Your first CSR report: 4 tips for getting it right
Your first CSR report: 4 tips for getting it right
While the benefits of incorporating sustainable business practices into company strategy have become indisputable, the concept of reporting on sustainability initiatives can be incredibly daunting. Particularly for companies in the manufacturing business, corporate social responsibility reporting can seem like another layer of red tape in an already extensively regulated industry. Developing a report is no small feat, but it’s ultimately a highly effective way to demonstrate your compliance with existing regulations while highlighting business successes that differentiate your company from its competitors.
Take PortionPac, for instance. In 2005, the Chicago-based chemical manufacturer began working to assess the life-cycle impact of its products. The company obtained third-party green certification for a number of its cleaners and updated packaging components to reduce waste – saving on disposal, freight and other costs. The result? Improvements to packaging saved the company $40,000 a year, and the life-cycle analysis helped identify a commercial user for one of the company’s byproducts (enabling it to divert waste materials from landfills and save the costs of hauling it away).
By reporting these accomplishments, PortionPac was able to market the sustainability credentials of its products along with their potential for savings. This strategy led to expanded sales and helped the company grow during the recession. Additionally, these efforts were officially recognized by both the city of Chicago and the state of Illinois, further underscoring the positive business impacts of implementing a sustainability reporting process.
Clearly, sustainability reporting can be worth the investment when it’s done right. For companies looking to harness existing socially responsible business practices, here are four best practices for beginning the reporting process successfully.
Decide on a framework
Information overload is common when organizing your company’s first CSR report. Having a defined framework from the start will help direct resources to gathering, analyzing and auditing the information that’s most meaningful to your organization and will have the greatest impact on your overall CSR strategy. For example, a microchip manufacturer will likely need a framework that includes supply-chain mapping and demonstrates compliance with conflict minerals reporting requirements laid out in Section 1502 of the Dodd-Frank Act, whereas a clothing manufacturer might be more concerned with sustainable cotton and water use.
Define your goals and measurement systems
Readers of your CSR report will need to understand how your organization is holding itself accountable. To meet this demand, you should clearly articulate the baseline you’re starting from, set benchmarks and long-term goals, outline how you’ll track progress and implement a monitoring system (if possible by an independent source). Tracking progress and securing third-party validation is an important part of demonstrating the credibility and quality of your sustainability report.
Demonstrate a connection between your business strategy and your key performance indicators
Identify and explain how your company’s mission statement, growth plan and overall business strategy tie into the key performance indicators laid out in the report. For example, if you decide to report your organization’s carbon footprint and its plans to reduce emissions in the future, an explanation of how this goal fits into your overall strategy also gives readers and potential investors a better understanding of the health of your company, your future goals and your overall approach to social responsibility. And that makes the CSR report more useful and effective.
Consistency between information disclosed in a sustainability report and other public reports, such as SEC filings or press releases, is crucial. A lack of transparency in the CSR report can decrease its validity and readers' trust in your findings. For example, if your CSR report states that energy consumption decreased without supplying details about what drove the reduction -- and you also report in a 10-K filing that your organization closed several production facilities as part of a restructuring plan -- it may lead readers to question your business's transparency and effectiveness on sustainability.
Beyond these four best practices, manufacturers might also consider turning to an external source, such as a trade association or other nongovernmental organization, to help navigate uncertainty at the beginning of the reporting process. Increasingly these organizations, such as the Responsible Jewellery Council, have set their own standards, which can help companies understand the sustainability baseline they should strive to meet in their industry.
Many organizations also offer tools and resources to assist members in their sustainability performance efforts. Take Dell, for example. The computer manufacturer worked with the Electronics Industry Citizenship Coalition to set a goal, outlined in its 2012 CSR report, to reduce its overall packaging volume by 10 percent. By the end of 2012, Dell had already achieved a 12.1 percent reduction.
Of course, once you have a CSR reporting process in place, that doesn't mean your work is done. For those of you who already have steps 1 through 4 down pat, here are two advanced tips to make your reports stand out from the crowd:
Integrate CSR strategies with risk management
Your CSR report can be a simple tool to supplement your company’s assessment and management of business risk. It may seem obvious, but evaluating the outcomes of a CSR report through a risk-management lens can allow for improved identification of challenges and opportunities to achieve cost savings and reduce risks. Samsung Electronics, for example, examined key environmental issues and identified an intensified water shortage as a key physical risk to production. It developed water resource-management strategies and a water-related risk management structure to address the issue.
Get third-party verification
Once a sustainability report is in place, independent assurance and monitoring add credibility, quality and continuous improvement -- all of which increase the effectiveness of reporting.
All this may seem like a lot to consider when developing a report, but investors, employees, customers and vendors are increasingly requiring manufacturers up and down the supply chain to demonstrate and comply with sustainable business practices. For many manufacturers, reporting has become a business imperative. With these tips in mind, reporting can be a great tool to help manufacturers market their socially responsible practices.