Sustainability Reporting: Daring to Hold Yourself Accountable
By Andrew Savitz
As the corporate social responsibility movement continues to gain
momentum worldwide, corporations need standards and measures to
define responsible business practices. One such standard —
sustainability — has emerged as the international benchmark
for corporate citizenship. Sustainability is defined as the "triple
bottom line" — the measure of an organization's economic,
environmental and social performance.
Transformation Through Reporting
But sustainability is more than the sum of those parts. Even with
outstanding performance, an organization cannot be sustainable unless
it reports its triple bottom line results. The act of reporting,
if well done, transforms a corporation from high performing to sustainable.
Reporting is as fundamental to being sustainable as running is to
being a politician. You may have the combined talents of Ronald
Reagan and William Clinton, but if you never throw your hat in the
ring, you are not a politician. As the philosophers might say: Running
is a necessary condition of being a politician.
This isn't merely semantics. Once you run, you may find that you
are not as good as you thought you were. You may get feedback that
causes you to modify your positions; you will be compared to other
candidates; you may be required to disclose and explain past mistakes;
your weaknesses will become apparent in the media spotlight. Eventually,
if you tell the truth and stick to your guns, you gain credibility.
Running holds politicians accountable.
Sampling Reports
Companies that issue sustainability reports may also experience
this kind of trial by fire, but there is no way around it. You must
simply hope that your organization will be stronger for having reported.
Reporting is a necessary condition of being sustainable —
it holds companies accountable.
In the past year, the Global Reporting Initiative (GRI) has emerged
as the recognized standard for sustainability reporting. Such a
standard is badly needed, judging by two corporate citizenship reports
that I happened to read last week. Both reports came from well-respected
Fortune 500 companies, so I was very surprised at what I found or
— to be precise — what I did not find.
The first report was a traditional environmental, health and safety
report, full of normalized data on Toxic Release Inventory emissions,
hazardous and solid waste generation and injury statistics —
with lots of graphs and charts. This didn't look like a "birds
and bunnies" report: There were no pictures of facilities surrounded
by sunflowers, no photos of the CEO fishing in a flannel shirt,
and no one sitting around the campfire singing folk songs on company
conservation land.
The report looked pretty solid. But there was something that disturbed
me, and I had to flip through it for a few minutes to finally figure
out what it was. All the data was positive, and I mean every bit
of it. All the trends were moving in the right direction, all the
challenges had been met, all the goals exceeded. Everything this
year was better than last, and everything last year was better than
the year before that. Then, as if to confirm my sneaking suspicion
— buried in the middle of a paragraph in the middle of the
report — I came across the following two sentences:
"Those [regulatory inspections] resulted in [the issuing]
of thirteen notices of violation and [U.S.]$52,000 dollars in
fines. While no fine is ever acceptable, we feel that our performance
is very good compared to our peers and companies of similar size."
In the world of public relations, the second sentence is called
spin — an attempt to put the best light on a bad fact.
In this case, it was also hypocrisy: The company's policy was to
be in full compliance with regulations, yet it chose to portray
thirteen violations as "very good." I suspect that the
Vice President of Environmental Affairs in this company is afraid
to relate bad news to her superiors, and that the company is afraid
to look at itself in the mirror.
The Whole Story
The world of corporate affairs is too complicated for everything
to be good all the time. In this day and age, a company that reports
only positive information about itself is probably not telling the
whole story. A company that puts everything it does in the best
light possible does not understand what corporate reporting is all
about.
The second report was a sustainability report, published by a company
that has built a reputation for progressive practices and products.
Call it "Company X." Although not published in accordance
with the Global Reporting Initiative, Company X's report utilized
many of the GRI indicators.
This report was impressive, with metrics that showed dramatic progress
presented with transparency such that, unlike the first report,
all the good news seemed highly justified. I made a mental note
to call the vice president of Company X to tell him what a truly
great report he had developed.
But I changed my mind when, reading the very next item in my briefcase,
the weekly Bureau of National Affairs Environmental Reporter,
I saw the following headline:
"Company X to Spend [U.S.]$34 Million to Settle Case Involving
Violations of Clean Air Act Rules."
I quickly flipped through the report. My first thought was that
two pages of the report had gotten stuck together — there
was no way I could have missed this! I searched in vain for some
hint of a regulatory issue, not to mention an eight-figure settlement
on the horizon. Nothing. I could only conclude that the company
had decided to omit the information and could only wonder about
what else was omitted.
Spin-Free Zone
Call me naïve, I am surprised to find such a lack of candor
in corporate reporting in 2003. It is contrary to good business
practices and, in the long run, it is going to cost these organizations
in terms of credibility, not to mention what it says about a "can't
take the heat" corporate culture. The secret to successful
environmental or sustainability reporting can be summarized in a
simple, easy-to-remember phrase that we all learned while watching
Perry Mason: "The truth, the whole truth, and nothing but the
truth."
No spin, please
The Chiquita Brands 2001 Corporate Responsibility Report*, which
just won an award from CERES — the advocacy organization for
sustainability reporting — provides an example of how to do
it right. The report's theme, "Getting Better At Living Our
Values," is exemplified in the table that identifies 2001 goals
as "achieved," "on target to achieve," and,
"unlikely to achieve." The report provides details of
compliant and non-compliant activities, with no excuse, and gives
candid employees feedback in categories ranging from "very
good" to "very bad."
Chiquita is trying to be transparent, providing balanced and comprehensive
information. The company holds itself accountable and is focused
on meeting future challenges — not taking credit or making
excuses for the past. Chiquita has achieved some goals, not all;
is compliant in some areas, not others; and is listening both to
its friends and its critics. When you read this report, you know
you are getting the truth.
The courage to tell the truth and the confidence to stay the course
— that's what distinguishes a successful politician and a
sustainable corporation. Neither voters nor advocates expect perfection,
but they do demand the unvarnished truth.
This raises an important final point. If non-governmental organizations,
community groups or the United States Environmental Protection Agency,
for that matter, want companies to voluntarily report their performance
on these issues — candidly and in the spirit of GRI —
then it is a mistake to turn around and punish companies based on
what they report. You simply can't have it both ways.
I've worked with several companies that are trying to become better
corporate citizens. None of our clients is perfect, yet all have
thrown their hats and hearts into the ring, daring to try to be
better, even sustainable. It takes hard work, it takes persistence
and, as the advocates within these companies know, it takes courage.
* "Talk About Transparency: In the nature of full disclosure,"
the author has clarified that PricewaterhouseCoopers was not involved
in the Chiquita Report, and his remarks are independent and without
professional conflict.
This column solely reflects the views of its author, and should
not be regarded as legal advice. It is for general information and
discussion only, and is not a full analysis of the matters presented.
Andrew W. Savitz is a Partner in the Environmental and Sustainability
Services group at Pricewaterhouse-Coopers. He can be reached at
andrew.savitz@uc.pwcglobal.com.
The ESS group specializes in strategic assessment, risk evaluation
and the design and implementation of sustainability programs.
Savitz was the Massachusetts General Counsel of Environmental Affairs
and served as a staff member to the United States House of Representative's
Committee on Commerce, Consumer and Monetary Affairs, where he drafted
legislation and organized hearings related to corporate governance,
labor and consumer protection issues.
He currently serves on the Steering Committee of the Environmental
and Natural Resources Program at Harvard University's John F. Kennedy
School of Government.
This article was originally published in the April 17, 2003
issue of Compliance
Week.
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