This post originally appeared on Newswire.ca
Corporate Social Responsibility (CSR) initiatives are voluntary activities undertaken by a company to operate in an economic, social and environmentally sustainable manner1.
When these companies operate in an economically, socially and environmentally responsible manner, they can enjoy greater success by clearly and credibly articulating how they create “shared value” (i.e., including and in addition to shareholder value) and achieve “social license” (i.e., beyond compliance) to operate.
Some publicly traded companies in Canada are combining CSR reporting with their Investor Relations (IR) responsibilities, producing records not unlike earnings and annual reports that describe the approaches they are taking and progress against benchmarks to improve CSR and broader business performance.
“There is genuine interest from several of our clients to shift their reporting and overall strategic mindset, such that they can clearly articulate the value that they create for themselves and society (i.e., purpose), based on a reflection of their financial and non-financial priorities,” notes Wesley Gee, The Works DesignCommunication’s Director of Sustainability. “To do this in a meaningful way, companies need to embed CSR priorities into a broader strategy (i.e., no longer random acts of kindness), and CSR and IR teams should agree on a common process by which they track, evaluate and communicate their corporate performance.”
As these reporting worlds converge, IR professionals will be increasingly tasked to produce CSR reports and speak to the impact of improving CSR/sustainability performance on overall corporate health. Here are a few things IR people should know:
1. CSR/Sustainability reporting is not required, but is increasingly expected
CSR/sustainability reporting isn’t mandatory, but stakeholder demand for comprehensive disclosure is growing. For example, in 2014, eight provinces and territories implemented new rules that require companies to provide more transparency on their policies to add more women to their boards of directors and senior management ranks. According to the rules, all boards affected must disclose this governance information in their proxy circulars in advance of their annual shareholders meeting2.
Reporting on CSR/sustainability can achieve a number of business objectives, including:
- Establishing trust by showing the company’s willingness to address critical issues that extend beyond a traditional financial reporting scope
- Enhancing credibility when showing how CSR/sustainability priorities are linked to a broader corporate strategy and improving in these areas will boost corporate competitiveness
- Strengthening stakeholder relations as well as building and maintaining brand and reputation by demonstrating a company’s desire to be a good corporate citizen
“CSR reporting doesn’t just explain a company’s operations, it improves them,” points out Neil Stewart of IR Magazine. In an article recapping a recent CIRI session on CSR reporting, he quoted Marie-Josée Privyk from Innergex Renewable Energy as saying, “Materiality is increasingly important in sustainability reporting. You want to be managing what’s important to your company, and you want to be talking about managing what’s important for your company.”
2. There are no official rules for CSR/Sustainability reporting, but there are guidelines
There are many guidelines and standards that can be used in sustainability reporting depending on a company’s disclosure requirements. However, the Global Reporting Initiative (GRI) Guidelines represent an industry standard for CSR/sustainability reporting. These guidelines offer a general framework with principles that are similar to Management Disclosure and Analysis (MD&A) principles that help companies clearly and credibly disclose their priorities, management approach and performance.
“The International Integrated Reporting Council (IIRC) introduced a framework in 2013 that brings annual report and CSR report content into one report. Their objective is to have organizations use the framework to communicate a clear, concise, integrated story that explains how all of their resources are creating value3,” said Yvette Lokker, President & CEO of CIRI. “While a number of companies abroad have adopted this framework for reporting, we have yet to see a Canadian issuer do so. What we have seen are some Canadian issuers combining their annual report with their CSR report, including PotashCorp and Hudbay Minerals, but without adopting the specific framework of the IIRC. In the coming years, I expect that more issuers will take this approach particularly now that we are seeing more IROs take on responsibility for the CSR report.”
Other guidelines are offered by the United Nations Global Compact (UNGC) and the Carbon Disclosure Project (CDP), along with more industry specific initiatives such as Toward Sustainable Mining (TSM) and the Principles for Responsible Investing (PRI), all of which are aligned with and support the GRI Guidelines4.
3. Companies can use CSR/sustainability reporting as a chance to stand out
Much of a company’s CSR report will consist of content resulting from the reporting guidelines, or by addressing specific interests of stakeholders. In addition, creative companies can use CSR/sustainability reporting to greater advantage by differentiating themselves within their industries. Consider the following reporting trends:
Smart reporting: use a multi-channel communications strategy to share news of CSR initiatives through a combination of print and digital methods, including social media, multimedia, news release and dedicated website presence. Adding marketing tactics to CSR reporting enables companies to broaden their reach, engage a wider audience, customize their engagement and measure their results.
Stakeholder engagement: companies can rationalize its CSR priorities and can frame issues based on the insights that it gathers when engaging with influential stakeholders. These insights can be shared as testimonials in a CSR as a way of showing how stakeholders influence and improve their CSR/sustainability and broader business strategy. This can and should include employees, who often have the best ideas and are the most important advocates when enacting change.
Sustainability governance: companies today are reporting on their environmental and social responsibility policies, systems and accountability, while providing the additional context of showing how these activities fit within a broader executive/board governance structure. This may include issues such as executive and board evaluation and compensation.
Supply chain: companies are offering a wider description of their operations and activities, including their impact and influence along the supply chain, including policies for, desired improvements with, and performance of major contractors and suppliers.
Metrics, targets and performance: leading companies are creating and disclosing CSR-related metrics, targets and performance to show what they are aiming to achieve, together with progress to-date.
“Many companies are beginning to realize the many missed opportunities from sustainability reporting,” notes Gee. “Beyond functioning as a disclosure, if a report is developed more as a “hub” than as a static document, there are many ways that its highlights, stories, illustrations and scorecards can be shared with intent to inform and engage with a wide group of stakeholders throughout the year.”
4. CSR and sustainability reports have a broad audience that companies can tap to their advantage
The audience for information about a company’s environmental, social and governance practices includes investors, employees, regulators, community members and other stakeholders who will use the information to form opinions and shape their decisions.
- Investors and analysts form projections and decisions based on their assessment of future risks and opportunities
- Regulators learn more about CSR/sustainability issues and performance at a company and within a sector
- Consumers help choose preferred product and service providers
- Businesses assess potential customers, partners and suppliers. Many businesses now have procurement policies that prohibit doing business with anyone who doesn’t meet specific environmental or social requirements.
- Board members and executives want more information about their priorities and practices and to compare to clients and competitors
- Employees want to be informed about and engaged by their company’s sustainability activities and students and new recruits ant to evaluate prospective employers.
Reporting on CSR/sustainability performance is a proactive way to address the changing priorities and expectations of your audience while creating a process to improve management approach and strategic planning. It can bolster reputation and create a social license for a company to conduct operations in challenging environments. It can also open up new communications and marketing channels enabling companies to cast a wider net and engage a larger audience for sales, investment and innovation or partnership opportunities.
1 Government of Canada bit.ly/1GkGCWX
2 Beyond the Wire blog http://cnw.newswire.ca/blog/Diversity-on-board.html
3 IIRC: http://integratedreporting.org
4 CPA Canada bit.ly/1GkGx5G