CR Reporting – Finding Value Inside and Out
By Nate | September 20, 2006
An article in the Wall Street Journal on September 6 reported on a study showing that an increasing number of large companies are “aligning disclosures related to their social-responsibility practices with a set of international guidelines” set by the Global Reporting Initiative, or GRI.
Frankly, what was newsworthy to me about the article wasn’t the convergence around GRI – guidelines designed to help companies report on their corporate responsibility activities pursuant to a consistent, comparable framework. Rather, what struck me was the fact that corporate responsibility reporting has become so commonplace that this study actually merited its own WSJ article. I’m not sure I would have expected to see a similar story reported in the Journal two years ago.
It is indeed the case that increasing numbers of public companies are producing corporate responsibility, or citizenship, reports in addition to the legally mandated financial disclosures that they must file each year. The growing prevalence of such voluntary reports – which are not particularly easy or cheap to generate or publish – speaks to the impact that corporate stakeholders – including but not limited to socially responsible investors and NGOs – are having in the executive suites here in the US and abroad. Stated simply, companies do not undertake such burdens lightly; clearly they are finding value in these non-financial disclosures.
But where is this value found? Maybe not where you’d expect. Some companies kid themselves into believing that their shareholders are clamoring for such reports. I think it’s true that some shareholders find these reports essential; it is nevertheless probably fair to say that the majority of shareholders are not reading these materials. But other key stakeholders are. These include regulators, community groups, the ever-growing world of socially responsible investors, and even employees.
It’s this latter group that I want to focus on for a moment. While businesses often think of CR reports as vital tools for communicating with external constituents (which they are), they tend to underplay or miss entirely the value of these reports to internal constituents. And the value is not limited to employees who may read the finished product. It importantly encompasses the teams of managers and employees who gather the data, evaluate the programs, and construct the narratives that make up the guts of these reports.
In a nutshell, CR reports, and the process of creating them, are key catalysts for important dialogue and strategy around corporate responsibility activities within companies. GRI has developed some tools for constructing reports that will help external stakeholders make apples-to-apples comparisons after the reports are published. But companies considering the publication of such reports will help themselves considerably by keeping in mind the tremendous internal benefits that the creation of such reports will also produce.