The best Alex cartoons skewer the City’s hypocrisy like nothing else. This cynical and outdated dig at sustainability isn’t one of them – not by a long shot. Even so, it does contain four excellent lessons for any company wanting to improve its sustainability reporting.
Lesson 1: Don’t call it CSR
‘Why do I have to put all this corporate social responsibility stuff in my annual report?’
A few years ago, pretty much everyone called it CSR. Now, most companies I work with have dropped the ‘social’ or call it sustainability instead.
My clients are mostly larger companies, with people dedicated to making their businesses sustainable. As they’ve developed their strategies, they’ve seen CSR as too limiting, too suggestive of sponsored walks and recycling drives, and – like Mr Hardcastle – too easy to dismiss, both internally and externally.
Call it sustainability, though, and you immediately widen the subject to include critical areas of your business. You make it serious.
Ultimately, it’s not about being social. It’s about your company’s short-term performance and its long-term survival.
Lesson 2: It is about the bottom line
‘Surely investors only care about the bottom line: my company’s profitability and its share price.’
Corporate reporting is a big part of my business, so I often talk to clients about what sustainability means to them. Over the last year or so, there’s been a definite shift in their views. There’s less rhetoric about being good corporate citizens and much more focus on how it makes their businesses better.
Believing that sustainability is irrelevant to performance is the cartoonist’s biggest mistake. Sustainability does contribute to the bottom line and to the share price, while creating social benefits at the same time.
- reducing energy use cuts costs (business benefit) and carbon dioxide emissions (social benefit)
- better health and safety increases employees’ productivity, morale and loyalty (business), as well as protecting their wellbeing (social)
- improving working conditions in the supply chain protects a company’s reputation (and therefore its revenue), as well as protecting its suppliers’ employees
- supporting local causes helps to attract and retain employees from the area, as well as creating stronger communities
- encouraging employees to raise money or volunteer fosters teamwork, improves skills and increases employees’ wellbeing, while benefiting the charities they help
This interconnectedness means that it should be impossible to separate your sustainability strategy from your business strategy. It’s just one part of the whole.
Lesson 3: It’s not about intangibles
‘A company’s intrinsic value is seen to be enhanced by intangibles like environmental and sustainability policy, employee “wellness programs”, cycle to work schemes …’
Except it’s not.
Sustainability is not about policy. It’s about how those policies work in practice and being able to evidence it. That means your reporting needs to include clear performance metrics in each area you’re talking about, from your greenhouse gas emissions to your employee engagement scores. Quantify your savings and explain how it all adds up to a more robust business.
It’s fine if you’re at the start of developing your sustainability strategy and don’t have much to show for it. Explain what you’re going to do and the business and social benefits you expect to achieve. Then make sure you capture the data, so you can report your performance the following year.
Lesson 4: Sustainability will affect executive pay
‘… it helps us justify the 400% increase in your salary …’
If sustainability is about creating better businesses, then it will be reflected in management pay. Traditional pay scheme metrics – profit and earnings, for example – already reflect the cost savings and the reputational and productivity benefits sustainability should bring.
Companies that are trying to change behaviour will also add specific sustainability goals to their management’s targets. Unilever’s CEO, for example, has sustainability targets as part of his bonus arrangements. Make sure your report brings out the links between pay and your sustainability objectives.
Corporate reporting is changing
Many companies are making great strides with their sustainability reporting. If you’re not talking about what you’re doing, how it benefits your business and the social outcomes you achieve, then you’re doing yourself a big disservice.
The pressure on companies to report effectively will only grow. The International Integrated Reporting Council’s framework is likely to become the benchmark by which reporting is judged, increasing investors’ expectations of what you should be doing and saying.
Unfortunately, half a page on ‘CSR’ wedged in before the corporate governance section doesn’t cut it anymore.