“Communicating Corporate Social and Environmental Performance”

It is not uncommon to read alarming reports in the newspapers and magazines today about “disasters waiting to happen”.

These reports typically paint a very bleak picture of the “The Day After Tomorrow”. Opinions on these reports are divided. Some question the scientific validity and hence write them off as fantasies of overzealous activists or as an effort of the media to “sell through sensationalism”. Some remain indifferent while a large mass, typically the average citizen does get worried. Worried about the price to pay for development. Worried about her child’s future.

But the questions that do remain in everyone’s minds are that – Is the quest for profit driving organizations away from holistic value creation for all stakeholders? Do organizations even consider anyone except customers and investors are stakeholders? Is the development sustainable? Are corporate being responsible social citizens?

 

organizations understanding their role in ensuring sustainable development communicating about their efforts to stakeholders (sustainable reporting)

This implies taking a holistic stakeholder view and not just a shareholder view. The definition of stakeholders has indeed changed from owners and consumers of any business to include also government/regulators, employees, suppliers and community at large. Today corporations are motivated to involve stakeholders in their decision making and to address societal challenges. It is not difficult to understand why. Today’s stakeholders are increasingly aware of the importance and impact of corporate decisions on society and the environment. Organizations have begun to recognize this and in this effort to optimize value delivery lies the origin of the concept of “sustainability” for businesses across the globe.

 

The World Business Council on Sustainable Development defines CSR as “the commitment of business to contribute to sustainable economic development, working with employees, their families and local community and society at large to improve their quality of life.” According to the WBCSD, CSR is the third pillar of sustainable development, along with economic growth and ecological balance.

Sustainable development involves meeting the needs of the present without compromising the ability of future generations to meet their own needs. Economic growth provides the conditions in which protection of the environment can best be achieved. Environmental protection, in balance with other human goals, is necessary to achieve growth that is sustainable. In turn, versatile, dynamic, responsive and profitable businesses are required as the driving force for sustainable economic development. They contribute by providing the managerial, technical and financial resources for the resolution of environmental challenges. Market economies, characterized by entrepreneurial initiatives, are essential to achieve this. Business thus shares the view that there should be a common goal, not a conflict, between economic and social development and environmental protection, both now and for future generations. Thus there is a considerable overlap, interaction and interrelation between the three elements of sustainability.

 

Organizations have been and will be an integral part of society. The reasons - contributions to society which includes creation of wealth, employment and many spin off benefits. However, historically, addressing environment, health and social issues has been perceived as a mandatory cost by most corporations and many may have not been proactive on this.

The last two decades have witnessed more stringent regulation; increase in compliance requirements, increased awareness amongst employees & local community and realization amongst organizations the importance of corporate responsibility. As a result there has been a paradigm shift. Businesses have reinvented themselves as entities delivering value to stakeholders rather than just producers and sellers of commodities/ services. This has brought the global community together on several occasions in international forums.

The outputs have been protocols, agreements and standards such as ISO 14001, OHSAS 18001, and SA 8000 for providing a guiding framework to industry. Businesses have had to realign their processes to these requirements, sometimes at very high costs. The approach of business to these changes has been largely reactive. However, over a period of time organizations across the world have realized that there are several benefits of proactively aligning to the “new way”. These are cost savings from environmental protection, economic growth and social improvements.

Today, several organizations have successfully deployed and implemented management systems compliant to requirements of ISO 14001, OHSAS 18001, and SA 8000. They are also using tools like codes of practices and principles to promote better corporate governance

 

There is no single activity that will form the basis for a corporate responsibility (CR) strategy. Instead, an effective CR strategy requires a pairing of meaningful stakeholder engagement and an effective internal management system. Such a system should include policies, targets, procedures, and monitoring. But most importantly the system needs a feedback loop, without which it will ultimately fail.

 
There is enough evidence that several organizations have contributed to society and become responsible citizens. However, on the flip side concern has been voiced by society on the negative impacts caused by corporations, for imposing huge costs on society. The allegation – profits created is largely from the costs borne by the society.

Today investors, consumers and prospective employees do not have any information about corporate social and environmental performance. The reason – no objective and structured disclosure of such performance. This impacts perceptions of stakeholders about all organizations. One Bhopal gas tragedy mars all the good being done by others. Moreover, the voluntary and selective nature of CR initiatives leaves onlookers in the dark about how well companies are actually performing overall on such matters.

Despite many attempts to bring forth these positive factors, corporations have failed to capture them in a holistic and systematic manner. There is a lack of consensus on the methodology adopted as well as the nature and type of information reported.

 

The GRI has developed a set of core metrics intended to be applicable to all business enterprises. There are sets of sector-specific metrics for specific types of enterprises and a uniform format for reporting information integral to a company's sustainability performance.

In broad terms, the GRI Sustainability Reporting Guidelines recommend specific information related to environmental, social and economic performance. It is structured around a CEO statement, key environmental, social and economic indicators, and a profile of the reporting entity, descriptions of relevant policies and management systems, stakeholder relationships, management performance, operational performance, product performance and a sustainability overview.


The organization needs to go beyond internal reviews and put its CR performance record out for public scrutiny and discussion. There is lot of soul-searching that accompanies sustainability reporting. The benefits of communicating and introspection are manifested both internally and externally.

• Build positive stakeholder perception
• Proactive communication of facts rather than only responses against allegations
• Meet information needs of stakeholders leading to improved decision making by them on aspects of investment, purchasing, advocacy and employment
• Strengthens internal codes of conduct, policies and processes which benefit all stakeholders
• Evolves with and accelerates new management systems

 
Over the next few years, sustainability reporting will become a fundamental method for measuring, disclosing, and strengthening the contributions of business to sustainable development. Correspondingly, sustainability reporting will become an essential component of any integrated approach to corporate responsibility. The experience across the globe has demonstrated that investors, consumers and regulators reward a corporation for its sustainability performance, if it is brought to their attention in a credible and structured manner. Does your organization report CR performance? If yes, then is it aligned to GRI guidelines? If not, then is this not the right time to start?

One in series of thought articles from Breakthrough Management Group India BMGI is the world's leading provider of training & consulting for performance excellence. Specializing in Innovation, Strategy Development, Six Sigma, Lean, Enterprise Process Management and Environmental Certification, BMGI works with leading companies around the globe to help “in-source" new capability and develop new core competencies. Headquartered in Longmont, CO, USA, BMGI has developed a loyal clientele that today exceeds 200 active businesses in industries as diverse as healthcare, financial services, telecommunications, chemical and manufacturing. BMGI has offices in 12 countries and has more than 150 employees worldwide. Our India office is located at Mumbai.

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