Sustainability Reporting helps build brands and reputations 

published 2007

Sustainability reporting is becoming a more utilised tool in maintaining and building corporate and brand reputations, with increasing numbers of major corporations producing reports on their economic, environmental, and social performance based on metrics from the Global Reporting Initiative (GRI).

Major corporations have been conscious of their responsibilities for a long time, and many have been putting a large amount of resources into this area which is called many things -sustainability, corporate social responsibility, corporate responsibility and social awareness just to name a few.

Until recently many have been reticent to go public for fear of being perceived as trying to exploit or leverage their work for ‘image’ reasons. However, companies are becoming more willing to ‘come out’ and ‘go public’ as this kind of activity is now more fully integrated into business practices and, more importantly, measurable.

The International Scene

The GRI has recently collated reports and articles to demonstrate how big business is embracing this new form of reporting.

GRI notes that a recent article in US Business Week, based on data supplied by Interbrand, showed that:

• The top five brands in the world - Coca-Cola, Microsoft, IBM, General Electric, and Nokia - all report on this basis using GRI’s Sustainability Reporting Guidelines as the model.
• 12 of the top 15 global brands do likewise.
• 43 out of the top 100 brands on the recent list released by Interbrand and Business Week also issue GRI reports.

To supplement its findings on top brands, GRI also studied the correlation between company size and sustainability reporting.

GRI used the results of the leading 100 companies featured in the Financial Times FT Global 500, Forbes Global 500, and Fortune Global 500, which base their results on a combination of metrics relating to revenue, sales, profit, assets, market value, and market capitalisation.

Findings demonstrate that top global companies which do not make sustainability reports are in the minority and that there is a strong correlation between high profitability and sustainability reporting amongst the world’s top businesses.

The GRI research broadly supports results published in McKinsey & Company’s “Building Retail Brands” in 2000.

The McKinsey study suggested that:

• Strong, well-leveraged brands produce higher returns to shareholders than weaker, narrower brands.
• The fact that a competitive advantage can be gained by reporting on relevant risks and opportunities associated with environmental, social, and economic factors related to sustainability, is becoming a standard business concept

According to GRI, a company that communicates this kind of information, based on its independent framework, is a company which will be able to assure its stakeholders that it is one step ahead of the rest. GRI has taken the lead in developing a standardised reporting model or template and is encouraging organisations to opt in.

Internationally the most recognised ranking mechanism is the Dow Jones Sustainability Index . Australia

In Australia there has been a growing movement by large local organisations to both act and report more meaningfully in this area.

Reporting

Susan Werkner, Managing Director of Interactive Investor, reviews key CSR trends and said, that while around 20-25% of Australian companies produce a formal CSR document, it is believed numbers will increase in the future as more companies participate in the Australian Corporate Responsibility Index (CRI) Awards.   In 2005, 29 CEOs submitted to public examination of their corporate responsibility practice under this award scheme.

Ms Werkner notes the single most effective and efficient CSR communications platform for companies is their corporate website.  Typically, Australian-listed companies have chosen one of two classic approaches: a “spirit of CSR” approach (e.g. Suncorp) or a “compliance” approach.  In each case the means of integration of the CSR message into the website is critical to ensure it complements the site and reinforces positive investor perceptions.

Locally the Corporate Responsibility Index 2006 was announced in May this year. 

Five companies scored over 95% in the Index: Westpac, Toyota Australia, BHP Billiton and Rio Tinto (equal third) and ANZ.

Westpac

Apart from gaining high credibility in the most recent Corporate Responsibility Index, Westpac in July this year also took top honours at the 2007 Banksia Sustainability Awards for its sustained and significant efforts to reduce its impact on the environment. Westpac was the only Australian bank chosen from among 53 finalists.

In addition, Westpac was also listed in the “Guide to the Greenest Companies in the UK and the World” that was produced in conjunction with The Independent and Eiris (Ethical Investment Research Services).  Westpac was said to have “adopted the Equator Principles, a framework for managing environmental and social risk in project finance..

Meantime when law firms get involved in an area, it’s usually evidence that it is gathering some momentum.

Legal Guide to CSR

In March 2007 Australian Baker & McKenzie released a useful guide - Corporate Responsibility - A Guide for Australian Directors.

Baker & McKenzie break down the key four areas of CR activity as:

• Social/Community

This includes community partnerships, philanthropy, indigenous relations and employee volunteering to name a few.

• Labour

This includes diversity and promotion of women, health and safety, freedom of association and collective bargaining.

•  Environment

This includes reporting, clean investment decisions, minimising ecological footprints and others.

•  Transparency

This involves the organisation being as transparent as possible, both internally and externally.