How to... make CSR reports credible

The increase in the number of companies producing CSR reports may be widely regarded as a positive trend, but many green groups remain sceptical about the true motivation behind many non-financial reports.

On the one hand, the initiatives of reporting organisations may reflect a genuine attempt to achieve sustainable development through systemic change of management practices. But on the other, a commitment to sustainability reporting may be part of a well-planned PR strategy designed to manage stakeholder groups and gain community legitimacy - or to give it its more colloquial label it could be a case of "greenwash".

So how do you convince stakeholders that your company is going beyond greenwash and the claims included in your published CSR reports are an accurate representation of your efforts?

Jennie Gibbons, corporate social reporting manager at British American Tobacco advises that the first step is to ensure there are clear internal walls between CSR from PR. She says that one of the easiest way to do this is to not highlight individual product brands within CSR reports.

"By not linking our activities to our brands we are demonstrating that we are serious about CR [corporate responsibility] for solid business reasons, not because we might sell a bit more if we pretend to be nice," she remarks, adding that those companies that treat CSR as a public relations exercise undermine their credibility. "We wouldn't have got any credibility at all if we had approached it as a PR exercise…greenwash is easy to see through," she said.

Stakeholder engagement

Demonstrating that stakeholders have been directly involved in the development of the report can also help assure the audience that CSR claims are genuine.

According to a recent survey on international corporate reporting trends from KPMG engaging with stakeholders during report development has doubled over the last three years.

For example, last November German software giant SAP announced the release of its first sustainability report, which highlighted the key measures of their corporate environmental, social and governance performance. Acknowledging that the topic of sustainability requires both transparency and stakeholder engagement the company issued an open call for dialogue to define the company's top corporate sustainability issues, and has launched an online collaboration site to promote further engagement with stakeholders on a range of concerns.

James Farrar, vice president for global corporate citizenship at SAP, believes the site provides the company with a real platform for collaboration and gives credence to its claims that its sustainability report is simply the beginning of an ongoing dialogue with stakeholders.

As part of a controversial industry BAT understand that some stakeholder groups may choose not to believe the company's corporate responsibility claims. But the company insists that as well as verifying reports using third party organisations, the best way to challenge these preconceptions is by engaging with its audience through independently facilitated and assured dialogue. "We believe we can build trust by addressing our big issues head on and being honest about our challenges," says Gibbons. "We are genuinely open to engagement and working with others to address our challenges - this honesty helps build trust. "

Jack Cunningham, head of group corporate responsibility and environment at ITV, agrees that talking to stakeholders is one of the most effective means of enhancing a CSR reports credibility. "Engage them and involve them in the development of your CR strategy," he advises.

Third-Party Verification… is it worth the paper?

Arguably the most effective means of bolstering the credibility of a CSR report and challenging accusations of greenwash is to have the report validated or audited by a third party.

However, despite the growing use of verification firms by CSR departments opinion is divided on how much value third party audits adds to a report. On one side of the debate it can be argued that verification helps an organisation increase its transparency and build trust in its reporting processes. But some critics counter that commissioning a service provider to conduct an independent review is contradictory and raises questions about their independence.

This accusation is rebuked by Dr Alan Knight, head of standards at green consultancy AccountAbility. "The notion that external firms cannot remain independent is a complete red herring, " he argues. "The majority of firms adhere to rigorous standards and maintain excellent professional integrity… people would question the credibly of a financial report if it did not include an independent audit statement."

AccountAbility advises that firms seeking to check up on the creditability of their external verifier should look for four key qualities: competence, independence, impartiality and rigour. The company has also developed a number of standards for both CSR reporters and external verifiers designed to ensure auditing organistions adhere to best practices.

However, Noel Morrin, senior vice president for sustainability and green construction at Skanska AB, suggests that there remains a credibility gulf between those firms auditing financial reports and those auditing CSR reports. "When we pay consulting firms fees in the same order as for financial auditing then I may be convinced," he observes.

Those firms that remain unconvinced about the credibility of private sector auditing firms can instead choose to partner with NGOs to assist in the development of their report - a practice that similarly serves to lend a sense of third party endorsement to a report.

For example, Charlotta Lyon, environment communications director at Tetra Pak, said that the company has developed a partnership with WWF that has reached a stage where it can ask the NGO for advice on sustainability projects.

However, developing a partnership with an NGO is not easy and requires patience, commitment and transparency. "With NGOs it's all about trust and that comes down to building long-term relationships based on honesty," observes Morrin.

WWF's Lovegrove adds that the organisation is only "keen to work with companies who are willing to push the envelope and drive sector-wide change".

Selecting the right standard?

The final technique for enhancing the credibility of the information included in CSR reports is to ensure that data adheres to established standards.

This is a sizable challenge for CSR reports given that there are a wide number of standards available such as those from the Global Reporting Initiative (GRI), Business in the Community (BITC) and the World Business Council for Sustainable Development (WBCSD).

Jack Cunningham of ITV advises that firms should aim to "choose a standard that fits the business", rather than try to "shoe-horn reporting into standards that don't fit the business!"

However, while each of the standards have their merits GRI appears to be gathering the widest level of support.

The organisation claims that almost 80 per cent of reporting organisations follow the its Sustainability Reporting Guidelines, normally in conjunction with internally developed company frameworks, as the basis for reporting.

The guidelines are designed to be flexible and applicable across organisation type, sector and region. For example, the latest G3 Guidelines, released in 2006, allow reporting organisations to declare the extent to which they have used the guidelines from the maximum A Level to the lowest C Level, which provides an entry point for new organisations and a system for continuous improvement year on year.

SAP's first sustainability report, for instance, was prepared in accordance with the Global Reporting Initiative (GRI) G3 Sustainability Reporting Guidelines and has been GRI-checked to achieve C application level certification. The company says that one of the key motivations for selecting GRI was that it provided a clear structure to make year in year improvements.

BAT's Lyon adds that the relatively widespread adoption of GRI standards also serves to make them increasingly attractive.

"We have chosen GRI as it is an internationally adopted standard and several of our key customers are using it," she says.