The need to be accountable
28 Mar 08
Businesses are placing increasing importance on measuring and reporting corporate socoal responsibility
by Robert Outram
It had all the potential for a public relations disaster. Nationwide pharmacy chain, Boots Group, was about to close its plant in Airdrie, Lanarkshire, after 54 years of operation and with the loss of 800 jobs.
Boots was clear about the need for the factory’s closure, but it set out to mitigate the impact, working with Scottish Enterprise and North Lanarkshire Council to ensure that, as much as possible, the impact on staff and the community was minimised. The company put funds into local economic regeneration, staggered the closure over two years and helped to put facilities in place to help deploy those affected.
By the end of the process, 96 per cent of the workforce had found other employment and a report from the Scottish Executive praised Boots and the local agencies for their part in dealing with the situation.
Jane Wood (pictured, above), corporate affairs manager for Boots in Scotland, cites the Airdrie project as an example of corporate social responsibility (CSR) in action. Increasingly, businesses like Boots are realising that they have to be seen as good neighbours.
She says: “Business strategy should be underpinned by CSR. There is no grey area – if our approach ticks both of those boxes then it’s working. CSR adds value to the bottom line.”
Wood explains that there are four key areas for Boots in terms of measuring and reporting its CSR performance: the community, the environment, the marketplace and the workplace.
For example, a KPI (key performance indicator) for the “community” might be the amount raised by the company’s staff and customer fundraising programmes, while the “environment” category would cover energy efficiency, carbon output and recycling, among other issues.
Wood, who is a director of Scottish Business in the Community, says: “I spend a lot of time talking with smaller companies. They say ‘CSR is all right for the big boys, but we can’t do it’. But very often they are already doing things that come under CSR, such as donating to charity or treating their employees well. They just don’t report or measure it.
“Jesse Boot was doing CSR back in the nineteenth century – he knew it was good for his business. It’s not something new.”
What is relatively new, however, is the way that companies measure and report on CSR issues. Authors Andrew W. Savitz and Karl Weber refer to this as “the triple bottom line” in their book of the same name. In this model, the three “bottom lines” are economic, social and environmental.
It can and should be more than just an add-on to corporate practice. For one thing, customers, increasingly, care about the environmental and ethical record of the companies whose products and services they use. A recent poll of UK marketing professionals by the Chartered Institute of Marketing found that three-quarters of them believed that companies’ sustainability practices will increasingly affect customers’ buying patterns, and a third said that environmental and social practices were “very important” within their organisation.
Simply asserting that your company is “green and clean” is not enough, of course. Companies taking CSR seriously will report on their performance, either as part of their narrative reporting – for example, the company’s business review – or in a separate report (as Boots does: see www.boots-csr.com for example).
They should also have some external verification. Just as auditors will look at the mainstream financial reporting processes, there are specialist consultancies that can report on environmental or social reporting.
One such specialist consultancy is csrnetwork. Jon Woodhead, director of csrnetwork, says: “We help write, or give an opinion on, CSR reports. An independent third party adds to the credibility of the exercise.
“It’s important that the report includes the company’s negative impact as well as its positive record, such as the level of carbon emissions.
“More enlightened companies see it as an opportunity to communicate with their stakeholders.”
The consultancy’s clients include leading names such as ScottishPower (see case study, below).
There is still no mandatory standard for CSR reporting. Plans for a mandatory operating and financial review (OFR) were scrapped in the name of deregulation, and the business review required under European company law is less comprehensive than the OFR.
Even so, there are guidelines and standards that are increasingly gaining acceptance. The international not-for-profit body the Global Reporting Initiative, founded in 1997, aims to provide “a trusted and credible framework of sustainability reporting that can be used by organisations of any size, sector or location”.
Principles set out by the GRI for sustainability reporting – effectively, CSR by another name – include materiality, completeness, balance, comparability and timeliness, with advice on how to apply them. For example, the “reliability” principle is backed up by the requirement that any data used must be capable of being traced back to its source.
A further level of detail is provided by the AA1000 Series Standards developed by AccountAbility, another not-for-profit organisation, to complement the GRI guidelines and set out an approach for assurance and reporting that takes in qualitative as well as quantitative data.
More recently, in the UK, the Prince of Wales launched the Accounting for Sustainability project, which aims to help businesses and other organisations to measure more effectively their impact on the environment.
At the launch, Prince Charles said: “We are financing what we in the developed world have today by accumulating a vast environmental and natural resource debt.” As part of the project, we can expect to see details of the “carbon footprint” of the Prince’s own business interests.
All these initiatives are not cost-free, and as the Triple Bottom Line authors Savitz and Weber put it, “If you don’t care about what you weigh, don’t waste your money on a bathroom scale”.
On the other hand, businesses that care about what their customers, shareholders, employees and neighbours think, should take CSR and CSR reporting very seriously.
CSR case study: ScottishPower
ScottishPower supplies over 5.2 million electricity and gas services to homes and businesses across the UK and operates electricity generation and gas storage facilities in the UK, US and western Canada.
ScottishPower’s 2005/06 corporate responsibility report is the first that the company has published entirely online. It is based around 12 impact areas, identified through consultation with the company’s internal and external stakeholders. These include provision of energy, health & safety and customer experience. Each impact area has a leader at executive team level and the report is structured to include (i) an overview of the impact, (ii) the company’s approach to managing the impact and (iii) the performance of the company against that approach.
The report is subject to independent assurance provided by consultants csrnetwork. The latest report can be found at www.scottishpower.com
ScottishPower’s assurance process has two stages. Once the business reporting team has collated the data, which includes for example greenhouse gas and other emissions, health & safety statistics and customer service performance, it is verified as part of an internal assurance process. Then, the csrnetwork team meets the managers responsible for the internal assurance process, reviews the evidence collated and carries out sample checks. As well as working in parallel with, but independently from, the internal assurance process, csrnetwork’s activities involve interviews with senior managers, meetings with stakeholders and a number of site visits.
Jon Woodhead, director with csrnetwork, says: “Assurance is an outcome, not just a process. In this context, the function of independent assurance should be about ensuring not only that ‘the information in the report is right’, but also that ‘the right information is in the report’.
“This latter function requires an understanding of stakeholder concerns – what issues are important to stakeholders and whether the report presents a balanced and complete account of the company’s performance and response on these issues.”
In the assurance statement for the most recent report by ScottishPower, csrnetwork commends the report for including information on ScottishPower’s main corporate responsibility performance issues that should enable stakeholders to make informed judgements. In contrast with standard financial audit opinions, the statement also includes any recommendations which the assurers consider would strengthen the report in future years.