Rolling off more presses: reports on 'social responsibility'

The 2,000 such reports are efforts to provide more disclosure – and to communicate with important stakeholders.

They come every year – a flood of sometimes glossy reports from companies eager to tell you what they're doing right. They'll tout a new environmental program or community donations. But do these corporate social-responsibility reports reveal challenges and failures, too? Do they tell the whole truth? To find out, the Monitor's Laurent Belsie sat down with two experts who help companies put out these reports. Andrew Brengle is a senior analyst with KLD Research & Analytics, a social research firm in Boston. Jeff Erikson is US director of SustainAbility Inc., a consulting firm and think tank with offices in Washington. Here are edited excerpts of their conversation:

How many corporations put out corporate social-responsibility reports?

Andrew Brengle: Estimates say about 2,000. It was only in the hundreds a year or two ago.

That's dramatic growth. How many are worth reading?

Brengle: I would say a small fraction – 15 to 20 percent would be very thorough and complete. Of course, it depends what you're looking for.

Why are more and more companies issuing these reports?

Jeff Erikson: In short, it makes good business sense for them to do it. More and more companies are understanding that it's not only about disclosure, it's about communicating with important stakeholders. Stakeholders include their employees as well as the folks that are buying their stock, buying their products, [and] supplying their products.

Some reports don't reveal a lot. For example: PPG, a Pittsburgh glass and specialty-chemicals company, says it has a product-design review to "ensure that our products are manufactured, stored, and transported in a safe and environmentally responsible fashion." That sounds good, but vague.

Brengle: It's a great introduction for trying to describe their view of environmental stewardship. But yes, the proof in the pudding will come in what kind of data they have to back up those assertions.

Dow, another chemical company, is a lot more specific. One of its goals for 2015 is that it "will have fewer than 75 leaks, breaks and spills, with no more than 10 Category 2 incidents and the elimination of Category 1 incidents" – the most serious kind of spill.

Brengle: It lends credibility. The company is attempting to offer specific numbers that you can hold them to.

Erikson: One thing that struck me about ... the contrast between the two companies is that the latter, Dow, indicated very specifically how it will be managed and how it will measure success, which the first report did not. And that's important. The other piece that's quite important for readers of the report to understand is: How important is the issue to the company? Now, the piece that's missing from Dow is: Is this a driver of value for the company?

Other reports seem inconsistent. Hess Corp., an energy company, acknowledges it had more spills in 2004 than in 2003. But I couldn't find any mention of an official US probe into whether it bribed government officials in Equatorial Guinea.

Erikson: There's a movement toward more complete transparency – companies telling the whole story. And it's often quite clear in the introduction to the report, most often a letter written by the CEO or a senior executive. A couple of years ago, in a report by Gap Inc., in their CEO letter, they said: We've got some big-time problems in our supply chain, and we don't even know how big they are. That kind of statement, that kind of honesty, lends so much credibility.

Are more companies telling the whole truth?

Brengle: I think they're getting better. But a little context here; this is a new era for transparency. Ten years ago, most companies were not doing this. It's still a voluntary effort in most countries.

Can companies be too honest? Shell, an energy company, described its problems in Nigeria this way: "... since December 2005 the situation has deteriorated significantly, following the bombing of a major pipeline by local militia." Why should I invest in a company that's being bombed?

Brengle: Credibility buys you investment. Yes, there is a risk to be taken there. But companies like Shell are doing that. They're still profitable and they're still solvent.

Erikson: There's quite often a tension internally between folks who believe that the risks outweigh the benefits and the folks who believe that the benefits outweigh the risks. It's not one or the other. It's a combination of the two. And [the corporate social-responsibility report] is not the only source for investment decisions.... So just because you don't talk about it in the report doesn't mean that it doesn't exist [in other published reports].

Nike put out a report on its contract factories several years ago and got sued. What happened?

Brengle: The actual lawsuit accused the company of false advertising – basically, saying that they were treating employees fairly when in fact there was plenty of documentation in news reports from overseas that factories that supplied Nike did not have very fair labor [practices]. And in fact there were many instances of human rights abuses.

Erikson: There was a concern that the court case would have a chilling effect on transparency. In fact, what's happened is that the courts have left it in a bit of limbo. And Nike has agreed to make some contributions and to get involved in improving labor practices overseas as part of the process. But there hasn't been a chilling effect. There hasn't been a rash of lawsuits. And I think a part of the reason for that is because companies are more careful about being able to back up what they say. And so, you can say [to companies]: You're not going to have a problem if you just tell the truth.

Now Nike is a leader in social-responsibility reporting. Does it always take a huge public-relations fiasco for companies to become transparent?

Brengle: A lot of that dynamic still remains. It's more of a hard sell to get a company that isn't a household name, that is more able to hide in the weeds, to produce a sophisticated and in-depth report because they don't have that public pressure.

Jeff, you've just come up with a report that identifies the top companies in social-responsibility reporting. Who are they?

Erikson: For the last eight years, in conjunction with the United Nations Environment Program, we've been conducting research that looks at 200 to 300 of the leading reports in the world. Interestingly, most of them are European. Out of the top 50, there's five that come from the US. Those five are Nike, Hewlett-Packard, Ford, GE, and the Gap. The leading companies in Europe ... are BT – British Telecom – and Cooperative Financial Services, a privately held bank.

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