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Is your CSR reporting hurting investment?

Research shows the design of your corporate sustainability and responsibility reports may be pushing investors away.

Corporate sustainability and responsibility reports are an important tool for communicating with investors, but it turns out most Fortune 100 companies are missing out on the full benefits. Companies such as Citi and Wells Fargo are actually presenting their CSR stories in ways that make investors subconsciously less motivated to buy their stock, according to research my team and I produced at the University of Illinois College of Business.

The effectiveness in telling your company’s CSR story has a lot to do with the interplay of words and pictures, but one size doesn’t fit all. Companies often frame their CSR work as either global or local: Their overarching message is about what they do for the world as a whole or local communities in particular. These two messages require a different balance and presentation of words and pictures.

Our research shows that on a subconscious level, investors process a global CSR narrative most easily and fluently when it puts an emphasis on words instead of pictures. The opposite is true when reviewing a local or community-centric CSR story; in these cases, a report feels easier to process when pictures are emphasized. And when a report feels easier to process, individuals are more likely to rely on the information and decide to invest in a company.

Starbucks vs. Target CSR

Why does it matter?

It feels easier for people to process and evaluate multiple types of information when it’s all communicated at the same level of detail. If a CSR strategy is framed at a concrete level — which most local programs are — performance relative to the goal feels easier to process when conveyed in a picture, which is also concrete because it prompts visualization of specific CSR activities. On the other hand, if a company’s CSR strategy is presented at a more abstract level — which most global programs are — then CSR performance feels easier to process if it’s presented in words, which are more abstract or high-level in nature.

When the framing of objectives and presentation of performance match up, it produces more extreme positive investment judgments. A mismatch, on the other hand, makes the investors less likely to rely on the positive CSR information, and thus less willing to invest in the company.

This effect is most pronounced with individual investors who are representative of the general investing population, rather than those who naturally process numerical information with the greatest ease.

My team and I were surprised to learn that even sophisticated Fortune 100 companies — including CSR leaders — create reports with this global/local presentation mismatch. Our research suggests they are missing out on an opportunity to tell their story to investors in a way that fully sinks in.

Telling a community or lower-level CSR Story

Target gets it right: Target’s CSR report is a good example of how to build out a community core message, with a heavier weighting on pictures than words. Their reporting creates a subconscious match between what they’re saying and how they’re saying it, and that makes investors more likely to invest in the company.

Target CSR

Wells Fargo gets it wrong: Wells Fargo also frames its CSR work as community oriented, but the wordy report triggers a subconscious disconnect among many investors. The text-heavy format works for a global message but not a local one.

Wells Fargo CSR

Telling a global or higher-level CSR story

Starbucks gets it right: For companies that position their CSR work as global, putting more emphasis on words than pictures is coherent and easily processed by readers.

Starbucks CSR

Citi gets it wrong: This report is clearly trying to paint a global picture of the company’s CSR work — but relying too much on images instead of words is the wrong way to do that.


What it means for your CSR reporting and beyond

Every company should take two main actions in light of this new research:

1. Evaluate and align your company’s strategy and performance presentation

Whether you emphasize global or community-based impact, you’ll need to design your CSR or sustainability communications to match.

If your message focuses on local, community-level impact, emphasize pictures in your sustainability report, and use text to support. If you are presenting global impact, put greater emphasis on the words, with supportive images. The key is to match the level of information between the strategy and performance presentation.

2. Apply the same lesson to non-CSR communications

These implications spill over to other non-CSR disclosures, including traditional and interactive annual reports, the Chairman’s letter to shareholders, and the MD&A section of the 10-K. It’s even relevant for social media, for companies that use Twitter, Facebook and mobile applications to share information directly with investors.

The Securities and Exchange Commission suggests that pictures are a more effective way to communicate statistical information than text. Our research suggests your company should question whether graphics are always beneficial in disclosures: test with key audiences and watch for unintended consequences and investor judgments.

As you review company communications across channels, consider the ways your company’s goals and strategies are introduced to investors and stakeholders — and how this meshes with the way performance is subsequently depicted.

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