Sunday, 1 May 2011

Reporting: forcing the conversation

Most corporate responsibility professionals approach the task of reporting in much the same way as spending Christmas with the in-laws: they grit their teeth at the prospect, try to keep from screaming during the event, and pray they don’t have to repeat it once it's all over. Social and environmental reporting is time-consuming, labour-intensive and expensive. So what’s the value?

Well, more than you might think, argues social responsibility investment guru Rory Sullivan in the latest issue of Ethical Corporation. For starters, the popular notion that no one cares about such information is misplaced. That might have been the case in the past, says Sullivan. Not any more. Taking account of non-financial issues “has now become mainstream investment practice”.

That doesn’t mean sustainability reports are flying off the shelves. Most still don’t get read. Why? Because, despite the talk from investors of the importance of social, environmental and governance issues, such reports are seen as “irrelevant” to investment decisions. For Sullivan, the situation is not a lost cause. It all comes down to better communication. Companies need to tell investors what they need to hear. At present, corporate assumptions on what that might be lie way off the mark. Investors don’t help. They are bad about spelling out just what non-financial data interest them and why. The result: an impasse.

Sullivan uses his fascinating essay (based on the conclusions of his new book, ‘Valuing Corporate Responsibility) to explain what responsible investment looks like; what this means in terms of investors’ use of non-financial data; and, how reporting can be made more investor-friendly. Answers to the first two provide a host of incisive insights. Unfortunately, these don’t mount to a step-by-step roadmap for reporters. Precisely what data should go into a report remains a “work in progress”. Nor are investors’ interests uniform. The onus, Sullivan maintains, lies with companies. Link information to corporate strategy and performance, and investors will sit up and listen. Don’t and it’ll be like Christmas with the in-laws once again: lots of conversation and very little said.   

(Note: Ethical Corporation readers can obtain a discount on Rory Sullivan’s new book. Click here and use the code EC3VCR at the checkout.)

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