By Jerry Brown
BrownonGreen.Net
They resemble the traditional financial annual reports required of publicly traded companies, but cover environmental and social performance in addition to economic performance. And, for now at least, they're voluntary.
If your company is doing one for the first time, be prepared for a challenge. And give yourself plenty of time -- perhaps a year or more -- to get it done.
If you approach it as primarily a public relations or marketing effort, chances are you'll spend a lot of time and money to end up with egg on your face. But do it correctly and your company will learn things that will help you improve efficiency and perhaps even profitability.
"Ten years ago, you had a few dozen, maybe somewhere close to 100 (companies) across the globe that were reporting," says sustainability expert Julian Lee, director of operations for Unisfera, a nonprofit Montreal-based organization dedicated to the advancement of sustainable development. "Those were really the pioneers."
Today, Lee says, between 3,000 and 3,500 companies are producing sustainability reports and the number is growing rapidly by the year. Companies in Europe, Canada and Brazil are leading the way, he says, but U.S. companies are becoming more active as well.
"The trend has been consistently upward even throughout the financial crisis of the last few years," Lee says. "That’s a pretty strong sign that the practice is becoming entrenched."
"It’s being driven by the larger companies, which have bigger budgets," Lee says. "It’ll be interesting to see how this trickles down the supply chain" to smaller companies. "That’s something we haven’t seen widely yet across the globe, but if current trends continue that’s likely to happen."
Lee taught a certified Global Reporting Initiative (GRI) sustainability reporting class I attended recently. The two-day training session was brought to Denver for the first time ever by CORE and Deloitte. GRI provides an internationally recognized framework for sustainability reporting so that analysts and companies can compare progress being made more evenly.
As someone who's written traditional financial annual reports and worked on a sustainability report produced by fellow Denver-based report writer Shannon Diederich, I decided to attend -- despite the $1,100 price tag. Nearly two dozen people were there. It was money well spent, for me at least.
A few observations about what I learned:
Producing your first sustainability report is a daunting task
The basic guidelines for preparing a GRI-based sustainability report are 45 pages long and include 79 performance indicators divided into 34 aspects under three broad categories -- economic, environmental and social performance. There are supplemental guidelines, with additional indicators, for some industries. Yep. It's a daunting task the first time you do it.
The minimum requirement for a report to meet GRI reporting guidelines is to cover at least 10 indicators, including one from each of the major categories. To achieve GRI's highest rating, you have to report on every indicator -- or explain why those you skip don't apply to your company -- and have the data you report verified by a third party.
Lee's advice to companies preparing their first report: "Be realistic. Don't aim too high the first time around."
Even following that advice, Diederich says, "the first three years can be expensive and painful because your company probably will have to develop new data-collecting systems, establish reporting processes and have some uncomfortable internal discussions about topics you haven't disclosed publicly before."
The best reports come from companies that take them seriously
"Quality comes down to the genuineness with which a company wants to report," Lee says. "If they're just doing it to check the boxes, chances are their report's not going to be very good."
A good sustainability report "should be an exercise in improving the business, not just a communications tool," adds Diederich. "It should not be a glossy marketing piece. You really have to take an honest, objective assessment of where you are. And it's okay to admit you fell short of your goals. Readers simply want to know these opportunities for improvement are on your radar screen and you are taking steps to achieve them."
Some of my GRI classmates have been in charge of their companies’ sustainability reports for several years. Without exception, they’re bright, thoughtful people seriously committed to helping their companies improve the sustainability of their operations.
One piece of good news they all agreed with: If you take the task seriously, your reports will become better every year, the task of preparing them will get easier -- and your company will learn more and more about how to improve.
Expect your report to be scrutinized with a critical eye
Back in the days when I was writing annual reports, most companies -- including the one I worked for -- divided their annual reports into two sections. The back section contained the legally required disclosures that serious investors and analysts care about. The front part was very much intended to be a marketing / public relations piece -- tied in varying degrees to the company's financial performance.
Everyone, including professional money managers and analysts, accepted the fact that the front part was written for marketing / public relations use. The money managers and analysts just skipped that part and went straight to the "real" stuff in the back.
A successful sustainability report should benefit your company's brand and image, of course. But all of it will be scrutinized with the same degree of care that once was reserved for the back section of a company's annual report to its investors.
And reports judged to be "greenwashing" -- putting too positive a spin on your company’s performance -- will do more harm than good.
"One thing that's huge is the tone of the report," Diederich says. "Is it understandable? Humble? Transparent? Does it come across as honest? Does the company admit mistakes? If it only contains positives, readers won't find it credible."
Help is available
BrownonGreen.Net
Once relatively rare and a largely European phenomenon, corporate sustainability reports are rapidly becoming more popular with American companies.
They resemble the traditional financial annual reports required of publicly traded companies, but cover environmental and social performance in addition to economic performance. And, for now at least, they're voluntary.
If your company is doing one for the first time, be prepared for a challenge. And give yourself plenty of time -- perhaps a year or more -- to get it done.
If you approach it as primarily a public relations or marketing effort, chances are you'll spend a lot of time and money to end up with egg on your face. But do it correctly and your company will learn things that will help you improve efficiency and perhaps even profitability.
Today, Lee says, between 3,000 and 3,500 companies are producing sustainability reports and the number is growing rapidly by the year. Companies in Europe, Canada and Brazil are leading the way, he says, but U.S. companies are becoming more active as well.
"The trend has been consistently upward even throughout the financial crisis of the last few years," Lee says. "That’s a pretty strong sign that the practice is becoming entrenched."
"It’s being driven by the larger companies, which have bigger budgets," Lee says. "It’ll be interesting to see how this trickles down the supply chain" to smaller companies. "That’s something we haven’t seen widely yet across the globe, but if current trends continue that’s likely to happen."
Lee taught a certified Global Reporting Initiative (GRI) sustainability reporting class I attended recently. The two-day training session was brought to Denver for the first time ever by CORE and Deloitte. GRI provides an internationally recognized framework for sustainability reporting so that analysts and companies can compare progress being made more evenly.
As someone who's written traditional financial annual reports and worked on a sustainability report produced by fellow Denver-based report writer Shannon Diederich, I decided to attend -- despite the $1,100 price tag. Nearly two dozen people were there. It was money well spent, for me at least.
A few observations about what I learned:
Producing your first sustainability report is a daunting task
The minimum requirement for a report to meet GRI reporting guidelines is to cover at least 10 indicators, including one from each of the major categories. To achieve GRI's highest rating, you have to report on every indicator -- or explain why those you skip don't apply to your company -- and have the data you report verified by a third party.
Lee's advice to companies preparing their first report: "Be realistic. Don't aim too high the first time around."
Even following that advice, Diederich says, "the first three years can be expensive and painful because your company probably will have to develop new data-collecting systems, establish reporting processes and have some uncomfortable internal discussions about topics you haven't disclosed publicly before."
The best reports come from companies that take them seriously
"Quality comes down to the genuineness with which a company wants to report," Lee says. "If they're just doing it to check the boxes, chances are their report's not going to be very good."
A good sustainability report "should be an exercise in improving the business, not just a communications tool," adds Diederich. "It should not be a glossy marketing piece. You really have to take an honest, objective assessment of where you are. And it's okay to admit you fell short of your goals. Readers simply want to know these opportunities for improvement are on your radar screen and you are taking steps to achieve them."
Some of my GRI classmates have been in charge of their companies’ sustainability reports for several years. Without exception, they’re bright, thoughtful people seriously committed to helping their companies improve the sustainability of their operations.
One piece of good news they all agreed with: If you take the task seriously, your reports will become better every year, the task of preparing them will get easier -- and your company will learn more and more about how to improve.
Expect your report to be scrutinized with a critical eye
Back in the days when I was writing annual reports, most companies -- including the one I worked for -- divided their annual reports into two sections. The back section contained the legally required disclosures that serious investors and analysts care about. The front part was very much intended to be a marketing / public relations piece -- tied in varying degrees to the company's financial performance.
Everyone, including professional money managers and analysts, accepted the fact that the front part was written for marketing / public relations use. The money managers and analysts just skipped that part and went straight to the "real" stuff in the back.
A successful sustainability report should benefit your company's brand and image, of course. But all of it will be scrutinized with the same degree of care that once was reserved for the back section of a company's annual report to its investors.
And reports judged to be "greenwashing" -- putting too positive a spin on your company’s performance -- will do more harm than good.
"One thing that's huge is the tone of the report," Diederich says. "Is it understandable? Humble? Transparent? Does it come across as honest? Does the company admit mistakes? If it only contains positives, readers won't find it credible."
Help is available
Some good news for companies preparing to do their first sustainability report. Help is available: Consultants who can help you figure out what to report; writers who can help put what you have to say into words that tell your story clearly; and several companies sell software products that simplify the process of gathering and analyzing the data you need to prepare your report. Jim Howard, energy and sustainability advisor for CA Inc., discusses his company’s sustainability reporting software product in one of the videos below.
Videos
Julian Lee, Director of Operations, Unisfera, Montreal, Canada:
Shannon Diederich, report writer, Clark Communications, Denver:
Jim Howard, Energy & Sustainability Advisor, CA Inc., Englewood, Colorado:
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