Conceptual Issues
Why Do a Report?
Companies produce a corporate sustainability report (CSR) for many reasons. There is seldom a single reason and the rationale for producing the report can change over time.
Motivating factors include:
Individuals like Paul Hawken and organizations such as the World Business Council for Sustainable Development have worked to publicize the economic, social and environmental benefits associated with operating more sustainably. Reporting on achievements in this area can enhance a company's public image but it also presents an opportunity for locating costly waste and inefficiency.
Core Values
A statement of company values can provide direction and rationale for the report. Wording is important. Clichéd catch-all phrases ("Building a Better Future") are unconvincing and difficult to measure. Saying that sustainability is important but failing to reflect this in stated company values raises doubts about the sincerity of the commitment.
Setting Priorities
Good sustainability reporting builds on core values and sets out decision-making principles that are consistent with these values. Sustainability reporting frameworks can provide a broader context for linking priorities rather than viewing them as competing objectives.
Examples of sustainability decision-making principles used in the reports include:
Businesses must make money. No matter what other goals and ideals directors and employees bring to the organization, staying in business and prospering is a fundamental value of any for-profit enterprise.
Supporters of sustainability insist it makes good business sense. Approaches such as eco-efficiency are based on a common sense proposition that reducing waste and inefficiency in production processes can save money and protect the environment at the same time. Life cycle analysis (LCA) offers a theoretical framework for understanding material flows and potential impacts involved with providing services or products in a closed loop. Sometimes referred to as "cradle to cradle" or "cradle to grave", LCA looks at an entire enterprise in term of input, throughput and output. This helps to identify inefficiencies that drain profit and produce waste including pollutants. Norsk Hydro has used this framework for significant portions of its corporate report.
Triple bottom line — evaluating company performance according to a summary of costs and benefits to the corporation's finances, the communities where it operates and impacts on natural resources — is another method for presenting and/or assessing corporate sustainability.
Many of these approaches — e.g. eco-efficiency, full cost accounting, LCA, systems-based pollution prevention, industrial ecology — are new to the business world. Even academic proponents of sustainability acknowledge the great number of uncertainties and contradictions associated with attempts to apply the concept to day-to-day operations. Therefore, companies setting out to produce a corporate sustainability report must show how business objectives such as profit and competitiveness are consistent with sound environmental management and/or sustainability principles.
The failure to make this connection is a weakness in many reporting initiatives. It makes a report appear superficial and a low priority. For credibility, the environmental/sustainability approach must be presented in a context that demonstrates its real value to the company.
The Royal Dutch/Shell Group of Companies is on the right track. The chairman kicks off the report by saying: "My colleagues and I are totally committed to a business strategy that generates profits while contributing to the well-being of the planet and its people. We see no alternative". The report that follows uses real-life examples to show how Shell's implementation of a sustainable development management framework has created business value by reducing costs, creating options, gaining customers and reducing risk.
Connecting Policy to Operations
Making broad policy statements is easy. The real test of commitment is implementation. This is particularly difficult in the field of sustainability where decisions can be guided by general principles but much practical application is still a matter of trial and error.
If the stated values and principles have any meaning to a company outside the need for reporting to the public, there will be obvious connections among the corporate management team, senior operations staff and employees generally. Companies that can demonstrate these connections — e.g. specific examples where policy has affected operations, the nature and extent of staff education and training, a responsibility flow-chart — generally have very convincing reports.
Reports that dwell on policy statements with no concrete results give the impression that the CEO and other senior corporate managers may understand the challenges but that this knowledge has not been translated into tracking and evaluating progress or any real change inside the company.
Many of the companies who have completed a CSR began with environmental reports that documented how the organization was meeting environmental regulations. In some cases, the approaches and tools used to meet regulations, such as more efficient process design, also made good business sense.
The Business Challenge
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