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January 13, 2011 / Speaking Sustainability

Why most CSR reports fail, Part 1: Leadership

CSR reports are often criticized as glossy PR efforts or obtuse, jargon-filled documents that only an insider can decipher. But these general criticims, however valid, aren’t helpful to companies trying to be truly responsible. The next four posts will outline concrete criteria you can use to evaluate how well your report communicates to core audiences of employees, customers/consumers, business partners and mainstream investsors.

I’ve spent a lot of time reviewing CSR reports lately trying to define what makes a report a persuasive and compelling read for a concerned, average person. I’ve developed a diagnostic scorecard with 15 criteria that fall into four categories. Of two dozen reports I’ve assessed, only two get a passing grade.

How can firms improve?This post will start with the first category: Leadership.

Leadership is a vague term that every PR person loves to claim for their company.  But in sustainability, there is a clear dividing line between those taking important but basic actions and those who are really taking the lead. Simply working within your company to reduce waste, cut energy use, treat employees fairly, etc. once qualified as leadership but initiatives like WalMart’s role in kick starting the Sustainability Consortium and Starbucks’ recylcable Cup Summit have raised the bar. Leaders now go outside their four walls — even recruiting their competitors — and use their influence to attack problems bigger than a single company can solve alone.

Companies also demonstrate leadership by showing that they are thinking not just about how to score image points, but are seeing the business value of responsible behavior and building it into their culture. The public is highly skeptical of business’ motivations and commitment for “doing the right thing” so when a company like TJX touts its acronym “V.A.L.U.E” to represent its commitment to responsible business it looks like typical corporate spin. To be fair, I think TJX is sincere and there may well be more to their efforst than meets the eye. But their communication falls flat. The discussion is wrapped in expected platitudes  such as “our vendor relationships…have been a key factor in our success.” Then stating that their code of conduct “requires each of our vendors, at a minimum, to act in accordance with all applicable laws and regulations” sets a very low standard.

Contrast this with the materiality matrix that Ford publishes. Management has clearly put a sincere and concentrated effort into understanding both the issues of concern to stakeholders and how those issues impact their business. For example, “low-carbon strategy” appears in the quadrant that is high concern to stakeholders and high impact on the business, presenting a clear business rationale why the company must address the issue in order to achieve its other financial and business objectives. The low carbon strategy has clearly moved beyond a clever ploy to deflect criticism and has engaged the company in an effort to reinvent its business.

 UK retailer Marks & Spencer makes it even more straightforward in their “2010 How We Do Business Report“. While their business depends on moving more and more goods, they see that they have a clear business interest in ensuring that their supply chain works to minimize materials used and protect natural resources — not from a tree-hugging, save-the-planet perspective, but because their future  business depends on it.

M&S doesn’t shy away from the good they are doing, but they also tie it to their bottom line, stating that their sustainability initiatives have dropped £50 million to the bottom line.

Purists may complain that by pursuing benefits to their business, M&S and Ford aren’t pursuing sustainability for the “right” reason. But after watching business fudge and spin their environmental commitment for the past 20 years, when companies demonstrate their view that environmental performance and business performance can coexist, I am more confident that the firm will follow through with their commitments.

Other leadership issues relate to consistent effort at sustainability internationally and embracing the emerging trend toward abolishing the CSR report in favor of the “integrated” report covering financial, governance, social, and environmental issues.

How well does your report stack up to these criteria?

Other posts in this series:

Part 2: Message Strategy

Part 3: Tone of Voice

Speaking Sustainability can evaluate your CSR report on our 15-criteria scorecard, benchmark you against your peers and best-in-class reports, and give you specific guidance on how to improve. Contact us!

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