The number of FTSE 100 companies issuing corporate responsibility (CR) reports has reached a record high, according to research from business advisory firm Deloitte. 80 of the UKs top 100 companies now report on corporate responsibility in their Annual Report and Accounts. This compares with 56 five years ago.
Mike Barber, corporate responsibility partner at Deloitte, comments:
The increase in CR reporting is a consequence of investors, pressure groups and other stakeholders demanding more information on social and environmental issues. Companies committed to best practice reporting focus on issues material to the business and its stakeholders and seek to validate chosen indicators through third party assurance.
Other key findings include:
The number of companies producing a stand-alone CR report has more than tripled from 21 in 2002 to 69 in 2006;
The number of companies receiving independent third party assurance on CR reporting has risen by 83% in these five years from 29 in 2002 to 53 in 2006.
As companies shift towards a more strategic and integrated approach on CR, subject matter reports, such as separate environment or community reports (down from 33 in 2002 to 6 in 2006) are being replaced by more business oriented stand-alone CR reports. The corresponding increase in narrative reporting in the Annual Report and Accounts shows that companies are increasingly identifying CR practices as core to business.
The research also showed that reporting against GRI (Global Reporting Initiative) guidelines, aimed at making reporting on economic, environmental and social indicators more comparable, has significantly increased from only 5% in 2002 to close to 30% last year. Companies report on 49 different indicators with guidance on how to determine the relevance of each indicator for their company and industry.
Trends in CR reporting and assurance vary greatly between FTSE100 sectors. This is due to the variation in the importance of drivers between industries including stakeholder requirements, regulations and marketing advantage. Energy, mining and utility companies lead the way in 2006 as they did in 2002.
More than 90% of companies in the energy, mining and utility sectors report on CR with 84% receiving independent third party assurance. Key factors driving robust reporting are the long standing regulatory requirements and heightened public scrutiny in the sector.
However, other companies are fast catching up. In both the real estate and financial services sectors 85% of companies produced stand-alone CR reports in 2006, up from 20% and 30% respectively 5 years previously.
Independent third party assurance has also increased significantly across all sectors (53 companies in 2006, up from 29 in 2002). This shows that companies recognise the added value that third party review of data and processes can bring to the credibility and robustness of reporting.
Mike Barber notes: Comparability with peers is another key driver for improved narrative reporting. Senior executives increasingly recognise that to deliver shareholder value, companies need to manage and report on non-financial factors that drive financial performance and corporate reputation.
Companies wanting to improve their reporting should consider a number of best practices such as:
Focusing on the material issues for the business and its stakeholders and then prioritising relevant key performance indicators to measure progress against targets;
Linking practices and performance to identified stakeholder expectations as well as to company performance;
Highlighting trends of performance data across relevant areas, e.g. employees, environment, community, and increasingly customers;
Moving beyond telling a story on all sustainability issues at a high level to addressing the significant issues in more depth.
Barber added: The trend across the FTSE 100 and 250 is that ever more companies are producing standalone CR reports. As stakeholder pressure for more information continues, it can only be expected that this trend will continue. It is likely that before too long, virtually all of the largest companies in the UK will produce CR reports.