Corporate responsibility reporting gains traction

Corporate responsibility reporting hit an all-time high in 2011. Once seen as fulfilling a moral obligation to society, the so-called triple-bottom-line approach to reporting is now considered a business imperative by the world’s largest companies. According to a study by KPMG, corporate responsibility reporting is increasingly providing financial value and driving innovation.

The KPMG study shows that 95% of the Global Fortune 250 (G250) report sustainability performance. That’s up from 80% in 2008. The research also found that the majority (69%) of the top 100 publicly traded companies in the 34 countries surveyed produce sustainability reports. The survey analyzed 3,400 companies worldwide in 15 industry sectors.

North American companies just scratching the surface

North American growth rates in CR reporting rose overall on the back of impressive gains by Mexico, where 66% of companies now report, versus just 17% in 2008. And while US and Canadian companies continue to close the gap, they enjoyed less impressive growth rates overall, 13% and 28% respectively. Companies in those countries are considered by KPMG to be only “scratching the surface” when it comes to the quality of communication and level of CR process maturity.

CR reporting in the pharmaceutical, construction and automotive industries grew by 39, 33 and 29 percentage points, respectively, since 2008. However, overall numbers in some sectors continue to lag stubbornly behind: just 51% of mining and 46% of utility companies. Surprisingly, the transportation industry, which has made great strides in incorporating low emission policies into its business, lagged behind, with only 57% of companies reporting CR activities.

Reputational considerations driving CR reporting

Reputational and brand considerations continue to drive CR reporting among G250 companies, topping the list of business drivers at 67%. Ethical considerations also remained high on the list at 58%.

Almost half of G250 companies report gaining financial value from their CR initiatives. That value overwhelmingly comes from two sources: direct cost savings and enhanced reputation in the market.

Integrating CR with traditional reporting

CR reporting is entering a new phase, moving from a pioneering and experimental practice toward standard practice. Still, the disclosure of sustainability metrics is largely unregulated, although it continues to evolve.

Leading companies often combine CR and financial reporting by integrating the two into the annual report. KPMG sees this as a stepping stone in building a holistic understanding of how CR impacts the business. The greater value, however, will be gained when both sets of information are treated as part of a company’s comprehensive business performance reporting, both to management and external stakeholders.

“Organizational transparency worldwide is improving – the practice of sustainability reporting is growing fast,” said Ernst Ligteringen, Chief Executive of the Global Reporting Initiative. “Anecdotal evidence also shows that the quality of sustainability reporting improves as companies gain experience, including the integration of the practice into the core management and governance of the business.”

The majority of companies surveyed – 80% of the G250 – now follow GRI reporting standards.

The International Integrated Reporting Committee (IIRC), meanwhile, has brought together leaders from the corporate, investment, accounting, securities and other sectors to explore new methods of CR reporting. An IIRC sponsored pilot program is underway to test various approaches to integrated reporting.

5 reasons to adopt CR reporting

Among companies that have adopted CR reporting, the five most important reasons are:

• provide transparency on risks, opportunities, performance and impacts to a range of stakeholders
• engage with and establish trust with stakeholders
• manage reputation
• improve their own performance

If you’re considering integrating sustainability reporting into your annual report, you must provide strategic focus and relevant, meaningful information. Remember, though, providing more information won’t necessarily make the report better. A short, easy-to-understand report will tell a far more compelling and memorable story.