Tuesday, May 10, 2011

Operational Data Improves CSR Report Credibility

It's springtime and most sustainability teams are in the midst of finishing or have just finished their corporate sustainability reports, CDP submittals and other external surveys. This now-annual spring ritual provides sustainability leaders the opportunity to re-secure management commitment to sustainability definitions, goals, and projects and to further strengthen their CSR reports with detailed environmental and operational data.

Many CSR reports are heavy on the platitudes and light on specific data. Like traditional annual reports, CSR reports backed with strong data are more credible.

The increase in public reporting of environmental sustainability data, especially among large companies, in the last ten years remains stunning. The majority of Fortune 500 companies now issue a CSR report, GRI-based reports are at a all-time high, and the number of companies reporting to the CDP has increased tenfold in seven years (from 350 in 2003 to 3,050 last year).

In fact, companies that don't publish basic sustainability information and carbon footprint information are justifiability viewed as laggards.

Despite ClimateGate, the recession, lack of carbon regulation and flattening consumer interest in sustainability, it is unlikely there will be any abatement in reporting trends. Notwithstanding the variance in reporting breadth, quality, and data veracity, sustainability reporting is here to stay, driven in part by the need to maintain a positive company brand image, requests from top customers, and a corporate desire to be responsible.

Like the company's annual report, the yearly update of the public CSR offers an opportunity to review sustainability goals and secure re-commitment from senior management and employees toward achievement of these goals. Public goals and progress reporting drive organizational focus in ways that internal goals often cannot.

When reading traditional annual reports, financial analysts quickly skim past the glossy pictures, platitudes, CEO letter and other marketing fluff and head straight to the financial numbers and footnotes.

Savvy CSR report readers do the same. The value is in the numbers.

In addition to providing detailed environmental data, leading companies are adding real substance to their CSR reports by combining financial and non-financial environmental data. This combination is a natural for companies who truly aim to deliver to shareholders strong financial return in a sustainable way.
American Electric Power is one company that now combines its CSR report with its annual report. Another, Novo Nordisk, is aligning the process of controlling the reporting of non-financial environmental data with that of financial data according to Sarbanes-Oxley.

Other companies go still further and have moved from yearly reporting of sustainability metrics to quarterly reporting. Quarterly reporting really ups the imperative of good data gathering systems and management commitment and it strongly cements the link between the sustainability team and operational teams in the company.

Line managers are used to accounting for and executing plans on a quarterly basis. The tracking and reporting of sustainability metrics demonstrate to the organization that, say, quarterly GHG emissions is an important operational metric similar to common measures like shipments, orders, or returns. Sales, operational and financial teams are very familiar with "closing the quarter" for data collection and reporting. Driving toward quarterly reporting of sustainability data ensures better data quality, more time to react when projects are below expected results, and avoids the year-end data crunching rush.

When sustainability is genuinely an important company imperative, the associated business processes need to be tracked and managed quarterly like all other critical business processes (sales, quality, customer satisfaction, profitability, rhttp://www.blogger.com/img/blank.gifetention, etc.).

One of the true leaders in quarterly reporting of sustainability data has been Timberland.

Yearly or quarterly goals for environmental aspects of operations or products are particularly impactful and impressive. These include energy reduction (either energy intensity targets or absolute reduction goals), more environmentally-friendly product ingredients and product packaging, a more sustainable supply chain, facility improvements, and reduced use of landfills and water.

The public reporting of environmental data tied to operations is not easy but materially enhances the credibility of CSR reports. Sustainably leaders need to continue to drive their organizations toward this end.

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