Majority Report: The new age of corporate transparency

Last year BT cut the number of days lost because of sickness by 12%. It also increased the amount of waste recycled by more than a third. But the company just missed its target for customer satisfaction.

Fascinating nuggets like these are revealed in BTs social and environmental report: Lets make a better world, recently published on the Betterworld website.

This is the fifth year the company has produced a report on how it affects people and the environment, but its environmental disclosure goes back to 1992. BT has picked up many prizes over the years, including being judged the best web-based reporter last year in the reporting Oscars from the Chartered Association of Certified Accountants (ACCA).

Reporting on social and environmental issues has now become the norm all over Europe, and increasingly in the US and Asia-Pacific. The trend is spreading from multinationals to smaller companies and other organisations such as charities. Special toolkits have been developed to make reporting easy for such organisations, which do not have the resources of a company like BT.

But nobody has to report. Opening up about relations with employees, customers and others is entirely voluntary and that is not good enough for some campaigners.

Deborah Doane is chair of a coalition of charities and campaigners on corporate responsibility, known as the CORE Coalition (it includes organisations such as the Womens Institute as well as the likes of Amnesty International and Friends of the Earth). She says reporting doesnt work if companies can choose what to report on, because it is impossible to make comparisons.

The problem is we are still finding it extremely difficult to compare between companies, let alone between sectors, she says. If we are ever to get to a proper level of scrutiny, reporting has to be mandatory, setting out what we expect companies to report and manage, and how we value them accordingly.

Comparability is being tackled by the Global Reporting Initiative (GRI), a UN-backed organisation which involves companies and other organisations and has developed reporting guidelines. The guidelines suggest reporting against a set of key indicators which should be common across the board, with extra reporting relevant to a particular sector or company. They cover areas such as labour and human rights, and environmental impacts. GRI is working on sectoral guidance and published a special handbook for smaller companies last year.

BT reports in accordance with the GRI guidelines, but many companies do not, which fuels the critics arguments. CORE has tabled several Bills which would require companies to produce reports, but the government has not been sympathetic. Ministers have argued that compulsion could backfire by leading companies to report the minimum necessary in a formalised boilerplate fashion which helps nobody.

Despite that, a form of mandatory social and environmental reporting is about to hit Britains quoted companies. From next year, conventional annual reports will have to include an Operating and Financial Review (OFR) which will give a broad review of prospects. Its coverage will include employee, environmental and social issues but only so far as they are important for shareholders.

Chris Tuppen, who has been responsible for BTs reporting since the start, says companies need to go further than that and address other stakeholders in the kind of broad report BT produces. There is a huge need to do it people expect companies to do it, he says.

Socially responsible investors (who manage funds on the basis of corporate responsibility) are the most obvious audience, and tend to be the most interested in what BT has to say. A good report can answer many of the queries which they otherwise inundate companies with. But responsibility reporting matters to other people too. For example, last year 30% of BT graduates said the companys reputation for social responsibility influenced their decision to join. BTs customer research has also found that responsibility is important in shaping what customers think of the company.

Chris stresses that reporting should not be an end in itself. The point is to improve performance, and he doesnt believe that making companies report on prescribed social and environmental subjects will necessarily make them do things better. It seems to me that if companies arent inclined to address these issues as being integral to their business, then we would be unlikely to see mandatory reporting have much effect. You have to have a belief in why you take action.

Its an important point. Companies actually need to do things differently, not just report on business-as-usual.

In some cases, though, the need to produce a report can drive change. It can push managers to focus on areas which may have been neglected. For example, having to report diversity statistics focuses attention on the issue. That can drive action to dismantle barriers to progress for women, people with disabilities or from ethnic minorities.

There is little point reporting if readers dont believe what is published, or if it doesnt cover key issues credibly. That is what critics describe as greenwash a whitewash in the environmental and social arena. BT tries to avoid such accusations by following an independent reporting standard, by having independent scrutiny of their report, and a panel of eminent reviewers.

Jonathon Porritt, the environmentalist who is now chair of the governments Sustainable Development Commission, is one member of BTs Review Panel.

Chris Tuppen says that people with that kind of experience and prestige help to make sure reporting is balanced and therefore believable. Its important to make sure a report is presented and communicated in a balanced way, as well as being prepared objectively. Our leadership panel ask awkward questions and they are influential.

Chris has also seen how this works from the other side, because he sat as an independent expert on Nikes Report Review Committee. Ive seen from the inside how influential it can be, he says. In their recent report Nike took the courageous step of disclosing full details of their supply base.

The ACCA judges who praised BT last year said the independent review particularly impressed them. And Nikes report has been widely praised, with the Financial Times saying it was ushering in a new age of transparency. The critics might argue that we need a new age of comparability, but reporting is moving ahead even without compulsion.

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