TRENDS IN CORPORATE SOCIAL
RESPONSIBILITY REPORTING 2001|02
Researched and published by
2 ‘Should I worry?’ checklist
Welcome to our second annual Directions report
which shows a significant increase in corporate
4 Levels of disclosure
social responsibility (CSR) reporting.
Nigel Salter – salterbaxter
Is this sustainable or are we living inside a CSR bubble? Evidence abounds of frothy activity.
6 To verify or not to verify?
Mark Wade – Shell Questions from socially responsible investment (SRI) analysts – the current teenage scribblers of the financial
community – swamp listed companies in all sectors. Chief executives use every opportunity to speak publicly of
their commitment to good corporate citizenship. The latest research by Business in the Community shows –
10 The oxymoronic world of the somewhat unbelievably – that 73% of European top 200 CEOs think CSR boosts profitability.
socially responsible investor
Andy Brown Politicians are riding the bubble too. The UK has a minister responsible, the French have published a decree and
the EU is considering how to institutionalise CSR reporting.
12 What SRI analysts say
Non-governmental organisations are panting from their pursuit by companies who want to engage with them.
Public relations companies – excited by the potential fluffiness of the issues and the perceived need of
companies to communicate their good behaviour – are in a feeding frenzy, scrabbling to service the cuddly
METHODOLOGY 13 world of CSR.
The distorted vision from within the bubble makes it difficult to think clearly about the relevance of CSR to
commercial performance. Is CSR a real change in business sentiment or just a passing fad, a fashionable
flirtation with doing good?
16 International Top 60
If reporting is an indicator of commitment to CSR then our research shows clearly that a fast-growing number of
companies are putting pen to paper, or at least pixels to screen.
Selected sector analysis
Such reporting is essential to prevent a premature popping of the bubble. But so is the yet to be proven success
22 FTSE 250
of indices, such as FTSE4Good and those from Dow Jones. These will only work if enough money follows them.
An analysis of the environmental and corporate Much is still to be decided. Our research has taken the pulse of the UK’s 250 largest listed companies and
social responsibility (CSR) reporting practices of the world’s top 60. Overall the picture is positive with the majority of large companies reporting in some form
the UK’s top 250 companies. or another.
31 Looking forward
With commentary and analysis from:
We are, of course, ever conscious of spin and humbug. This is why we counterbalance our enthusiasm for CSR
• Roger Cowe – Journalist with a more critical look at SRI investing. We also attempt to demystify the CSR management speak that is
32 About salterbaxter • Mark Wade – Shell regurgitated by too many in our business.
• Simon Propper and Peter Knight –
• Nigel Salter – salterbaxter We hope you find this report useful and we do appreciate feedback, no matter how critical.
33 About Context
Nigel Salter Simon Propper Peter Knight
salterbaxter Context Context
firstname.lastname@example.org email@example.com firstname.lastname@example.org
Please tick the relevant box ✔
Should I Worry? Confused by CSR jargon? Unsure if you have all the issues
covered? Mystified by consultants’ self-assessment flow
A HUMAN RIGHTS
0 1 2 3 4
3 2 1
l by Simon Propper and Peter Knight CONTEXT diagrams? Relax. CSR is not rocket science. For peace of mind Forced labour (slavery) ✕ =
(or instant heart failure) complete our simple checklist and find Disciplinary practices (abuse & intimidation) ✕ =
your unique worry quotient. And then decide how much to fret. Security (use of armed guards etc) ✕ =
Indigenous rights – respecting ✕ =
Health & Safety =
B EMPLOYEE RELATIONS 0 1 2 3 4 3 2 1 Total
Discrimination (diversity & equal opportunities) ✕ =
Working hours ✕ =
By the painful weight of acronyms and the sheer heat of the debate, one Managing CSR might involve cross-functional relationships and is certainly
would imagine that business had never thought of its corporate social demanding. For example, human rights issues cut across the organisation: Wages & benefits ✕ =
responsibilities before, let alone tried to communicate its performance. human resources handle topics such as ethnicity and diversity, safety Job satisfaction ✕ =
professionals will be in charge of work safety and procurement would deal
All those morally robust Quaker business leaders, Lord Lever and the with labour issues in the supply chain. Training & career development ✕ =
Carnegie-look-alikes must be giggling in their graves at the antics of new- ✕ =
Industrial relations (employment practices, unions & staff forums)
age CSR. Very few of the issues that business has to deal with today are For those who have not given CSR much thought, the first step is to
new, only the context has changed: a smaller, faster-moving world where identify the issues that are important to the company. All the relevant Importance Management
values are king and corporate reputations very vulnerable. topics are contained within the various codes and guidelines that have
C COMMUNITY/SOCIETY 0 1 2 3 4 3 2 1 Total
been issued by organisations ranging from the OECD to Amnesty
Our survey shows a steady increase in reporting but it's clear that there International. Community investment ✕ =
are still many companies that are struggling to put CSR into perspective. ✕ =
Despite the fog of confusion, it's worth remembering that CSR is not rocket We have developed a short cut for those who don't know their SA8000
science - it's simple common sense. from their GRI - and don't particularly want to. Each category in our Charitable giving (money & resources) ✕ =
‘Should I Worry?’ checklist has a number of sub-categories not listed,
Education ✕ =
Like telephones and PCs, the CSR report is fast becoming a must-have but don't be too concerned about them now.
business tool. This is not the place to debate its benefits nor justify the Importance Management
cost - when last have you done that with your mobile phone? But if you're
a hesitant reporter, mystified by the fuss or turned off by the tedious D BUSINESS ETHICS 0 1 2 3 4 3 2 1 Total
processes recommended by management consultants, read on. Corporate governance ✕ =
Bribery & corruption ✕ =
Political donations ✕ =
Product/consumer ethics (efficacy and honest marketing) ✕ =
E ENVIRONMENT 0 1 2 3 4 3 2 1 Total
INSTRUCTIONS Resource consumption ✕ =
Energy/climate change ✕ =
TO CHECK YOUR WORRY QUOTIENT, FOLLOW THESE SIMPLE INSTRUCTIONS (PhD NOT NEEDED): Water use ✕ =
Below is a list of critical CSR issues. Most will affect your company, but others could be irrelevant. Waste ✕ =
Follow these three easy steps: ✕ =
Polluting discharges and emissions
Step 1 Using the scale on the right, judge how important an issue is and then how well you manage it. Importance Management SCORES A+B+C+D+E= TOTAL
0 Irrelevant 1 Good
1 Little 2 Medium
Step 2 Tick the relevant boxes in the panels on the opposite page. For each issue, multiply the two 2 Moderate 3 Poor
numbers together. Add these to give you a subtotal. 3 High
Step 3 Add the subtotals to give you a worry quotient – the lower this number, the lower the risk and
the less you need to worry.
In the band Above 130
For example, if an issue is critically important to your company and you manage it poorly (be honest!), you score an embarrassing 12! 101-130 Ring our social
(The system allows for irrelevance - no matter how well you manage an issue of no relevance, you will end up with a score of 0). No need to environmental
Under control, emergency
worry! Tel +44 (0)20 7251 0050
but watch it! number now!
Levels of disclosure THE KEY QUESTIONS WHEN DECIDING ON YOUR LEVEL OF DISCLOSURE:
l by Nigel Salter SALTERBAXTER c how important is this to your business?
c how exposed are you? (See the previous article)
c where does your company want to get to on CSR?
c what are your competitors doing?
Companies opt for widely differing degrees of disclosure – choosing the right level c who are you publishing for?
should reflect your business objectives. c what systems do you have to support a reporting programme?
c how do you respond to the debate once you have published?
Not everybody has to have an award-winning stand-alone report plus Reporting is important but not everybody has to go the full monty
a fantastically detailed website. For many businesses an effective, on CSR – common sense, good communication and your overall business
straightforward and well written section in the annual report is more objectives in this field should be your guide.
Above all else, make sure that what you publish is credible and don’t assume
And yet some companies with quite sensitive issues to address still only put that publishing is the end of the process - on the contrary, it is the start of
a tiny paragraph on environment policy in the back of their annual report. the debate.
The most important thing in deciding your company’s approach is to identify The following levels of disclosure are a quick summary of the current
what is appropriate. response from the FTSE 250:
Leaders in this field typically have a long heritage of reporting and almost
certainly have difficult or high profile issues to address.
For many businesses, the limited range of
issues they are exposed to does not justify
a separate report on CSR. This level of disclosure is most likely to suit a
major multinational or a business with exposure
This doesn’t mean that they don’t want to to difficult issues (for example bribery and
address CSR seriously and effectively. In such corruption or health, safety and environment
cases a succinct section in the annual report, WEB REPORT ONLY (HSE) in the oil or chemicals sectors).
addressing the key issues and supporting those This makes sense for reasons of cost but simply
with data is an excellent solution. doesn’t stack up when viewed from the The programme would typically consist of a
communications angle. printed report, a web report, a section in the
Typically a paragraph in the Getting to grips with the issues but not diving annual report and an internal communications
Directors’ Report. Probably only into over-spin. Done well this is actually a The simple fact is that the more senior the programme.
mentions environment policy better solution than a stand-alone document audience the less likely they are to use the web.
and possibly includes charitable full of fluff and no substance. This level of reporting brings together teams from
donations. If you want people to hear what you’ve got to say all around the business. CSR, corporate affairs,
Lots of companies have a section in the annual and if you want to influence the serious opinion human resources, legal, brand and HSE teams
74 of the FTSE 250 fall into this report but, unfortunately, an effective response formers you need at least a printed summary. would all be working together meaning that the
category. at this level is all too rare. Carlton and GKN are CSR programme is very much in the mainstream
good examples of how to do it. People like printed documents! of management disciplines.
3 MONOSYLLABIC WITH
ADDED PICTURES 4 SHORT BUT SWEET
5 SINGLE CHANNEL
(WEB OR PRINT) 6 MULTI-CHANNEL
7 THE FULL MONTY
It’s getting cold and Possibly worse than level 2 as it smacks of puff and A PRINTED REPORT (possibly supported by a pdf on the web) Every piece of corporate communication will fully
lonely out there. decoration. The content may consist of a couple more The key aspects here are: integrate social, environmental and economic issues.
paragraphs than level 2 and it may have a dedicated title. - make sure you have enough content to make it worthwhile.
Only 5 of the FTSE 250 - what is the scope? Is it mainly environment with a bit of community, Few have gone this far.
fall into this category. Typically focused on charity information or work in the is it mainly community, or is it environment, health and safety?
community. This is the type of response frequently supported - is it a full report or a summary complementing the web? Such a scenario may well have been provoked by
by pictures of bunny rabbits, ducks on a pond and the CEO - leading from the above, what is the title? Many documents claim something of a corporate nervous breakdown or the
handing over a cheque to a local charity. to be CSR reports and then fail to deliver. decision will have been taken that the company would
- make sure it is well designed by people who understand CSR. CSR is benefit from operating on full sustainability principles.
4 fundamental to corporate reputation but is not marketing. Too many
reports look like they’ve been either poorly conceived, designed by BAA have gone down this path and The Shell Report
people who don’t understand the content or designed as a marketing leads the way in many people’s eyes.
- make sure it is well written. Not too technical, not too much PR, not This is more a business philosophy than an approach
too much self promotion. to disclosure.
- make sure you get it to people. If your report is good, lots of people
will want to see and use it.
4 | 5
893,000 100,000 2,893,000 15,700,000 314,300
029,000 15,000,000 2,029,000 12,300,000 12,400,010
639,000 7,800,000 639,000 39,000,000 22,200,700
109,000 40,909,000 8,109,000 107,680,000 65,916,768
l by Mark Wade SHELL SUSTAINABILITY TEAM
“They need to feel confident that
what we say is correct.”
Independent verification of CSR reporting is relatively new. Shell has pioneered social
and environmental verification, starting in 1996. Mark Wade, founding member of the
Shell Sustainability Team, looks forward.
e recognise the importance of accountability to stakeholders and Who are we verifying for?
W are learning to be more open, through greater engagement. People
are less willing than they were in the past to take the assurances
of authorities such as government, scientists and companies on
trust. There is an increasing call for corporations to show what it is they
are doing. And in the absence of trust – something that characterises the
We verify for a range of audiences. These include:
As managers and staff, we need to have confidence in the effectiveness of our internal systems.
It also helps us establish progress against targets and commitments – we know how much has been
modern world – there is a demand for independent verification of what is achieved and what still needs to be done. We need confidence too that our work will be seen to make
being shown. a difference by those inside and outside of our organisation.
Verification increases stakeholder confidence that what is being reported is
a fair picture of performance. It also improves an organisation’s ability to c Specialists
monitor and manage its activities. This is why we go to considerable lengths to These include what we call ‘special publics’, those people who are particularly interested in what
verify the Shell Report – a publication we want to embody completeness and we do. Included in this group are shareholders, analysts – particularly those specialising in socially
balance, display accountability and be an active document that invites debate. responsible investment - rating agencies, our business partners (who need to know that they are dealing
with a trustworthy company), government officials, journalists and non-governmental organisations
(NGOs), such as labour organisations, UN agencies, church, human rights and conservation groups.
c Industry colleagues
To build mutually-beneficial knowledge in your sector on impacts, you need to be able to benchmark
performance. Verification provides greater confidence in the information that is being compared in
this way and helps in developing industry norms and standards.
We are very much part of the communities in which we operate and we need to establish credibility
with our neighbours. They need to feel confident that what we say is correct.
c The general public is not a key audience. Few read corporate reports. They tend instead to take their
lead from opinion formers among the special publics, such as NGOs and journalists.
6 | 7
BEST METHODS THE FUTURE
Verification is built on the experience gained over the past decades in With this information in hand, we worked with our verifiers to focus our Because of the different levels of verification that apply across the We are now exploring ways of moving from confirming the accuracy of
verifying financial data. This model can be applied to much of our health, attention on the 12 HSE parameters that we – supported by our verifiers – environmental and social aspects of the Shell Report, we have, working data to adding further meaning for stakeholders: for example, is our
safety and environmental (HSE) information – certainly the bulk of it that believe reflect the significant HSE impacts at Group level. Those Shell with our verifiers, developed three types of verification. These are: performance good, bad or indifferent? To achieve this we will use other
can be expressed in numbers. But complexity increases dramatically as you operating units that were subject to on-site verification in 1999, and that methods of assurance, such as testimonials from experts, making
shift from financial to environment information, and then by a further can demonstrate to the verifiers that their HSE data management systems Global verification comparisons with other companies (benchmarking) and recording
order of magnitude greater as you move to social information, very little are still effective, are subject to review centrally. Other Shell companies Applies to the most important HSE data. stakeholder perceptions of our performance. This is part of our effort
of which can be expressed in simple numbers. continue to receive on-site verification of their data. Here the verifiers obtain an understanding of the systems used to
to understand how well we are performing, communicate this to others,
generate, aggregate and report these data. They assess the and to learn from those that do better.
Despite recent controversies in financial auditing, that system – which Providing assurance on social information – such as the effectiveness of completeness and accuracy of the data reported by visiting the
focuses on a single unit, the dollar – is still evolving but reasonably mature anti-bribery and anti-corruption practices – is a far less mature process. operating units (site level) to test data and systems. They perform a
and has taken a profession over a century to develop to its current state There are hundreds of potential areas that could be verified (conforming to review of all data reported and assess the appropriateness of the data
of sophistication. human rights, integrity, inclusiveness…) but few standard definitions exist trend in discussion with management. They test the calculations “We believe that our inclusive approach –
and there are neither calibrations nor formulae that can be used. Social made at Group level. For financial parameters they also check that
The financial model of verification has been successfully applied to the HSE information can be fuzzy and difficult to define. Because of the sheer they are properly derived from the audited Financial Statements. through greater transparency and a broader
field where the parameters can be mostly expressed in figures. Despite the volume and complexity, applying standard verification procedures to social interaction with a wide range of stakeholders
increased complexity – tens of different units and numerous definitions – information would be a very expensive failure. That is why we have looked Systems and process verification
verifiers have made considerable progress over a decade and are delivering instead at alternatives that can help achieve our ultimate goal: the trust of Applies to case studies and benchmarking data. – is simply good business practice in a more
useful environmental verification within the inherent limitations in the stakeholders.
accuracy of data.
The verifiers assess systems and processes and underlying evidence demanding and uncertain world.”
supporting the data and statements marked with this symbol. Their
And if it is this trust that we are after, why not ask the stakeholders for assessment includes interviewing Shell people and external experts,
their views? This is exactly what we have done. We have been looking at reviewing documentation and confirming the accurate use of data Fundamental to this approach is to focus on what is important for
“Despite recent controversies in financial how we can make use of stakeholder panels to offer advice on our derived from external sources. stakeholders. Our experience shows that while they want less information,
performance (this is working well in Canada and the Philippines), it has to address their concerns. One way of creating focus – and the
auditing, that system – which focuses on a single unit, the testimonials from independent experts who know what we do, and surveys approach we have chosen – is to develop a limited but significant set
dollar – is still evolving but reasonably mature and has to tap into people’s views. If they make a judgement of our performance Applies mostly to social and ethical data.
of key performance indicators (KPIs) in collaboration with stakeholders.
taken a profession over a century to develop to its current then their perception is our reality.
At the central level only the verifiers test the integrity and accuracy We see KPIs as the logical basis for targets and milestones and for developing
state of sophistication.” Of course there is still a role for classic verification processes because one of the aggregation of data pertaining to the Shell Business Principles.
standards of reporting and verification. Here common definitions and
This includes testing samples from a complete set of site (Operating
can check to see if management systems are working and that data from systems are in place and data are verified and reported regularly. Efforts
Units) returns. No site visits are made by the verifiers and no
such systems are reliable. So far, for example, we have verified the central since 1999 to test the practicality of the other 11 have led us to conclude
verification is made of the reliability of the data at site level.
consolidation of social data (has it been added up correctly, how many that these fall into two basic groups. The first includes those whose
In 1996 we started verifying our environmental data in the upstream returns?). We have also made progress in developing with a broad group measurement can be largely and meaningfully achieved by survey and
business and extended this to the rest of the Group in 1997 and 1998, of stakeholders a set of key performance indicators (KPIs) that will form a We have adopted this multi-level approach to acknowledge the differences the results from local or other levels can be aggregated (reputation, brand
when we commissioned the most extensive verification ever undertaken basis for reporting and verification in the future. We also published an in the nature of the information and to demonstrate to our stakeholders performance, acceptability of environmental performance, integrity, staff
by a multinational. This involved the verification of 25 parameters and independent view of the effectiveness of our Business Principles letters of that we are being open and honest. We did not want to publish bland feelings on how they are treated with respect, and diversity and inclusiveness
visits to 40 operating units around the world. The rigour of the verification assurance process, undertaken by the US-based Ethics Resource Center. statements normally associated with verification and we use the symbols in the workplace).
gave the verifiers, and us, a better understanding of the quality of our to help communicate better.
underlying systems and processes. The second set contains those that can best be developed by a ‘learning-by-
doing’ approach for corporate reporting, focused on a particular ‘hot spot’
or case study. Examples include: stakeholder perception of the quality
of engagement, social performance and acceptability of environmental
performance at local level. Pilot studies are continuing to develop tools
and approaches in a range of operational and cultural contexts.
Each study involves external experts and extensive consultation with
local communities and other stakeholders to seek their view of Shell’s
performance, identify areas for improvement and agree local performance
indicators. We have growing confidence in this new model of assurance
where classical verification is complemented by independent expert
appraisal and stakeholder perception of social performance. Data from
this approach at different locations cannot be aggregated meaningfully.
We advocate reporting performance at the corporate level on a hot spot
or case study basis, aligned to international stakeholder interest and local
“…complexity increases dramatically as We still have a long way to go, but we feel confident that we are making
progress towards our goal of improving stakeholder trust in our actions.
you shift from financial to environment We believe that our inclusive approach – through greater transparency and
a broader interaction with a wide range of stakeholders – is simply good
business practice in a more demanding and uncertain world. If you
information, and then by a further order understand and respond to the expectations of society – and make this part
of your everyday business – there is less need to attach a formal verification
process at the end. This is because trust is established along the way.
of magnitude greater as you move to social
information, very little of which can be
expressed in simple numbers.” 8 | 9
l by Andy Brown
Andy Brown is an independent investor. Until April 2002, he was a
Managing Director of Morgan Stanley Investment Management. j £ 50 50
oxymoron n .,
an epigrammatic effect, by
which contradictory terms
are used in conjunction.
“If you invest
The £1,000 in a new issue
of gilts, you are putting
world of the socially responsible investor
your capital to work
in support of a
routinely pollutes the
uses and sells arms;
power; and sponsors a
Investing is the outlay of capital in exchange for expected income and/or profit.
‘Socially responsible’ investing is investing while steering clear of activities deemed
objectionable by people who pronounce on such matters. Assuming you listen to the
right pronouncements, ‘socially responsible’ investing should be a relatively
ut I’m not so sure it is. It seems to me that virtually any financial If we can’t run a responsible gilt portfolio, what hope can we have when If you answered ‘A’ to any of the questions, you may find a kindred spirit
B asset could be deemed to violate at least somebody’s notion of what
constitutes socially responsible behaviour. That would make ‘socially
responsible investing’ an oxymoron.
The contradiction begins with government securities, known in Britain as
it comes to investing in equities? As anybody who has had anything
more than an academic involvement in the corporate sector knows, the
purpose of companies is to pursue their corporate self-interest, rather than
some notion of the public interest, and any chairman or chief executive
who tells you otherwise either is pulling your leg or has lost the plot.
in Morley Fund Management, a socially responsible investor that purports
to rank the companies in the FTSE 100 Index according to what it calls
‘Business Sustainability’. Companies are graded from A to E, with the A list
seen as providing a “sustainability solution to major environmental or social
issues,” and E companies regarded as “fundamentally incompatible with
gilts. Gilts are prized for their government-guaranteed certainty of being Try taking this simple Social Responsibility Quiz: sustainable development”. Morley aims to ‘engage’ with management and
re-paid, with interest. Gilts form the cornerstone of most long-term encourage companies to improve their sustainability ratings. Morley’s own
investment portfolios. In the investment world, gilts are viewed as the Which group is more responsible for atmospheric pollution? ‘Sustainable Future Funds’ cannot hold shares in companies rated D or E.
‘risk free’ benchmark against which all other investments should be judged. A Oil companies
B Motorists Unsurprisingly, companies receiving a D or E from Morley are in businesses
My problem is this: if you invest £1,000 in a new issue of gilts, you are like oil and gas, power generation, mining, building materials, alcoholic
Which group is more responsible for lung disease?
putting your capital to work in support of a government that routinely A Tobacco companies
beverages, weapons, and tobacco. To improve their sustainability ratings,
pollutes the environment; procures, uses and sells arms; promotes nuclear B Smokers Morley presumably urges such companies to abandon their ‘unsustainable’
power; and sponsors a state lottery. activities and acquire or develop businesses characteristic of companies
Which group is more responsible for gambling? earning an A, B, or C grade – typically drugs, telecommunications, financial
You might prefer to think that your £1,000 was contributing expressly to A Casino operators services, media, food or retailing.
such worthy expenditures as hospitals or schools. But you’d be wrong.
Money is fungible, as the economists say. Your £1,000 is interchangeable Perhaps Morley and its ilk in the social responsibility industry will succeed.
with all other monies raised by the government. Once you have purchased If, like me, you chose answer ‘B’ to each question, you probably agree with Perhaps companies will dutifully work their way onto the buy list of Morley’s
your gilt, your £1,000 cannot be traced to any specific government my notion that companies would not provide products or services frowned ‘Sustainable Future Funds,’ thereby transforming the FTSE 100 into a
expenditure, but to all government expenditures, ‘responsible’ upon by the social responsibility lobby if there were not a great deal of Potemkin village for socially responsible investors. That wouldn’t mean there
(kindergartens) as well as ‘irresponsible’ (nuclear submarines). consumer demand for such products and services. For some (perhaps would be any fewer socially irresponsible businesses in the world; there just
primordial) reason or reasons, the personal mobility afforded by the car or would be fewer FTSE 100 companies with the stomach for owning such
Socially speaking, are gilts responsible or irresponsible investments? That motorbike, the paradoxically stimulating and relaxing effects of smoking businesses.
depends on where you draw the line. As a professional investor (but only and the thrill of betting hold a powerful attraction for many human beings.
an amateur moralist), I do not presume to draw that line in my investing To disabuse people of such urges requires altering the very course of What possibly could be the purpose of such an approach to investing? Is
activities. But an ideologically rigorous do-gooder could and should exclude human nature, either through proselytism, or legislative fiat – or both, it to change the world? Or is it to make socially responsible investors feel
gilts from what he or she considered to be a responsible portfolio. as in America’s disastrous experiment with Prohibition in the 1920s. good, if not morally superior? If the former, then it’s ineffectual. If the
latter, then let’s be clear about it.
10 | 11