Corporate reporting is undergoing a revolution as more and more multinational and local companies report on their management of social, environmental and economic impacts — the “triple bottom line”.
Sustainability, social or corporate citizenship reports are intended as a dialogue that tells society about a company’s values, management practices and relationships with its stakeholders.
Why are companies reporting? The sustainable development movement has put heavy pressure on the corporate world to show that it is not harming, but enhancing, society, the environment and the economy.
Signs that sustainability reporting is moving up the agenda include:
The adoption of the Equator Principles by banks subscribing to international finance corporation’s environmental and safeguard policies.
The recent Mining Minerals Sustainable Development project, funded by the top 12 global mining companies.
The World Business Council for Sustainable Development and industry associations have devised new methods of corporate reporting.
The Global Reporting Initiative has developed indicators for reporting on the triple bottom line. It aims to make sustainability reporting as common as financial reporting.
United Nations Secretary General, Kofi Annan, launched the Global Compact, Corporate Citizenship in a Globalised World, based on human rights, environmental and labour principles, and has invited companies to sign. The compact was launched in South Africa last month.
Of course, there are problems. Most reporting currently occupies a few pages of the annual financial report and is largely a public relations exercise. Companies are keenly aware they must satisfy investors, financiers and governments.
Securing a “political and social licence to operate” is often difficult for social environments in flux. Unstable and emerging democracies, for example, challenge South African companies operating in Africa.
Reports range from a photograph of a CEO handing over a school, at the minimum, to stand-alone printed sustainability reports — some confined to positive aspects, others brave enough to reveal “warts and all” — to CD-based and even Internet versions.
Some companies arrange to meet stakeholders — several banks recently launched reports in Sandton.
These are laudable moves, but some executives breathe sighs of relief when no hard questions are asked or mistakes are pointed out. Few companies publish separate reports for different constituencies, such as employees.
A key weakness is that besides stock analysts, shareholders, financiers and the occasional academic, few people read reports. This applies especially to local communities, municipalities and labour.
Even management attention is low. I recently attended a corporate governance seminar where only three of the 40 participants had read the sustainability report of a South African multinational mining company.
The danger is that companies will lose interest in reporting, and reports will become a dull and technical list of standard tick boxes — scaring off even more readers.
The responsibility for ensuring reports are read does not lie only with companies. NGOs, government, unions, management, shareholders, customers, suppliers and industry associations all have a responsibility to scrutinise them and put tough questions to the companies concerned.
Finally, very few companies ask their stakeholders what they should report on. This is the first step in the “conversation”. If it is flawed, long-term trust between business and society could be undermined.
Paul Kapelus is co-founder and director of the African Institute of Corporate Citizenship. He is on the judging panel of the Mail &Guardian‘s Greening the Future Awards 2003