Chapter Sixteen: Reporting Your Good Work - Moving Toward Triple-Bottom-Line Accounting


Chapter Sixteen: Reporting Your Good Work ” Moving Toward Triple-Bottom-Line Accounting

Overview

Transparency is at the core of the ethical supply chain. Reporting on a company s activities and its performance with regard to supplier behavior is therefore central to creating an ethical supply chain framework. In fact, the way in which a company s social and environmental activities are reported is in many ways as important to a company as adopting the performance standards themselves , in that it is through a believable (and readable) sustainability report that a company can best explain its efforts and its accomplishments.

As we have seen, hoping to capitalize on the upbeat press garnered by the original group of companies ” such as the Body Shop ” that produced social reports in the late 1990s, and bowing to growing pressure from NGOs, investors, consumers, and governments , the number of companies producing some form of social and environmental reports has ballooned to more than 2,500. Nearly half of the world s largest companies (those in the Global Fortune 100 and the FTSE100) now produce some type of social and environmental or sustainability reports, with the number in Britain alone jumping from 18 of these large corporations in 2001, to 50 in 2002. [1]

What I am seeing is steady growth, if not explosive growth, in companies reporting, says Allen White, cofounder of the Global Reporting Initiative. [2 ]

Ironically, however, as we have also seen, this uncontrolled rush toward reporting has gone a long way toward undermining both the reporting process and the standards themselves. Just as with the lack of early agreement on a common standard, the lack of a single, agreed reporting process has hampered early reporting attempts. As companies scrambled to produce some sort of social and environmental report, corporations have for the most part simply written up their activities, cherry picking and creating a publicity document, or worse , compiled massive volumes of information, particularly on the environmental side, that can only be read by specialists.

The quality of [CSR] reports is still deemed to be very poor, says Deborah Doane, head of the corporate accountability program at the New Economics Foundation. [3 ] With the average sustainability report jumping from 59 pages to 86 pages in the past two years (as companies compile ever greater amounts of data under the illusion that more is better), readers are now subject to what SustainAbility calls carpet bombing ” enormous amounts of often irrelevant or inconclusive information. [4 ]

The increase in reporting is good news, says Peter Knight, director of Context, a CSR consultancy. But there s still too much fluff about. [5 ]

To be fair, many companies have taken their reporting process very seriously, and have made legitimate efforts to monitor their suppliers activities and report on conditions in a balanced and transparent way. That is why many of the more progressive corporations in the world are leading the crusade to recognize the GRI as a standard, global reporting framework. For them, without a consistent reporting process, their good efforts are undermined by inconsistent, overweight, or misleading reports from their competition. After all, why should a company be rigorous in applying standards and honest in reporting its failures if its competition can simply write up a public relations document that only describes broad, positive results and omits any negative issues?

In fact, many would argue that the lack of a single recognized reporting-framework is what contributed to the Kasky v. Nike lawsuit. Although the case has taken on new concerns over corporate free speech, the dispute had its origins in accusations that Nike was misreporting the employment policies of its suppliers. Although some would contend that being bound legally to claims made in these reports will drive companies away from reporting, the more logical evolution of the conflict would be for companies not to avoid making any claims at all, but instead to move toward independent, third-party audits that bring consistency and legitimacy to the whole process. After all, in the world of financial reporting auditors are expected to present a legitimate certification of a company s financial performance, ostensibly, at least, free from company pressure.

For all of these reasons, companies, NGOs, and increasingly governments, and agencies such as the UN s Global Compact, have begun to recommend a reporting regime which has become known as the Global Reporting Initiative. The purpose of the GRI is to provide a single, consistent, universally recognized reporting process ” just as financial reporting has the Generally Accepted Accounting Principles framework ” that will form the basis for consistent and comparable company social and environmental reporting.

The Global Reporting Initiative was initiated in 1997 by a U.S.based group known as the Coalition for Environmentally Responsible Economies (CERES), and is probably the leading reporting initiative today. Working in partnership with the United Nations Environment Program, and a broad group that includes corporations, universities, NGOs, major consultancies, and accountancy firms, GRI s mission is to create universally applicable guidelines for social and environmental reporting. This means making sustainability reporting, according to Allen White, the GRI s former CEO, as routine as financial reporting. [6 ]

Dr. Judy Henderson, Chair of GRI s Board, thinks that things are moving in that direction. Reporting will become as routine as financial reporting, she agrees. And that will happen through various routes whether it happens through the legislative route or through other incentives ” probably a combination of both ” or down the track it becomes a regulatory issue the same way that financial reporting has. [7 ]

To do this, the GRI guidelines provide a framework that explains the principles and procedures that companies need to adopt in order to prepare a balanced and easily comparable report on environmental, social, and economic performance.

Endorsed by NGOs, the UN s Global Compact, and integral to many of the process and performance standards, the GRI is very much at the center of the European move toward requiring triple-bottom-line accounting, in that it (and other methods ) provides guidance to companies on how to develop consistent and easily compared reports that reflect their activities (and the activities of their suppliers) in these areas. When combined with leading codes of conduct and performance and process standards, the GRI provides the final key feature of the ethical supply chain framework ” audited , consistent, and verifiable social and environmental reports.

More than 140 companies ” including such household names as Proctor & Gamble, BASF, Volvo, Electrolux, ICI, and Johnson & Johnson ” have already adopted the GRI guidelines, including most of the 50 companies that made Sustain Ability s best global reporters list in 2002. The initiative has been recommended by the European Commission, and was the basis for France s new mandatory reporting legislation that requires first- tier listed companies to produce social and environmental reports. It is also endorsed by the UN s Global Compact, has been adopted by government departments in Australia, the Unitzed States, Japan, South Africa, and the United Kingdom, is compatible with SA 8000, and is integrated into the AA 1000S assurance principles. The GRI was even one of the principal recipients of Ted Turner s largesse, receiving a grant for $3 million to help in its development. In short, the Global Reporting Initiative is quickly emerging as the de facto global reporting standard. [8 ]

[1] Alison Maitland, Social Reporting: Pressures Mount for Greater Disclosure, FT.com, December 10, 2002.

[2 ] Interview, August 12, 2003.

[3 ] Sarah Murray, Benchmarks for Good Behaviour, FT.com site, December 4, 2002.

[4 ] Alison Maitland, Truants, Nerds and Supersonics, The Financial Times, November 18, 2002.

[5 ] KPMG International Survey of Corporate Sustainability Reporting 2002 at www.global reporting.org as cited by Alison Maitland, Survey of Sustainable Business: Companies Start to Detail What on Earth Is Going On, The Financial Times, August 23, 2002.

[6 ] Tim Dickson, The Financial Case for Behaving Responsibly, The Financial Times, August 19, 2002.

[7 ] Interview, July 29, 2003.

[8 ] Alison Maitland, Social Reporting: Pressures Mount for Greater Disclosure, FT.com, December 10, 2002.