ Tables and graphs more easily processed
¡ Improved comprehension
¡ Tables: best for data values
¡ Graphs: best for summaries
Graphics: Use & Abuse
¡ Both U.S. and non-U.S. companies rely heavily on graphics in reports.
¡ Non-U.S. companies use significantly more graphics.
¡ Both groups failed to comply with many of the guidelines for good graphics
¡ Financial graphs contained within U.S. reports were materially distorted, on average 81%.
¡ Within the non-U.S. sample, for which the average distortion was 173%.
Graphics Problems
¡ Vast number of Canadian companies use financial graphics and that a substantial number of annual report graphics were potentially misleading. (CICA)
¡ Inadequate chart titles and labels
¡ No numerical values
¡ Obtrusive backgrounds/no boundaries
¡ Optical illusions
¡ Inappropriate use of colour
¡ Chartjunk
¡ “Lie factor”
Sustainability Reporting & CSR
¡ “[S]ince economic impacts of a company include (but a are far wider than) its financial profitability, the reduction or ‘collapse’ of an economic bottom line into a financial one should be avoided.”
¡ “CSR has, in fact, come to be identified with reporting. The major task of most CSR managers is to prepare for and publish the annual social or sustainability report.”
Aside: Sustaining What?
¡ Sustaining long-term business success = social responsibility linked to operations and strategy
¡ Before the emergence of public, national, or global economies, subsistence and sustaining one’s own life and survival was the name of the game
¡ Economics: rooted in a social context of the commons
Sustainable Reporting: Why?
¡ Business does not exist in isolation from other forces and relations (the lesson of CSR)
¡ Business interacts with and occurs in social and cultural contexts
¡ Business can no longer detach itself from its surrounding environment.
¡ Annual reports as main channel for communicating with stakeholders.
¡ Voluntary Disclosure Theory
¡ Superior CSR performers disclose more than inferior CSR performers.
¡ “Companies will welcome the chance to distinguish themselves positively from competition in their communications with stakeholders.”
Sustainability Reporting
¡ Reporting on CSR
¡ Social/Environmental Reporting
¡ Separate or combined with Annual Reporting.
Sustainability Reporting: Maps
GRI Guidelines
¡ Becoming the standard for CSR/Sustainability Reporting
¡ Formed in 1997.
¡ First draft of guidelines in 1999.
¡ First full version in 2000.
¡ G2, 2002; G3, 2006.
¡ Independent, but works with United Nations Global Compact (Stohl et al, COEs)
¡ Agrium, Bell Canada, EnCana, Nexen, PotashCorp, RBC, Talisman Energy, TD, VanCity
AA1000 Assurance Principles
“Promoting accountability for sustainable development.”
¡ Materiality: does the sustainability report provide an account covering all the areas of performance, that stakeholders need to judge the organisation's sustainability performance?
¡ Completeness: is the information complete and accurate enough to assess and understand the organisation's performance in all these areas?
¡ Responsiveness: has the organisation responded coherently and consistently to stakeholders' concerns and interests?
Sustainability Reporting
¡ Audience: internal and external stakeholders
¡ Content: reporting on economic, environment, and social impacts (TBL, CSR)
¡ Purpose & Function:
§ Benchmarking
§ Demonstrating
§ Comparing
Principles for Defining Content
Materiality: influential to stakeholder assessment and decision-making
¡ External factors: stakeholder interest, peer/competitor reports, relevant laws, agreements of strategic significance, reasonably quantifiable affects
¡ Internal factors: key values, policies, strategies, goals, targets; stakeholder investment in organizational success; risks; factors affecting success; core competencies
Stakeholder Inclusiveness
The organization’s identification of and responsiveness to stakeholders.
¡ Description
¡ Integration of engagement outcomes in ongoing activities
¡ Consistent with report scope and boundaries
¡ Remember CSR 1: emphasis on openness, integrating stakeholder concerns
Sustainability Context
The organization’s performance within the context of sustainability.
¡ Sustainable development defined and evaluated according to objective criteria
¡ Demonstrable incorporation of sustainable values within performance reporting
¡ Demonstrable impact and contribution within geographical contexts
¡ Sustainability related to strategy, risks, opportunities.
Completeness
The organization’s report should offer sufficient information for stakeholder assessment and decision making.
¡ Report draws in upstream and downstream entities, as well as all materially relevant information.
¡ All entities affected by or affecting organization included
¡ All significant events, actions, and impacts included
¡ All relevant information presented
Principles of Quality
¡ Balance
¡ Comparability
¡ Accuracy
¡ Timeliness
¡ Clarity
¡ Reliability
Balance
Presents both positive and negative news from reporting period
¡ Favourable and unfavourable results/topics
¡ Formatted to allow users to discern trends
¡ Emphasis reflects significance/materiality
Comparability
Consistency in selection, compilation, and reporting of information and issues
¡ Year-to-year comparisons
¡ Benchmarks clearly stated
¡ Variations in boundary, scope, time identified and explained
Accuracy
Information accurate and sufficiently detailed to enable assessment and decision making.
¡ Measures indicated and techniques described
¡ Estimations (assumptions, techniques) indicated and explained
¡ Qualitative statements validated
Timeliness
Regular reporting schedule, timed to enable shareholder assessment and decision making.
¡ Disclosures (esp. recent) relevant to reporting period.
¡ Key information collection and publication schedule aligned with reporting schedule.
¡ Clear indications of time periods for collection and updating
Clarity
Information made accessible and understandable to stakeholders
¡ Avoid excessive, unnecessary detail
¡ Information reasonably locatable
¡ Avoid language unfamiliar to stakeholder (or provide glossary)
¡ Anticipate diverse accessibility needs
Reliability
Information and processes should be able to withstand examination, enhance credibility.
¡ Identify source
¡ Support assumptions with evidence
¡ Attest to validity of original data
¡ In other words: PERSUADE
Report Boundaries
Organizations should identify relationship partners and dynamics:
¡ Control: ability to influence/govern policies in order to reap rewards
¡ Significant influence: ability to participate in policy decisions, but unable to control.
Boundary Setting
¡ What content goes into which report?
¡ Questions of relevance, completeness, and comprehensive picture of operations.
Standard Disclosures
¡ Strategy & Profile: overall context for organizational performance
¡ Management approach: more detailed, given set of topics
¡ Performance indicators: comparable information on TBL performance
CSR/Sustainability Reports
¡ GRI: Global Reporting Index
¡ Template for transparent corporate reporting on TBL issues.
¡ General model plus industry-specific supplements
GRI Reporting Framework Overview
¡ “The Sustainability Reporting Framework - of which the Sustainability Reporting Guidelines are the cornerstone - provides guidance for organizations to disclose their sustainability performance. It is applicable to organizations of any size or type, and from any sector or geographic region, and has been used by thousands of organizations worldwide as the basis for their sustainability reporting. It facilitates transparency and accountability by organizations and provides stakeholders a universally-applicable, comparable framework from which to understand disclosed information.”
GRI Content Index
¡ Strategy and Analysis 1.1 – 1.2
¡ Organizational Profile 2.1 – 2.10
¡ Report Parameters 3.1 – 3.13
¡ Governance, Commitments, Engagement 4.1 – 4.17
¡ Management Approach and Performance Indicators 5.1 – 5.7
GRI Framework
¡ 1. Strategy and Profile
§ Statements from most senior decision-maker
§ Description of key impacts, risks, opportunities
¡ 2. Organizational Profile
§ Name
§ Brands, products, services
§ Operational structure
§ Location of headquarters
§ Location(s) of operations
§ Nature of ownership (and legal form)
§ Markets serve
§ Scale of operation
§ Significant changes to size, structure, ownership
§ Awards received over reporting period
¡ 3. Report parameters
§ Reporting period
§ Date of most recent report
§ Reporting cycle
§ Contact information
§ Definition process for content and stakeholders
§ Boundary (i.e. Countries, divisions)
§ Limitations of scope
§ Data measurement techniques
§ Significant changes from previous reporting periods
§ GRI Content Index
§ Assurance(s) provided
¡ 4. Governance, Commitments and Engagement
§ Governance structure
§ Communication mechanisms within structure
§ Linkage of compensation and company performance
§ Processes for avoidance of conflict of interest
§ Internal mission/values statements, codes.
§ Oversight procedures (including frequency)
§ Evaluation procedures for most senior governors
§ Externally developed charters/principles subscriptions
§ Association with relevant advocacy organizations
§ Stakeholder engagement
§ Basis of stakeholder identification
§ Approaches to stakeholder engagement
§ Demonstrable response to stakeholder concerns
¡ 5. Management Approach and Performance Indicators
§ Economic
§ Environment
§ Social: Labour, Human Rights, Society, Product responsibility
¡ Economic
§ Economic Performance
§ Market Presence
§ Indirect Economic Impacts
o Success & failure?
o Beneficial & harmful?
¡ Environmental
§ Materials
§ Energy
§ Water
§ Biodiversity
§ Emissions, Effluents, and Waste
§ Products and Services
§ Compliance
§ Transport
§ Overall
¡ Social/Labour
§ Employment
§ Labour/Management Relations
§ Occupational Health and Safety
§ Training and Education
§ Diversity and Equal Opportunity
¡ Social/Human Rights
§ Investment/Procurement Practices
§ Non-Discrimination
§ Freedom of Association and Collective Bargaining
§ Child Labour
§ Forced and Compulsory Labour
§ Security Practices
§ Indigenous Rights
¡ Social/Society
§ Community
§ Corruption
§ Public Policy
§ Anti-Competitive Behaviour
§ Compliance
¡ Social/Product Responsibility
§ Customer Health and Safety
§ Product and Service Labeling
§ Marketing Communications
§ Customer Privacy
§ Compliance
Corporate Knights CSR Reports 2010 Report: Method Indicators
Environmental, Social, Governance (ESG)
CAC 2009 Corporate Reporting Awards
¡ Chartered Accountants of Canada: “The importance of disclosure in good and bad times.”
§ Member organization of the Canadian Institute of Canadian Accountants (CICA)
¡ “We are more inclined to want to share a report when disclosures revolve around profits, growth and success. When markets are less favorable, it takes some degree of courage to enter a report that must explain why goals were not met and why expectations must be lowered.” (CAC, 2009, p. 2)
CAC 2009: Reporting Trends
¡ “Economic uncertainty reflected in 2008 reports.”
¡ “Stormy economic times lead to focus on risk management.”
¡ “Corporate reporting on the Web: maturing but lacking innovation.”
¡ “Sustainable development reporting: what worked, what did not.”
CAC 2009 Reports: Winning Reports
¡ Online + Print
§ Interactive sections (including financial statements)
¡ Readable; useful information for stakeholders (investment propositions, contexts for directors)
¡ Use of plain, straightforward language
¡ 4 Categories: Financial Reporting, Corporate Governance, Electronic, Sustainable Development
¡ Numbers & glossaries for clarification
¡ Reliance on anecdotes & human interest stories
From CAC 2009: Sustainability
“Indeed, leading reporters not only stay one step ahead of regulatory drivers, but
also seize the opportunity to use the SD [sustainability development] report as a vehicle to communicate strategy and create value for stakeholders.” (CAC, 2009, 59)
What worked:
¡ Indicating data integrity and boundaries
¡ Maintaining fairness and transparency
¡ Ensuring the clarity of communication
¡ Facilitating web navigation
¡ External Review Process
What didn’t work:
¡ Overlooking sector-specific issues
¡ Overlooking issues raised in regulatory findings (lack of continuous disclosure)
¡ Failing to integrate a “sustainability mindset” in the corporate agenda (going beyond a cosmetic SD report)
¡ Sustainability = long-term success + operational and strategic sustainability development/social responsibility
Applications to Communications Plan
¡ Does organization’s reporting include CSR and TBL?
¡ Does organization’s reporting follow (or attempt to) GRI or CAC/CICA guidelines for honesty and disclosure?
¡ Does organization’s reporting feature appropriate levels of readability and graphics?
¡ Does organization provide resources for adequate reporting?
¡ “Mark Carney wants to ensure that consumers don’t add to already swollen debt levels in an era of still-low interest rates and an unusually uncertain outlook. The Bank of Canada Governor’s harshest warning to date indicates policy makers are concerned that consumers who haven’t yet got the message will continue piling on debt if the central bank holds rates steady, after three increases, amid a sluggish recovery.” (Torobin & Grant, G&M, 1 Oct. 2010)
Reporting Political Interference?
¡ "It's striking that [CSR reports] have no information about companies' political or lobbying activities," notes Wayne Norman, a professor of business ethics at North Carolina's Duke University. Though the language of CSR is imbued with notions of corporate citizenship, the Canadian-born Norman adds, "it's a very depoliticized view of citizenship. If corporations are using this language to enhance their profile as members of the community, then it's only fair to use this language to shed light where they may not always want it. What we should be looking for is a parallel amount of transparency about [their] political activities.”(Yakabuski, G&M, 2008)
What is Money?
¡ Before the emergence of money, what was exchanged to undertake economic relations?
¡ An arbitrary object of exchange, which has no value save for the nominal assignment we give it…
¡ Radical: a unified and consistent system of creating and fixing value to a particular register
¡ Modify: finding equivalence between different things based on the measure of money
Going Quant
¡ “Are Metrics Blinding Our Perception?” (Giriharadas, NYT, 21 Nov 2009)
¡ “In the Age of Metrics, vocation after vocation is discovering numbers. Doctors are going quant with evidence-based medicine, which promises to improve care by quantifying different treatments’ probabilities of success. Wall Street has gone quant, with financial models automating trading — sometimes brilliantly, sometimes disastrously. Academia has gone quant, with once-humanistic fields like politics, on which I work at Harvard, studied in a more rigorous way, but at the price of having ever less to say about the world’s big questions. Even charity, built on the instinct of altruism, has gone quant… Philanthropists were once satisfied with a fuzzy feeling and, in the United States at least, tax benefits .Increasingly, though, they insist on precise metrics of their ‘social return on investment.’”
The Age of Metrics
Metrics as Narrative
¡ “In this world in which we are so centered on metrics, those things that are not measured get left off the agenda…You need a metric to fight a metric.” Nobel Laureate Economist Joseph Stiglitz(in Giridharadas)
Reporting: Talking Your Walk
¡ “...[T]ransparency is not the same as reporting: there is more to be transparent about than is typically reported and there are other ways to be transparent than reporting.”(Henriques, 2007, p. 66)
¡ “Transparency is not the same as truth...An attitude of authenticity is more important than an act of transparency.”(Wakefield & Walton, 2010, 882)
¡ We desire openness...Is the company disclosing what it’s actually doing?
¡ Assume a link between transparency & trust.
¡ Transparency does not enable credibility either.
Annual Reports in the Past
¡ Limited audience
¡ Very brief
¡ Facts and figures
¡ Canadian Institute of Chartered Accountants Corporate Reporting Awards
¡ 1951: Average report length, 8-9 pages
¡ 2008: PotashCorp Annual Report, 116 pages
Annual Reports
¡ Two-thirds of the portfolio managers and 54% of the security analysts surveyed stated that the annual report is the most important document prepared and disseminated to those outside the corporation.
¡ 8o% of portfolio managers and 75% of the security analysts say they use the annual report when making investment decisions.
Evolution of the Annual Report
Hudson’s Bay Company: 1670 – present
¡ Fiscal year-end: 31 May, 30 September, 31 January
¡ Annual Report to Shareholders
¡ Required by law
1821 format change:
¡ “Profit and Loss Account”
¡ Narrative account of year’s activities
Evolution: HBC AR
¡ Changes to form:
1930: Governor’s narrative recap changed to formal address of issues relevant to shareholders.
1939-45: Annual Report shortened.
1947: Single document, increasing use of graphic design principles
Types of Reports
¡ Annual Reports
¡ CSR/Sustainability Reports
Annual Reports
¡ Narrative section
§ Little regulation
§ Varying length, depth, content
§ May contextualize bad financial news
¡ Financial section
§ Heavily regulated in US (and US-trade partners)
¡ Both may be examined by auditors, but few guidelines exist for narrative portion. (Penrose)
¡ Narrative section
¡ Management Reports
¡ Letter from Primary Agent (CEO, Chairperson, etc.)
¡ Graphics and photographs
¡ The financial statement section: usually black and white.
¡ Audited and regulated.
¡ Include corresponding footnotes.
¡ Financial section
Income statement
Balance sheet
Statement of retained earnings
Statement of cash flow
Readable Narration
¡ Companies that are performing well tend to produce more readable reports, stronger writing style.
¡ Problems arise with multinational companies: difference in chairmen letters
¡ Women underrepresented
¡ Companies with good or favourable performance more likely to use graphs (Penrose).
Narrative Reports: Why?
¡ Qualitative vs. Quantative: Rhetoric and Persuasion
¡ Investors value supplementary information
¡ Top performers provide more information than average ones.
¡ “While financial information is obviously and critically important, it provides only one part of overall business performance, and has a built-in bias towards recording the short-term results of companies.”
¡ “Contextual narrative reporting helps to cult through the complexity and partial opacity of today’s financial reporting.”
¡ “A good understanding of performance by segment is fundamental for assessing which areas of business are most productive and where value is or is not being added.”
¡ “Narrative reporting exists to help explain the financial statements”
¡ Effective Communication
¡ Structure: Clear and logical organization helps readers retain more of the story and be convinced by it.
¡ Messaging: Focus on key points so that readers can’t miss them.
¡ Navigation: Helpful navigation ensures that readers will find the information that companies go to such trouble to collect, analyze, and publish.
Steps to the Report (PWC “Narrative”)
¡ A Cohesive Team: “Information Owners.”
¡ Meeting Needs: Readers
¡ Speaking the picture: Can you articulate the drivers of sustainable value?
¡ Information quality: Will it withstand public scrutiny?
¡ Structure and coherence: Does all the information support the story?
¡ Alignment and corporate consistency: Is the communication strategy fully integrated?
¡ Adopt the right mindset: seeking, ensuring, reporting information.
¡ Obtain Board sponsorship and buy-in: consensus on goals, expectations, ambitions.
¡ Develop picture of possible content: sources of information.
¡ Build a blueprint report: flexible.
¡ Benchmark the blueprint: Assess against competitors, norms.
¡ Identify the information gaps: quantity and quality.
¡ Assess adequacy of supporting systems and procedures: information access/quality, transparency, veracity.
¡ Determine level of accuracy and reliability: verifiable, internal/external sources.
¡ Create cohesion and clarity: format (conservative or innovative?)
¡ Design implementation plan: reaching the goals.
Why Graphics?
¡ Volume and detail of text may confuse reader or hamper comprehension.
¡ Graphics present overview, summary.
¡ Graphics may enhance communication of financial data, illuminate trends, enable greater understanding.
¡ Poor design and construction can render potentially helpful graphical communications ineffective and misleading (CICA, 1993).
¡ Graphics can highlight and clarify relationships, filter and summarize data.
¡ Reports tend to feature graphics to depict financial more often than non-financial information.
¡ Graphics can simplify complex information, enable communication across language barriers.
Graphic Problems
Graphics
¡ Accuracy or appeal?
¡ Potential for manipulation
¡ Tables and graphs more easily processed
¡ Improved comprehension
¡ Tables: best for data values
¡ Graphs: best for summaries
Graphics: Use & Abuse
¡ Both U.S. and non-U.S. companies rely heavily on graphics in reports.
¡ Non-U.S. companies use significantly more graphics.
¡ Both groups failed to comply with many of the guidelines for good graphics
¡ Financial graphs contained within U.S. reports were materially distorted, on average 81%.
¡ Within the non-U.S. sample, for which the average distortion was 173%.
Graphics Problems
¡ Vast number of Canadian companies use financial graphics and that a substantial number of annual report graphics were potentially misleading. (CICA)
¡ Inadequate chart titles and labels
¡ No numerical values
¡ Obtrusive backgrounds/no boundaries
¡ Optical illusions
¡ Inappropriate use of colour
¡ Chartjunk
¡ “Lie factor”
Sustainability Reporting & CSR
¡ “[S]ince economic impacts of a company include (but a are far wider than) its financial profitability, the reduction or ‘collapse’ of an economic bottom line into a financial one should be avoided.”
¡ “CSR has, in fact, come to be identified with reporting. The major task of most CSR managers is to prepare for and publish the annual social or sustainability report.”
Aside: Sustaining What?
¡ Sustaining long-term business success = social responsibility linked to operations and strategy
¡ Before the emergence of public, national, or global economies, subsistence and sustaining one’s own life and survival was the name of the game
¡ Economics: rooted in a social context of the commons
Sustainable Reporting: Why?
¡ Business does not exist in isolation from other forces and relations (the lesson of CSR)
¡ Business interacts with and occurs in social and cultural contexts
¡ Business can no longer detach itself from its surrounding environment.
¡ Annual reports as main channel for communicating with stakeholders.
¡ Voluntary Disclosure Theory
¡ Superior CSR performers disclose more than inferior CSR performers.
¡ “Companies will welcome the chance to distinguish themselves positively from competition in their communications with stakeholders.”
Sustainability Reporting
¡ Reporting on CSR
¡ Social/Environmental Reporting
¡ Separate or combined with Annual Reporting.
Sustainability Reporting: Maps
GRI Guidelines
- Checklist of actions/initiatives and progress
- Quantified measures
- Hard, verifiable
- Focus on process of reporting as the means to accountability and transparency.
- Soft, unverifiable (Sutantoputra 2009)
¡ Becoming the standard for CSR/Sustainability Reporting
¡ Formed in 1997.
¡ First draft of guidelines in 1999.
¡ First full version in 2000.
¡ G2, 2002; G3, 2006.
¡ Independent, but works with United Nations Global Compact (Stohl et al, COEs)
¡ Agrium, Bell Canada, EnCana, Nexen, PotashCorp, RBC, Talisman Energy, TD, VanCity
AA1000 Assurance Principles
“Promoting accountability for sustainable development.”
¡ Materiality: does the sustainability report provide an account covering all the areas of performance, that stakeholders need to judge the organisation's sustainability performance?
¡ Completeness: is the information complete and accurate enough to assess and understand the organisation's performance in all these areas?
¡ Responsiveness: has the organisation responded coherently and consistently to stakeholders' concerns and interests?
Sustainability Reporting
¡ Audience: internal and external stakeholders
¡ Content: reporting on economic, environment, and social impacts (TBL, CSR)
¡ Purpose & Function:
§ Benchmarking
§ Demonstrating
§ Comparing
Principles for Defining Content
Materiality: influential to stakeholder assessment and decision-making
¡ External factors: stakeholder interest, peer/competitor reports, relevant laws, agreements of strategic significance, reasonably quantifiable affects
¡ Internal factors: key values, policies, strategies, goals, targets; stakeholder investment in organizational success; risks; factors affecting success; core competencies
Stakeholder Inclusiveness
The organization’s identification of and responsiveness to stakeholders.
¡ Description
¡ Integration of engagement outcomes in ongoing activities
¡ Consistent with report scope and boundaries
¡ Remember CSR 1: emphasis on openness, integrating stakeholder concerns
Sustainability Context
The organization’s performance within the context of sustainability.
¡ Sustainable development defined and evaluated according to objective criteria
¡ Demonstrable incorporation of sustainable values within performance reporting
¡ Demonstrable impact and contribution within geographical contexts
¡ Sustainability related to strategy, risks, opportunities.
Completeness
The organization’s report should offer sufficient information for stakeholder assessment and decision making.
¡ Report draws in upstream and downstream entities, as well as all materially relevant information.
¡ All entities affected by or affecting organization included
¡ All significant events, actions, and impacts included
¡ All relevant information presented
Principles of Quality
¡ Balance
¡ Comparability
¡ Accuracy
¡ Timeliness
¡ Clarity
¡ Reliability
Balance
Presents both positive and negative news from reporting period
¡ Favourable and unfavourable results/topics
¡ Formatted to allow users to discern trends
¡ Emphasis reflects significance/materiality
Comparability
Consistency in selection, compilation, and reporting of information and issues
¡ Year-to-year comparisons
¡ Benchmarks clearly stated
¡ Variations in boundary, scope, time identified and explained
Accuracy
Information accurate and sufficiently detailed to enable assessment and decision making.
¡ Measures indicated and techniques described
¡ Estimations (assumptions, techniques) indicated and explained
¡ Qualitative statements validated
Timeliness
Regular reporting schedule, timed to enable shareholder assessment and decision making.
¡ Disclosures (esp. recent) relevant to reporting period.
¡ Key information collection and publication schedule aligned with reporting schedule.
¡ Clear indications of time periods for collection and updating
Clarity
Information made accessible and understandable to stakeholders
¡ Avoid excessive, unnecessary detail
¡ Information reasonably locatable
¡ Avoid language unfamiliar to stakeholder (or provide glossary)
¡ Anticipate diverse accessibility needs
Reliability
Information and processes should be able to withstand examination, enhance credibility.
¡ Identify source
¡ Support assumptions with evidence
¡ Attest to validity of original data
¡ In other words: PERSUADE
Report Boundaries
Organizations should identify relationship partners and dynamics:
¡ Control: ability to influence/govern policies in order to reap rewards
¡ Significant influence: ability to participate in policy decisions, but unable to control.
Boundary Setting
¡ What content goes into which report?
¡ Questions of relevance, completeness, and comprehensive picture of operations.
Standard Disclosures
¡ Strategy & Profile: overall context for organizational performance
¡ Management approach: more detailed, given set of topics
¡ Performance indicators: comparable information on TBL performance
CSR/Sustainability Reports
¡ GRI: Global Reporting Index
¡ Template for transparent corporate reporting on TBL issues.
¡ General model plus industry-specific supplements
GRI Reporting Framework Overview
¡ “The Sustainability Reporting Framework - of which the Sustainability Reporting Guidelines are the cornerstone - provides guidance for organizations to disclose their sustainability performance. It is applicable to organizations of any size or type, and from any sector or geographic region, and has been used by thousands of organizations worldwide as the basis for their sustainability reporting. It facilitates transparency and accountability by organizations and provides stakeholders a universally-applicable, comparable framework from which to understand disclosed information.”
GRI Content Index
¡ Strategy and Analysis 1.1 – 1.2
¡ Organizational Profile 2.1 – 2.10
¡ Report Parameters 3.1 – 3.13
¡ Governance, Commitments, Engagement 4.1 – 4.17
¡ Management Approach and Performance Indicators 5.1 – 5.7
GRI Framework
¡ 1. Strategy and Profile
§ Statements from most senior decision-maker
§ Description of key impacts, risks, opportunities
¡ 2. Organizational Profile
§ Name
§ Brands, products, services
§ Operational structure
§ Location of headquarters
§ Location(s) of operations
§ Nature of ownership (and legal form)
§ Markets serve
§ Scale of operation
§ Significant changes to size, structure, ownership
§ Awards received over reporting period
¡ 3. Report parameters
§ Reporting period
§ Date of most recent report
§ Reporting cycle
§ Contact information
§ Definition process for content and stakeholders
§ Boundary (i.e. Countries, divisions)
§ Limitations of scope
§ Data measurement techniques
§ Significant changes from previous reporting periods
§ GRI Content Index
§ Assurance(s) provided
¡ 4. Governance, Commitments and Engagement
§ Governance structure
§ Communication mechanisms within structure
§ Linkage of compensation and company performance
§ Processes for avoidance of conflict of interest
§ Internal mission/values statements, codes.
§ Oversight procedures (including frequency)
§ Evaluation procedures for most senior governors
§ Externally developed charters/principles subscriptions
§ Association with relevant advocacy organizations
§ Stakeholder engagement
§ Basis of stakeholder identification
§ Approaches to stakeholder engagement
§ Demonstrable response to stakeholder concerns
¡ 5. Management Approach and Performance Indicators
§ Economic
§ Environment
§ Social: Labour, Human Rights, Society, Product responsibility
¡ Economic
§ Economic Performance
§ Market Presence
§ Indirect Economic Impacts
o Success & failure?
o Beneficial & harmful?
¡ Environmental
§ Materials
§ Energy
§ Water
§ Biodiversity
§ Emissions, Effluents, and Waste
§ Products and Services
§ Compliance
§ Transport
§ Overall
¡ Social/Labour
§ Employment
§ Labour/Management Relations
§ Occupational Health and Safety
§ Training and Education
§ Diversity and Equal Opportunity
¡ Social/Human Rights
§ Investment/Procurement Practices
§ Non-Discrimination
§ Freedom of Association and Collective Bargaining
§ Child Labour
§ Forced and Compulsory Labour
§ Security Practices
§ Indigenous Rights
¡ Social/Society
§ Community
§ Corruption
§ Public Policy
§ Anti-Competitive Behaviour
§ Compliance
¡ Social/Product Responsibility
§ Customer Health and Safety
§ Product and Service Labeling
§ Marketing Communications
§ Customer Privacy
§ Compliance
Corporate Knights CSR Reports 2010 Report: Method Indicators
Environmental, Social, Governance (ESG)
- Environmental: energy, carbon, water, and waste productivity
- Governance: sustainability leadership, leadership diversity, sustainability remuneration
- Social: CEO-to-lowest-paid worker, employee safety, percentage tax paid, pension plan, pension funding
CAC 2009 Corporate Reporting Awards
¡ Chartered Accountants of Canada: “The importance of disclosure in good and bad times.”
§ Member organization of the Canadian Institute of Canadian Accountants (CICA)
¡ “We are more inclined to want to share a report when disclosures revolve around profits, growth and success. When markets are less favorable, it takes some degree of courage to enter a report that must explain why goals were not met and why expectations must be lowered.” (CAC, 2009, p. 2)
CAC 2009: Reporting Trends
¡ “Economic uncertainty reflected in 2008 reports.”
¡ “Stormy economic times lead to focus on risk management.”
¡ “Corporate reporting on the Web: maturing but lacking innovation.”
¡ “Sustainable development reporting: what worked, what did not.”
CAC 2009 Reports: Winning Reports
¡ Online + Print
§ Interactive sections (including financial statements)
¡ Readable; useful information for stakeholders (investment propositions, contexts for directors)
¡ Use of plain, straightforward language
¡ 4 Categories: Financial Reporting, Corporate Governance, Electronic, Sustainable Development
¡ Numbers & glossaries for clarification
¡ Reliance on anecdotes & human interest stories
From CAC 2009: Sustainability
“Indeed, leading reporters not only stay one step ahead of regulatory drivers, but
also seize the opportunity to use the SD [sustainability development] report as a vehicle to communicate strategy and create value for stakeholders.” (CAC, 2009, 59)
What worked:
¡ Indicating data integrity and boundaries
¡ Maintaining fairness and transparency
¡ Ensuring the clarity of communication
¡ Facilitating web navigation
¡ External Review Process
What didn’t work:
¡ Overlooking sector-specific issues
¡ Overlooking issues raised in regulatory findings (lack of continuous disclosure)
¡ Failing to integrate a “sustainability mindset” in the corporate agenda (going beyond a cosmetic SD report)
¡ Sustainability = long-term success + operational and strategic sustainability development/social responsibility
Applications to Communications Plan
¡ Does organization’s reporting include CSR and TBL?
¡ Does organization’s reporting follow (or attempt to) GRI or CAC/CICA guidelines for honesty and disclosure?
¡ Does organization’s reporting feature appropriate levels of readability and graphics?
¡ Does organization provide resources for adequate reporting?
