A material world

Reporting what really matters

As BT launches its radical new look society and environment report, BTs head of sustainable development and corporate accountability, Dr. Chris Tuppen reveals why, in the pursuit of transparent reporting, business faces a dilemma

The annual CSR (corporate social responsibility) report has become a key publication for any responsible business wanting to share its performance on key social and environmental metrics with its stakeholders.

But every year the issues covered by the term CSR grows, so too, the number of indicators people expect companies to report against expands. Yet every year reporting 'experts' tell us to make sustainability reporting more focussed and better linked to company strategy. Therein lies our dilemma.

The challenge is to find a reporting approach that provides the comprehensive data some stakeholders require, while still being able to show what's really important to the success of the business. Not overwhelming the reader with the sheer volume of information is also a key consideration.

This is why, at least in sustainability reporting circles, the one word on everybodys lips at the moment is materiality.

Yet while everybody seems to be talking about it, its definition is very foggy. And if its definition is foggy, then guidance on its practical determination is positively opaque. Perhaps this is why a number of companies have gone it alone and have started to develop their own approach notably BP, Ford and BT.

So how does an organisation decide whats material and whats not? In my view, the determination of materiality in the context of corporate sustainability reporting must be a combination of both relevance and significance, and of company and stakeholder priorities. A materiality determination process should therefore identify those issues that are most important to both the company and its stakeholders.

Our materiality process starts with a mixture of relevant issues including:

• Those covered in our existing sustainability report

• The GRI indicators

• Sector specific indicators including those used by our peers

• Emerging CSR topics

• Topical media coverage

Determining levels of materiality then requires some form of quantification. This generally involves mapping perspectives external to the company against those internal to the company.

This approach guided our thinking in BT for producing our new 2006 social and environmental report. Work began back in August 2005 with the identification of numerous key issues:

For each issue we asked four questions:

• Does BT have a policy on this issue?

• What is the financial impact of the issue on BT?

• Are stakeholders interested in this issue?

• Is there societal interest in this issue?

A materiality model was produced and used to engage people across the company in a dialogue on what was most important to them - from a process control (policy) perspective and in terms of the level of financial impact the matter has (or might have) on BT.

Stakeholder and societal interest levels were also input into the model. Stakeholder interest was assessed through research with customers, employees, and suppliers. We asked them what are the most important social and environmental issues that a company such as BT should be taking action on? We also analysed parliamentary questions and investor questionnaires.

We determined levels of societal interest through an extensive media review covering seven countries - weighted according to our level of activity in different parts of the world.

As a result, our 2006 sustainability report looks very different to previous years. Our printed overview report covers BTs most material social and environmental issues those that have been identified as the most relevant and significant to BT and its stakeholders. Our online report, which includes a searchable database, is where people can find all the comprehensive data on our performance. It covers the issues in our printed report as well as those identified as less important but still material to BT. Some indicators have been dropped altogether.

There have been other benefits too. The way in which the report is created has also changed, saving time and money. The endless paper chain involved with the submission, editing and verification of the report has been replaced by an online management system.

We believe that our new approach offers clearer, more straightforward reporting that gets to the heart of what really matters. It achieves this through better prioritisation of CSR issues, improved links between CSR activites and company strategy and useful engagement with internal and external stakeholders.

Im convinced that this approach to reporting will mark the end of the massive printed tome which tried so desperately to give a voice to every stakeholder no matter how tenuous their relationship with the business. No more paper given over to every indicator ever postulated. Rather, tightly focussed reports highlighting key performance indicators and clearly indicating how CSR is interlinked with the companys commercial success.

The future of sustainability reporting lies here.