I’ve been skeptical about the value of CSR/sustainability reporting. I now have to admit I was wrong. Partly.
For years, I viewed reporting as a necessary evil: necessary for transparency and meeting stakeholder expectations, but evil in terms of disproportionate effort and dysfunctional impacts on strategy.
I’m not opposed to reporting. Going back to the first corporate environmental reports in the 1980s, doing a report has been a great way to hold up a mirror for senior management, helping (or forcing) them to see how their company looks from the outside in. (Disclosure: ERM is one of the world’s leading providers of EHS/CSR/Sustainability reporting services.)
But I have been wary. In an early blog, one of my new year’s resolutions was:
4. Don’t confuse reporting with doing. Transparency is important, but results are more important.
Many readers agreed, saying “too much time spent chasing data to report has led to putting off long term strategizing,” or noting: “I liked #4 a lot as reporting can take an inordinate amount of time!” I’ve echoed those sentiments over the years. I’ve frequently urged clients: “Don’t let the reporting tail wag the performance dog.” I often quote a client who said: “I’m afraid my reporting is writing checks that my performance can’t cash.”
Now, though, I’m seeing companies use the reporting process as an incredible strategic tool, as a lever to raise the strategic discussion in their company. What’s changed?
Fundamentally, the reporting process (in some companies) has changed from peer competition and branding, to a truly strategic process admittedly with branding implications. Give credit to evolving GRI guidelines, growing analyst attention, and simply the maturing of the art form. Give some credit also to the great subversive work of the green whisperers.
In the past, the reporting process juggled several questions:
- What do we want to talk about?
- What good pictures, stories and data do we have that we can use?
- Who – if anyone – is listening?
- What do the loudest stakeholders want to hear about?
Increasingly, the process revolves around four very different questions:
1. What matters?
“Materiality” has finally gotten serious. It has become a true business risk process, asking “what matters to the business?” and “what matters to the stakeholders who matter to the business?”
2. What do we do about “what matters”?
This is the real strategic opportunity. You don’t have to just lunge from materiality to writing any more. This is a huge change. This step can drive deep questions of goals, priorities, and performance.
3. What do we say about what we do?
You have to talk about “what matters,” but more to the point you have to talk about what you’re doing about the issues that emerged from question #1.
4. What do we do with what we say?
In some companies the emphasis is shifting from “the report” to “communication and reporting.” It’s a process now, not an event. As one colleague pointed out, “We focus on who owns each chapter of the report going into the process. We don’t talk about who owns each section coming out of the report.” That’s the emerging challenge: integrating the annual document into an on-going process of communicating with (not just to or at) stakeholders, both inside and outside the company.
Is the process perfect now? No. Can it still take too much time and attention? Yes. Can the tail still wag the dog? Sure.
But the trend is going the right way. Some companies are using the reporting process to drive deep discussions of business risk, prioritize actions, and stimulate on-going dialog. In some cases, this is an evolution in the companies who were already leaders. In other cases, it’s a “leapfrog” opportunity for companies who are coming late to the game: they are starting out with a focus on strategy, rather than having to unlearn or dismantle a document-driven, communications-only process.
“Necessary” is increasingly trumping “evil.” I guess I was wrong.
[Scott Nadler is a Senior Partner at ERM. To share this post, see additional posts on Scott’s blog or subscribe please go to snadler.com. Opinions on this site are solely those of Scott Nadler and do not necessarily represent views of those quoted or cited, ERM, its partners or clients.]
I have actually seen exactly what you have described happen right here in our company. I have been a part of our Sustainability Reporting process since early on in our Sustainability Reporting journey and it wasnt until we went public with the report that the rubber met the road and we saw at the individual office level the importance of the KPI’s and action plans created to meet them. This also created momentum for those of us who were already on the sustainability bandwagon to re-inforce to the rest of the office why our sustainability-related office activities were important and backed by corporate.
Great to see this discussion being aired. My 18+ years experience in CR reporting and assurance in Europe tells me that it often takes some time (5+ years of reporting) before organizations get to this point – what is the real value of reporting, and how does it fit into our strategic longer-term business success. Certainly GRI G3 didn’t help, collecting more and more data in order to tick boxes for issues which are not material and therefore not managed – in other words, missing out #2 altogether! The AA1000 (APS 2008) principles of inclusiveness, materiality and responsiveness can also be a useful guide on how to take this forward in an organisation.
I’ve recently been thinking about this phrase: “as long as you’re a good person, it’s OK to be a person.” I use it when I teach as a way of pushing students to take more risk – doing an assignment / paper / project / presentation the way they would do it rather than the way they perceive it should be done based on the unwritten rules of formalism. I use it when I make drawings and physical models as a way of pushing myself to take action versus just doing the labor of production (see Hannah Arendt’s book, The Human Condition). In both cases, the phrase raises important questions:
1. What matters to me as a person?
2. Why is what matters to me good?
3. How can I take action to express that goodness?
4. How do I present / represent that action in such a way that others will understand?
The resultant growth and intellectual risk that occurs after asking and answering these questions is remarkable. Two weeks ago, I assigned a class to write a one-page response paper on a required reading – Susan Cain’s book, Quiet – after leading a discussion on this idea of self-expression. I got back 12 one-page papers. I also got a painting, a sonnet and a two-minute silent film. The quality of the painting, the poem and the film were likely “bad” by most art critics’ point-of-view. However, the students that created these pieces all arrived at clarity on the four questions above. They actually engaged in the content and took on the problem of the assignment in a very personal way.
Now I have not fully left reality, here. I don’t expect to appeal to a business audience with a philosophical viewpoint about life essence and goodness, especially from the inefficient and gratuitous academic world. But I see connections.
I only have a couple of years of experience actually working on sustainability reporting and my experience was much closer to your “necessary evil” position from which you started the blog entry. But I’ll take your insights and the associated comments to this entry as truth for a minute.
My intuition tells me that my question 2 above is often skipped – in business, in government, in academia, in personal lives. In the business context, I think many “visioning” conversations that precede an effort like a report tend to hold certain assumptions fixed. One of them is something like “well, if it matters to us, it’s good because it matters.” It can certainly be perceived as semantic or academic to challenge premises like this. But it’s also childish in the best possible way. For all the headache that every two-year-old gives the world, they walk around asking the best possible question 100 times a day – “why?”
You did not mention in your post that you’re seeing a maturity occur in reporting – you were careful to simply point out a change. But I know it’s one of the consultant’s tools with the powerpoint arrows going from past sin to present awkwardness to future nirvana with dollar signs and smiling people. I’m guilty of using it myself.
Here’s what I think is interesting, though: maybe this shift you’re seeing is more representative of immaturity. And maybe we need more immaturity models. Immature in the sense that the sustainability reporting process is perhaps not so well-behaved and predictably formalist anymore. Immature in the sense that maybe business is not just business, it’s personal. It’s personal because we’re talking about what matters – and hopefully about why it’s good.
I think I’m responding positively to what you’re seeing. And I think I’m suggesting that maybe business can become too impersonal in its “maturity.” That these personal questions about what matters to individuals and why it’s good can be in dialogue with these themes you’re seeing in reporting. That the idea of not knowing and being curious is more valuable than the idea of knowing without knowing why. Maybe a good sustainability report is a broadway play. Or a sonnet or a painting.
As always, thanks for the post.
Very nice piece, Scott. The first two questions are most important. What matters, and what organizations do about it are paramount. Materiality is, in fact, driving this metamorphosis to some degree. However, there is still a disconnect between this and focusing upon the external benchmarking of companies. As long as companies continue to chase these instead of your questions, sustainability will still be a “nice-to-have,” rather than a “must-have.”