The Social Reporting Report
The 1990s have seen an explosion in the number of companies reporting on their
environmental performance and targets. The process started in 1990, with pioneering
companies like Norsk Hydro in Norway and Monsanto in the USA, but the trend has widened
out rapidly to embrace most sectors.
Even though many of these reporting companies had
signed sustainable development charters, they saw the challenge as environmental
reporting. Now, with growing recognition of the need to address the ‘triple bottom
line’ of sustainable development (1), the agenda is expanding again - with companies
and other organisations focusing not only on their environmental performance but also on
their economic and social impacts (2).
The corporate accountability challenge is now greatest in two areas. First, in social
and ethical accounting and reporting. And, second, in the integration of social,
environmental and economic information streams into management accounts and
decision-making. The Social Reporting Report, the latest in our ‘Engaging
Stakeholders’ reports for the United Nations Environment Programme (UNEP), focuses on
the first of these challenges.
From ‘Trust Me’ to ‘Show Me’
In the past, business leaders – and, to a degree, politicians – could rely on a
culture where there was a greater degree of trust in the ‘Establishment’. In its
Profits & Principles report, Shell notes that the world is moving from a ‘Trust
Me’ culture (where companies can rely on society’s broad acceptance that they
act in good faith), through a ‘Tell Me’ culture (where society wants to be told
what is going on) to a ‘Show Me’ culture (in which companies have to demonstrate
their serious intent to change for the better).
Different parts of the world still operate on different lines, clearly. Until the
recent focus on ‘crony capitalism’ in countries such as Indonesia and Malaysia,
for example, most of Asia was still very much in ‘Trust Me’ mode. But the
globalisation of the media, leading to the creation of what some dub a "CNN
World", means that all major international companies will increasingly be exposed to
‘Tell Me’ and ‘Show Me’ requirements.
So what does this greater accountability imply?
For many companies it
means turning the concept of a ‘Show Me’ world into a reality - and a starting
point is to listen to stakeholders and respond to their views. The result will be a
seismic shift. The implications for corporate governance, strategy, management, auditing
and reporting are profound. And we see social accountability and reporting as central
drivers in the process.
What is corporate social reporting?
There are a number of definitions of corporate social reporting, but one of the best known
comes from the Institute for Social and Ethical Accountability (ISEA). Their concept of
social and ethical accounting, auditing and reporting (SEAAR) is increasingly influential.
It is important, however, to distinguish between the process of corporate social
accounting and the end product - the corporate social report.
As in other areas of corporate disclosure, diversity rules here, too. To date, there is
no such thing as a ‘standard’ social report, because the nature of each report
depends upon: the range of stakeholders for whom it is intended; what the reporting
organisation is trying to achieve; and the variety of issues covered.
If you look at who is doing SEAAR work, the companies and organisations are
increasingly mainstream. Where once values-led organisations such as Traidcraft, VanCity
and The Body Shop blazed the trail, we now see mainstream organisations like BP, BT, IKEA,
Novo Nordisk, Rio Tinto and Shell joining in. And where pioneers like Ethos and the New
Economics Foundation (NEF) once worked in isolation, mainstream management accountancy
groups are now piling in.
Hot topics
Hopefully, these trends will help spread the new thinking to a much larger universe of
companies and other organisations as we move into the 21st century. In The Social
Reporting Report, we look at a range of questions often raised in relation to social
accounting and reporting. Here are just two of them:
Is this a Trojan Horse?
A real worry for some companies, particularly
those based in the USA. They fear that sustainable development and social reporting
potentially represent Trojan Horses – through which socialism (or even communism)
might be wheeled in through the back door. Anything is possible, but it is far more likely
that social reporting – and the social dimension of sustainability reporting –
will provide business with channels to re-engage key stakeholders.
Will social reporting become mandatory?
In some parts of the world,
yes. France already has a legal requirement for companies with over 300 employees to
produce a Bilan Social, and it looks as if Brazil will be following suit. But elsewhere
this is going to remain an uphill struggle.
Conclusions and recommendations
We conclude that social accounting, auditing and reporting will be a central business
agenda item in the early years of the 21st century. In terms of advice to would-be
reporters, here are highlights of two key recommendations:
Build the business case.
Think early on about institutional barriers,
cost and budgets. Pioneering SEAAR companies report costs ranging from C$100,000 (VanCity)
through US$750,000 (The Body Shop) per cycle. In the case of companies the size of BP or
Shell, however, the costs can be significantly greater.
Spotlight financial risks and opportunities.
In preparing your
business case, include the financial risks linked to key aspects of your
organisation’s actual or perceived performance against the social bottom line. At the
same time, ponder potential business opportunities in this area.
Longer term, some early pioneers in this area expect major changes. "In 10 years,
we won’t have social reports - we’re going to move towards not simply web
delivered reports but also to real-time reporting," says Simon Zadek, NEF development
director. "Audiences will become users of information, rather than just receivers.
Software will enable each user to access and assemble customised information from the
original accounts."
SustainAbility is grateful to Shell International, and to Tom Delfgaauw in particular,
for their financial support for the social reporting project.
1 John Elkington, Cannibals with Forks: The Triple Bottom Line of 21st Century
Business, Capstone Publishing, 1997.
2 SustainAbility, The CEO Agenda: Can Business leaders Satisfy the Triple Bottom
Line?, report for the United Nations Environment Programme (UNEP), 1998.
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