Have you ever wondered why some companies publish “Sustainability” reports while others publish “Corporate Social Responsibility” reports? Of course, neither is meant to take the place of the “Annual Report” with its focus on financial reporting. Instead, Sustainability reports and Corporate Social Responsibility (CSR) reports both include ‘non-financial’ reporting which, as a result, may make them seem interchangeable - rarely does a company publish both a CSR report and a Sustainability report. (Keep in mind, non-financial reporting in the U.S. is for the most part voluntary so there is a great deal of variety in what is reported.)
If you are considering publishing a non-financial report, but don’t know if a Sustainability report or a CSR report is right for you, there are some important differences you should be aware of.
Sustainability Reporting vs. CSR Reporting
What is included in a CSR Report?
Chances are good that if you are responsible for publishing a CSR Report, your goal is to communicate how your organization’s impeccable ethics have earned its social license-to-operate. A CSR Program, and hence its Report, will often emphasize community engagement, volunteer hours, charitable contributions, employee benefits, and efforts which go beyond compliance with labor and civil rights regulations. A CSR report does not necessarily include natural resource management and efforts to mitigate environmental risks which may threaten the organization’s long term financial health. A technically robust report on GHG emissions and water balance is often beyond the reporting capacity of a CSR Program, especially if silos exist. (Apologies, dear Reader, for the generalization if your CSR Program has been able to overcome that ubiquitous challenge.) CSR, from its origin, is driven by the need to protect a company’s existing reputation and speaks in plain language to a broad, consumer-heavy stakeholder group.
What is included in a Sustainability Report?
If you are responsible for publishing a Sustainability Report, you may exist embedded within Operations or have an Environmental Health & Safety role. You may have an engineering or science degree, maybe even several of them! Your reporting objectives are more likely aligned with the need to convey the ways your organization achieves a balance among people, planet and profit, so you may also be assembling a cross functional reporting team representing accounting, HR, procurement, legal, investor relations and communications. A Sustainability report will not only contain tables upon tables of data but will often need to educate the reader on complex matters such as why three kinds of GHG emissions are reported, how Criteria Air Pollutants are different from GHGs, what pollution control equipment does - and does not do, how reuse and treatment systems work to secure community water supplies, and how data is normalized to production levels. Sustainability reporting, in its contemporary form, is driven by the primary need to provide decision-useful information about material topics to financially engaged stakeholders (e.g. investors and their ratings providers such as CDP, ISS, MCSI). The best sustainability reports are multi-faceted and they do this while also appealing to the myriad interests of the stakeholder community-at-large. (Ask us how using the GRI-Standards can help you achieve this!)
But which one is a better strategy for my company?
If you are still undecided, I offer you a cautionary statement: A CSR report might not be the best choice for your organization. The May 16, 2018 episode of Freakonomics Radio titled “Does Doing Good Give You License to Be Bad?” caught my attention with its teaser:
“Corporate Social Responsibility programs can attract better job applicants who’ll work for less money. But they also encourage employees to misbehave.”
The host, Steven Dubner, begins the episode interviewing John List, an economist at the University of Chicago who posits that the roots of CSR originate in the 19th century in Great Britain, when there was some social unrest around issues like poverty, working conditions, and child labor. And soon after that, businesses responded with an industrial-welfare movement which may have been profit-motivated, socially motivated, or both. John List implies that his research has relevance to the gender pay gap - i.e. that women work harder for less pay if they perceive a social benefit. I thought this was an interesting down-side to CSR reporting that was not further explored in the program. (You can listen to all 38 minutes of the podcast here where there are also links to the various sources cited in the episode.)
Also, on August 24, 2018, The New York Times published “Beware Rich People Who Say They Want to Change the World” which reminds us to be more critical of corporate philanthropy – often a central topic in CSR reports - and of who benefits most from the kinds of change it promotes.
Finally, the World Business Council for Sustainable Business (WBCSD) published its 2017 Report which details the results of their examination of 157 sustainability reports from WBCSD member companies and found that the titles of sustainability reports have evolved to reflect the increasing sophistication of companies’ approaches to non-financial reporting: 41% of reports reviewed have the word “sustainability” in their title. Other key words include “CSR” or “corporate social responsibility” (10%) and “CR” or “corporate responsibility” (4%). Granted, their results may be skewed toward their members’ inherent preference for the term “Sustainability”.
The benefits of a Sustainability Report make it a better choice.
While both CSR and Sustainability perspectives result in reports which have the potential to create value for an organization and enrich society, modern Sustainability reports can sidestep the pitfalls outlined above and go beyond shoring up a company’s admirable reputation by framing a company as a better long-term investment, making the business case for environmental stewardship and raising stakeholder expectations for transparency and accountability.
KERAMIDA provides Sustainability Reporting Training services to organizations throughout the U.S. as a CDP Accredited Provider and GRI certified Training Partner. For more information about our Sustainability and CSR Consulting Services, including sustainability strategy, planning, and reporting, please call us today at (800) 508-8034 or contact us here.