The evolution of corporate reporting

A key challenge in communicating an organisations’ corporate social responsibility initiatives is making those initiatives sound like they matter to the organisation. That requires an understanding that they do in fact matter and that they are more than just a nice to have.



All too often social, community and environmental initiatives are written up as case studies, as positive things to do with a smattering of public relations fluff thrown in to emphasise how good the company is to do them. Not very convincing, and it also misses the point that doing good is essential to an organisation’s success.

Being responsible is essential to the organisation’s success

Why is socially and environmental responsibility essential to an organisation’s success? Well, no organisation can survive without good relationships with its communities, customers, people, suppliers and other stakeholders. Building those relationships involves building trust (hence the need for accurate, purposeful reporting) and creating value for a broad range of stakeholders.

Economist Milton Friedman famously said that the role of business executives is “to make as much money as possible while conforming to the basic rules of the society” (New York Times Magazine, September 13, 1970). Since his time, the basic rules of society have changed and organisations that don’t treat people and the environment responsibly have suffered significant reputational damage and financial losses.

Clever – and successful – organisations are recognising this.

Paul Polman, Unilever’s chief executive officer, has made a clear connection between long term business success and tackling social and environmental issues:

The biggest challenge is the continuing threat to ‘planetary boundaries’; resulting in extreme weather patterns and growing resource constraints. These have increasing impact on our business (…) We remain convinced that businesses that both address the concerns of citizens and the needs of the environment will prosper over the long term… As [the Unilever Sustainable Living Plan] becomes embedded, there is growing evidence that it is also accelerating our growth.” 
(Unilever annual report and accounts 2012 )

This is not an isolated statement. There are a number of things in Unilever’s annual reports that make the company stand out as a leader in connecting business success and value for investors with value for society. The 2013 annual report succinctly captures the moral and business imperative for thinking in a holistic, integrated way: “Business needs to be a regenerative force in the system that gives it life”. It all stems from Unilever’s vision to double the success of its business while reducing its environmental footprint and increasing its positive social impact, so there is a consistency across these statements.

The vision and strategy are backed up with hard data and targets. There’s alignment with vision and strategy and a powerful visual putting sustainable living at the centre of their business model. This demonstrates that social and environmentally responsibility is integral to Unilever’s success and that the reports comply with the ‘five essentials to communicating corporate social responsibility’.

What makes a good corporate social responsibility communicator?

• Knowing when and how to use social media

• Having good relationships with those collecting and analysing social and environmental data and the rest of the communications team

• Understanding of key social and environmental issues which concern your stake-holders and sharing them

• Accepting of the importance of communicating without embellishment

• Understanding how your social responsibility work adds value to your organisation and fits with its strategy

Five essentials to communicating corporate social responsibility

• Leave out the self-congratulatory PR fluff (keep it factual and accurate)

• Demonstrate alignment with your strategy and vision (ensure your messages are consistent)

• Use data to demonstrate what you’ve achieved but only if it’s accurate)

• Explain how your actions add value to your organisation

• Make it readable and interesting with innovative visuals portraying outcomes

Meaningful communication

Communications of social and environmental issues and activities which embellish positive outcomes, underplay or gloss over negative outcomes or which contain inaccurate data will create mistrust and can damage reputations. It is important to address the big issues and check the presentation of information with those who know the data, to ensure it faithfully represents the facts. If you don’t, the press and other sources will expose inconsistencies and misrepresentations as well as material omissions. This results in a ‘portrayal gap’ – a mismatch between how you portray your organisation’s performance and how it is portrayed by external sources. The reality may be somewhere in between, but the reputational damage is done.

Meaningful communication requires an understanding of the issues, their impact on stakeholders and the concerns that stakeholders have in relation to them. This requires an on-going engagement where stakeholders have an opportunity to express views which are heard and responded to.

When things go wrong

It is not enough to simply acknowledge the link between doing the right thing and delivering value to stakeholders – a company needs to set out its targets and say how this will be achieved. And bragging without the facts to back it up is never a good idea. VW must regret saying in its 2014 annual report“Thanks to its corporate culture, Volkswagen is better suited than almost any other company to combine a modern understanding of responsibility and sustainability with the traditional values of running a business…” (p118).

It follows a claim by the CEO, Martin Winterkorn (p4): “Our pursuit of innovation and perfection and our responsible approach will help to make us the world’s leading automaker by 2018 – both economically and ecologically.”

VW’s commitment to responsibility and ecology have been questioned and the fact that they claimed a strong commitment to these values only serves to increase the mistrust.

Communication and engagement to aid transformation

Communication and engagement with stakeholders, including staff, is an important part of the process of transformation required by today’s businesses to work in a global environment with social and environmental mega forces impacting on business success – both now and in the future. Effective communication and engagement is an essential part of both developing a strategy which is responsive to social or environmental risks and opportunities and delivering on that strategy. Many of the activities companies engage in, such as employee volunteering for social good and equal opportunities initiatives, are an important part of that transformation, changing the way employees think and behave both at work and home. They also change broader perceptions about the company.

The corporate reporting landscape

Corporate reporting is changing and communication professionals have an important role to play.

Reporting on the processes of communicating and engaging with stakeholders to identify material issues has been best practice in sustainability reporting for some time and companies reporting under the Global Reporting Initiatives G4 guidelines are required to set out their stakeholder engagement process. A new form of corporate reporting, integrated reporting, involves articulating concisely how your organisation creates value for providers of finance. Some companies are also thinking about how they create value for a broader range of key stakeholders, employers, customers, suppliers and so on – as well as providers of finance. And of course, in some organisations, providers of finance might be members or customers (for example, in a customer-owned bank) or employees (in an employee-owned organisation). 

This involves both understanding how you create value and, equally important, articulating that in a concise and meaningful way so that others understand it. Organisations are drawing on the skills of communications professionals to do this.

This approach allows a different style of reporting on social and environmental initiatives – one which focusses on value created rather than the impacts or costs of such initiatives.

Integrated reporting requires thinking about value beyond financial terms – a long overdue development given that around 80 per cent of the value of a company is typically in intangible assets. Building strong relationships with stakeholders, building a loyal customer base, developing intellectual capital and managing environmental risks and so on tends to fall off the radar when corporate executives think short term. But they are critical to long term success. Integrated reports are forward looking documents covering strategy, the context in which it will delivered and how the company has, and will, create value for providers of capital and others in the short, medium and long term.

The International Integrated Reporting Framework recognises that long term success depends, amongst other things, on sound management, relationships, a satisfied work force and the availability of natural resources.

Critical to good relationships and a satisfied workforce is a communications plan which sets out to achieve this. An integrated report fills some of the gap and allows an organisation to tell providers of capital, and others, how it creates value for them – including through those communication and engagement processes.

Executive Summary

• Communication with stakeholders is vital if businesses are to work in a global environment with social and environmental mega forces impacting on business success.

• Founded in 1997, The Global Reporting Initiative is an international standards organisation that helps organisations communicate their impact on a range of societal issues.

• Global Reporting Initiatives guidelines requires businesses to set out approach to stakeholder engagement, including frequency of engagement.

• Integrated reporting requires businesses to spell out how they create value – for investors but also other, broader stakeholders.

• The International Integrated Reporting Council (IIRC), was launched in 2010.

Carol Adams writes on her website Towards Sustainaible Business

Carol Adams

Carol Adams is a professor of accounting at Durham University, an advisor on corporate reporting and integrating sustainability into organisational practices and a non-executive director.