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The Scotsman: CSR taking world by storm

EXTRACT: As evidence, Baker points to the way Friends of the Earth attacks Shell and BP, both of whom compile comprehensive CSR reports with a tremendous range of technical information, while they ignore what Baker calls “some of the worst corporate villains in the world.”

By Anthony Harrington

MALLEN Baker, business development director at Business in the Community – an umbrella group of more than 700 UK companies committed to corporate social responsibility (CSR) – is quite clear that CSR should be about two things.

The first, more technical, objective should be about accountability and responsibility, met by detailed, technical reporting which will be of interest to analysts and specialists.

To meet this objective, reporting companies lay out some detailed information on such matters as the chemical structure of emissions, remedial works, the composition of its waste effluent and so on. This may not make fascinating reading for the lay person or the non-technical investor but it should be sufficently robust to allow independent experts to pass judgment on the company’s claims and progress towards improvement in its environmental policies.

The second objective is to use CSR as a communications tool for wider reporting to all interested parties. Logically, if the company succeeds with the first objective, and has honestly tackled all the key issues, then charges that its CSR policy is just a load of “greenwash” and PR hokum should not stick, even if the second part is glossy, slick and designed to present the information in a positive way.

One problem with CSR reporting, Baker suggests, is that most companies try to make the same report serve both functions. Another problem, which is even more fundamental, is that the world is only slowly working its way towards a consensus around what CSR reporting should be about and there are currently almost as many approaches to CSR reporting as there are companies producing CSR reports. However, Baker notes, since it has taken around 300 years for financial reporting to get itself standardised and industry has only recently begun getting to grips with an international standards framework for financial reporting, we should not be too downhearted by the fact that CSR reporting still needs some polishing.

The best-known attempt to come up with an internationally viable set of CSR reporting standards is the Global Reporting Initiative, or GRI. However, not everyone is thrilled by the GRI, even in its third incarnation, which takes account of much of the criticism raised by GRI Mark 1 and GRI Mark 2. “The problem with the GRI as it stands right now is that it does not really help us to unpick what CSR reports are really for. If what you want from CSR reporting is real accountability, then arguably GRI Mark 3 still does not quite deliver,” he says.

Part of many business leaders’ dissatisfaction with the GRI in its present form is that the GRI has been heavily driven by NGOs (non-governmental organisations) and labour unions. As a result, when businesses use the GRI framework as the basis for their CSR reporting, it can turn into a defensive box-ticking exercise, generating a product at the end of the exercise that lacks real value.

Another problem with CSR reporting as it stands today is that with no universally-agreed terms of reference, it is only natural for many companies to report on what they do well, rather than on what they do badly. In his comprehensive reading of big company CSR literature, Baker says he only rarely comes across admissions by firms of real problems they are addressing and trying to put right. Nike and its supply chain issues are one such example, but they are few and far between.

While this is perhaps only to be expected, it lends credence to the chant from cynics and NGOs that CSR is all “greenwash” and no substance. “The leading companies in CSR reporting are getting this idea and there is some movement, but not much,” he says.

In his view, the NGOs could do a good deal more to make themselves more approachable and more reasonable.

“The World Wildlife Fund (WWF) has been critical of CSR reporting, but it is willing to work with companies who want to improve their reporting. On the other hand, it seems to me as if NGOs such as Friends of the Earth simply attack anything that moves. And if you move in their direction they just attack harder, on the grounds that it might make you move still further in the direction they would like,” he says.

As evidence, Baker points to the way Friends of the Earth attacks Shell and BP, both of whom compile comprehensive CSR reports with a tremendous range of technical information, while they ignore what Baker calls “some of the worst corporate villains in the world.”

“My point is if you are an NGO with a mission, why not start with the companies that are laying waste to the environment and don’t seem to care a jot, and engage meaningfully with those who are trying to be environmentally friendly? That would seem to me to be a reasonable change strategy,” he says.

Baker argues that the point the NGOs and green campaigners tend to miss when they attack CSR reporting is that this is not the place where you get dodgy claims being made. The really silly claims tend to be made in advertising literature which seeks, for example, to paint cars and aircraft as green.

“People who are communicating smartly, who set themselves ambitious agendas and who report on those agendas and objectives are doing very good work on the CSR front and that should be applauded,” he says.

Stuart Hay, head of policy and research, responds: “We welcome the CSR agenda and better reporting and commend the companies that do this properly, but this does not mean they should be free from criticism where their practices are damaging and they engage in environmentally destructive activities, even if they do this in a transparent way. Whilst it is good that some NGOs work closely with big business it is also vital that others remain independent and act as a watchdog.”

One of the more easily verifiable predictions of global warming is increased violent weather conditions. This impacts on the insurance industry more sharply than just about any other sector, with the exception perhaps of agriculture. “When you start to see parts of the global financial network being destabilised by extreme weather you start to get huge knock-on effects. You cannot underestimate the potential for such conditions to bring about direct damage to businesses that rely on resource streams,” Baker points out.

For this reason, businesses are all now seeking in some shape or form to mitigate the risks posed by global warming. It is now simply good business to “green up”, and to the extent that CSR reporting focuses corporate thinking on the goals they should be setting themselves, and the progress they should be making towards those goals, it has to be a good thing, Baker suggests.

He argues that we won’t be seeing any consumer-led revolution for better CSR reporting for some time yet. “Consumers only vote when something gets really personal, such as GM foods, where you actually put the product into your mouth. However, climate change is becoming more visible and public concern is growing.”

This in turn creates an impetus for big businesses with a consumer-facing side to them to look to market themselves on that front. “Wal-Mart, for example, has said that by 2015, all the fish it sells will be from sustainable resources. Right now, the world does not have the capacity to meet demand on that scale. But Wal-Mart has recognised that current practice is unsustainable and there is a direct link here to the consumer – no fish, no fish fingers,” he concludes.

Published: Jun 14, 2007

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