CSR Reporting: Rainbows Versus ROI

Source: Environmental Leader, 18 April 2008

You’ve heard it all before*. Someone reviews a corporate social responsibility report and complains that there are too many pictures of rainbows and smiling children. There’s not enough hard data. It’s clearly a marketing piece.

On the other hand, overly-analytical reports are described as “dense” and can be overwhelming to anyone but the report writer. You hear things like, I’m not a financial analyst, I’m just trying to understand if your company is “green” or not.

The dilemma for companies is whether to make a CSR report accessible to a broad group of stakeholders (i.e. rainbows) or focus mainly on progress against key indicators (i.e. return on investment).

Can rainbows lead you to the pot of gold?

A good report must discuss a company’s successes and challenges with sustainable development. These stories make CSR reports palatable – even bearable – to the average stakeholder. People look to these reports to get a narrative about the company’s behavior. Using pictures and stories will help to personalize the information in the report for consumers, employees and other stakeholders.

On the other hand, a CSR report that strings together a never-ending list of stories about recycling programs and philanthropic endeavors can ring false to even the most casual reader – not to mention the jaded ones.

The problem with a success story is that it’s anecdotal by nature. While easy to grasp, it doesn’t give you a holistic understanding of the corporation’s impact. A stakeholder that takes the time to read a CSR report can get high on the sugary sweetness of success stories, but will inevitably crash when they realize that they still have no real read on the company’s progress.

The ROI on return on investment

We are an analytical society by nature. Trust is not something we willing bestow upon a corporation – it has to be earned. Numerical proof is one way to illustrate the progress a company is making on issues like climate change, global human rights or community engagement.

Use the Global Reporting Initiative (GRI) as a source of these indicators, but don’t be constrained by it. Look to the issues that are material to your organization and provide meaningful data. When possible, provide trends to make it easier for stakeholders like socially responsible investment analysts to understand the progress that is being made.

Too many numbers, though, can act like a sedative. The eyelids of even the most determined stakeholder will become heavy navigating through pages and pages of numbers. This isn’t a 10-k and most people aren’t skilled enough to absorb this much data. Use data judiciously to reinforce progress on issues that are material to your industry.

Also, put numbers in context. You can’t tell me that you achieved a 15 percent reduction in computer energy use by updating your laptops, if you don’t (a) tell me how much energy that represents in the absolute sense and (b) how much of your total energy use is represented by computers.

Final judgment

So, should a CSR report writer focus on the rainbow or the ROI?

As you might have guessed, a little of both. A good report provides a narrative about progress and backs up these claims with data. The stories and the numbers are put in context with the historical performance of the company and peers in their industry.

While a rough tool, a CSR report is currently the best option to achieve transparency and accountability with a broad group of stakeholders. Once a balance between rainbows and ROI is achieved, stakeholders can begin to understand the corporation’s impact on the environment and society.

Now, if we can only get people to read these reports…

* Assuming you are in the minority of people who read or care about CSR reports.

Alex Hausman is CSR Reporting Manager at The Timberland Company.