The Yin and Yang of CSR Reporting

The Yin and Yang of CSR Reporting

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Crafting an effective corporate social responsibility (CSR) report is both an art and a science. A blend of facts and feelings. An amalgamation of quantitative and qualitative parts assembled into a more complete whole.

When corporate social responsibility reports first emerged, they were packaged as a "feel good" communications tool for showcasing a company's community relations, environmental or volunteer activities. There was no industry-accepted, gold standard for what constituted a well-written or comprehensive report. Companies were free to come up with their own recipe and approach.

Now, in the age of limitless information, businesses are facing mounting pressure to not just understand their corporate environmental "footprint," but to provide an honest and accurate snapshot of that footprint to people outside the organization.

It's no longer sufficient to make vague statements that hint at goals to reduce a company's environmental impact. Investors, regulators, consumers and even some corporate leaders (including Walmart) are demanding an elevated level of transparency regarding exactly what those businesses are doing to reduce their impact, and are pressing for more quantitative data to substantiate progress in their stated focus areas.

CSR-related metrics are now used to compare a company's performance to other organizations, or to track a company's performance over time. With the emergence of the Global Reporting Initiative's G3 reporting guidelines and other NGOs like the Carbon Disclosure Project, businesses are under the gun to provide verifiable, quantitative data about the size of their environmental, economic and social imprint.

Most businesses are comfortable with the process of collecting and verifying financial data, but few are well-equipped or have a methodology for aggregating accurate CSR data. In particular, companies just starting their reporting journey may struggle with how to measure and communicate their performance, due to a lack of understanding of the metrics material to their industry or stakeholder interests.

So what factors should a company consider when developing its CSR reporting strategy?

First, it's important to start with a strong understanding of how corporate stewardship aligns with that company's brand, mission and business objectives. When designed effectively, a CSR report can be an important tool for advancing and disseminating the company's broader business strategy.

Companies must also decide whether it makes sense to utilize an external reporting framework. Many of the largest global corporations have adopted the Global Reporting Initiative's G3 reporting guidelines. However, using a reporting framework like G3 can ultimately be very helpful for a company of any size, especially if is struggling to identify what type of information is relevant and material for their business.

As a next step, a company should evaluate what CSR performance data is readily accessible or could realistically be made available. It's also important to look at what data competitors are reporting on, as well as to understand the types of questions customers, vendors, partners, investors and regulators are currently asking.

{related_content}In more advanced sectors, quantitative data may be more readily available.

However, in most cases, CSR data aggregation is a multi-phased process. Compiling big picture, macro-level CSR data is a formidable, complex and corporate-wide effort. Business units and individual managers should be tasked with spearheading and managing the process.

Some data may also require outside input from vendors or partners. For example, a company may need to talk to waste haulers and recycling providers at each of its facilities to determine how much waste is going to a landfill as compared to how much is being recycled.

Organizations should look at whether existing IT systems, such as financial systems, ERP applications or other operational systems, can be reconfigured or extended to automate the collection of CSR data. Also, does the company have an internal communications strategy for aggregating CSR case studies or success stories?

Then, once a company has determined what data is readily accessible, it should benchmark its current progress and use that information to set goals for improving environmental performance down the road.

Many companies struggle because they set arbitrary goals for improvement that aren't based on fact or a reasonable assessment of their own corporate limitations. Or goals remain just that -- aspirations -- because they aren't pushed down the food chain and incorporated into the personal work plans of relevant managers and employees.

The goal setting process can't occur in a vacuum. Companies should set meaningful targets based on current and historic performance, planned initiatives, stakeholder expectations and available resources for making improvements to facilities and operational processes.

As a final step, both internal and external data should be assessed for comprehensiveness and accuracy. With the rapid growth of G3, more companies are beginning the engage internal and external auditors to evaluate internal controls related to CSR data.

If a company isn't able to publish performance metrics in every area today, it's important to be honest and open about its intent to report on those performance indicators in the future. If possible, the report should include a description of what steps the company is taking to establish a measurement system to collect data in that area for future reports.

Finally, the most successful reporting companies will find a way to enhance transparency through both quantitative and qualitative data. A CSR report can encapsulate how a business interacts with the world and paint a persuasive picture for how it is working to improve that interaction.

Corporate social responsibility isn't just about numbers and regulations, it's about story telling -- the human side of a business. Companies should view every report as an opportunity to showcase its individuality, versatility, innovation and progress.

Jill Kolling is the founder and president of Paydirt, LLC, a sustainability consultancy advising organizations of all sizes on ways to align environmental and corporate stewardship with key business objectives.

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