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July 06, 2004
Trends in Sustainability Reporting
by William Baue
Part two in this two-part article looks at how the present trends in sustainability reporting
project into the future.
SocialFunds.com --
Part one of
this article traced the history of sustainability reporting to the present; part two projects
future trends. Perhaps the clearest, most indisputable trend in the reporting of corporate social,
environmental, ethical, and economic performance is its growth. CorporateRegister.com, a free online directory of
corporate non-financial reports, estimates that it tracks about 80 percent of all such reports.
Last year, it covered about 1,300 reports.
 "We expect this to rise to 1,500 for
2004," said Paul Scott, director of Next Step
Consulting, a UK-based consultancy that manages CorporateRegister.com.
Beyond this
proliferation, Mr. Scott sees three discernible trends that he places under the alliterative
categories of the "3 Cs": content, credibility, and communication.
"In terms of content,
the trend towards inclusion of a wider range of issues, such as human rights, ethics, and
anti-corruption measures, will continue," Mr. Scott told SocialFunds.com.
He sees this
trend as more developed in Western Europe, "which currently leads the field both in quality and
quantity of reports," than in the US, where "there has been a reluctance to cover issues not
already in the public domain," according to Mr. Scott.
"US companies appear more
comfortable in reporting how their money is spent, such as on charity and good works, rather than
how is has been made," he said. "There are honorable exceptions--companies such as Baxter [ticker:
BAX], Ford [F], GM [GM], IBM [IBM] and
Bristol-Myers Squibb [BMY] all publish challenging
reports."
In terms of credibility, Mr. Scott sees the most significant trend being the
rise of third party assurance statements.
"At present this field is frankly a mess--the
reader has no idea what procedures have been carried out, what is covered, and how far the data can
be relied on," Mr. Scott said.
Developments in the field include the emergence of the
assurance standards such as AA1000, launched in 1999 by AccountAbility, a UK-based institute promoting
accountability for sustainable development.
In addition to securing independent
third-party assurance, reports can also create credibility internally.
"Credibility can be
established in part by the tone and style of the report, in part by including 'bad' news such as
failed targets, along with the 'good' most companies are so anxious to tell us--in other words, by
presenting a balanced picture," Mr. Scott said. "Reports need to be taken seriously, they should
not be degraded into mere marketing puffery."
This point overlaps with trends in
communication.
"The graphic clichés--smiling kids in baseball caps, happy chairmen
planting trees, cupped hands cradling the globe--will be seen for the unnecessary padding they
are," Mr. Scott said. "Reports will also become shorter, and the Internet will become more
important--'real time' reporting is a new trend we are watching closely."
Internet
publishing may fuel other trends in sustainability reporting.
"I see more companies
reporting every two years, and complementing this bi-annual report with shorter, more targeted,
communication pieces between, taking advantage of the opportunities offered by the Internet," said
Riva Krut, vice president of Cameron-Cole, an environmental management services (EMS)
consultancy. Dr. Krut has been tracking sustainability reporting since 1993.
This time
extension stands to save not only money, but also human resources, which required significant
mobilization to get sustainability reports off the ground. Moreover, the process of reporting
often catalyzes change, leading to the integration of social and environmental sustainability
issues into corporate culture.
"It is often the same team of people that in the past
have done the report who are now tasked with the organizational change work," Dr. Krut told
SocialFunds.com. "So as they turn the report into more of a commodity, which takes less time to
produce, and also extend the period between reports, they can spend more time tacking the bigger
problem of embedding corporate sustainable development."
Another significant question in
sustainability reporting formatting is whether or not to integrate non-financial information with
financial reporting in the Annual Report.
"The negative side to a holistic report is that
unless a report is very lengthy (and it then becomes unreadable), it can be very superficial," said
Mr. Scott. "The main hurdle is that there are so many issues to cover in varying degrees of
detail--when we can achieve a 'sustainable balance sheet' over a few pages, then there should be no
major objections to producing holistic reports."
"The balance can be found by publishing
summaries and highlights in a printed report, and leaving the detail for the company website," he
concluded. "The positive implications outweigh any negatives--producing a single report has to be
the ultimate objective."
©
SRI World Group, Inc. All Rights Reserved.
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