Transparent Sustainability Reporting

• Author: William R. Blackburn
• Pages: 309-371

Chapter 10

Transparent Sustainability Reporting

“Sunlight is said to be the best of disinfectants.”1

—Justice Louis D. Brandeis

Reasons for Transparent Reporting

Primary school students understand performance reports. Even at that

young age, they see clearly the relationship between these reports and ac-

countability. Mothers and fathers beam with pride when good scores ap-

pear on their child’sreport card from school. Extra money, treats, or other

rewards may result. On the other hand, a report showing poor perfor-

mance can prompt great displeasure in the household, causing parents to

cut their child’s valued play time and liberties to make room for extra

study. To teachers, these reports are a critical tool for improving scholas-

tic results. They know that shining a light on performance can produce

the heat of accountability which heightens the likelihood of construc-

tive change.

Driving Constructive Change

The idea that “light brings heat brings change” applies to a company’s

sustainability performance as well. The light of internal and external re-

porting on performance helps drive internal change in several ways.

First, it forces a company to identify its sustainability issues and assess

the gaps. By communicating the gaps internally, company sustainability

leaders can show managers and employees what needs to be done and

rally broad support for action. In this regard, the sustainability report

serves as part of the “check” in the plan-do-check-act process that is pop-

ular with quality and environmental management professionals. As an

essential element of the SOS, reporting helps a company realize the bene-

fits of an SOS discussed in Chapter 3.

Change is also affected by sustainability reports through bench-

marking and positive encouragement. The report and the process of gath-

ering data for it can surface those groups that are delivering superior per-

formance. Moreover, reporting can help pinpoint what was done to

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achieve these good results, presenting the path for success to others

inside and outside the organization who are eager for similar results

and acclaim.

Finally,sustainability reports spur change because they invite scrutiny

and reaction to performance by stakeholders from whom a company

needs support. Like students who don’t want to disappoint their parents,

companies are often willing to extend extra effort to keep employees,

customers, and investors satisfied and to avoid the wrath of the all-too-

critical public. Business-unit managers know that both the CEO and im-

portant stakeholders may read the report, and they don’t want to let them

down. Rather, most managers are eager to show they can run all aspects

of their business just as good as, if not better than, their peers. Their egos

and competitive nature are powerful forces which can be stimulated by a

candid sustainability report.

But it’s not just the executive ranks that can be influenced by these re-

ports. Workers at all levels take pride when they see the name of their

company, division, or facility linked with successful, socially responsi-

ble performance. Moreover,they tend to work even harder when they

realize their efforts are being applauded in this way. This enthusiasm

for action can be best channeled for enhanced performance if the re-

port is balanced, providing acclaim when warranted but also openly dis-

cussing specific opportunities for improvement. The trick is to develop a

report—or a complementary collection of internal and external re-

ports—which best stimulates all these forces for constructive change.

Building Stakeholder Trust Through Transparency

Besides driving internal change, another reason to report on sustain-

ability performance is to build trust and credibility with key stake-

holders. As we saw in Figure 3.11, a trusting relationship is essential for

building good support among those stakeholders—the employees, cus-

tomers, suppliers, investors, and communities—that determine a com-

pany’s success. Unfortunately, much is wanting in this regard: only one-

third or less of the respondents in several public surveys said they

thought companies were trustworthy.2To gain trust, a company must

demonstrate transparency, that is, openness, honesty, and enlightened

self-criticism. A sustainability report is a good place to start.

Writers who seek to be transparent must be mindful of not only what

goes in their reports, but what is left out. A publication of only positive

310 THE SUSTAINABILITY HANDBOOK

stories will do more harm than good. The public knows that business life

is filled with ups and downs, and that a glossy report of great achieve-

ments reveals only part of the picture. Moreover, such a report invites un-

comfortable questions: Is the company undertaking a cover-up of actions

that have or will harm key stakeholders or are otherwise embarrassing?

Does the company’s culture discourage employees from speaking out

about weaknesses and failures? Is communication so poor that company

officials simply don’t have a clue about the problems that exist? Trans-

parency is more than just telling the truth; it is truthfully telling the whole

story before others tell it. It is about talking with stakeholders to under-

stand their concerns and then responding to them candidly with complete

and accurate information.

The most embarrassing or unpleasant issues are often the most impor-

tant issues to discuss. Certainly that’s the message from a 2003 survey of

56 NGOs, where nearly 4 out of 5 respondents said that sustainability re-

ports were “very” or “fairly” useful, but less than one-half considered

them believable. The most effective way to improve the credibility of re-

ports, according to the survey, is to acknowledge noncompliance, poor

performance, and significant problems.3This information may include

some executive impropriety, a product quality problem, an unpopular

lobbying position, or some union activity.If the situation smells bad or is

widely covered by the media, then it is probably ripe for disclosure un-

less, of course, the information is proprietary.Indeed, a legal review is es-

sential before releasing any sensitive information. Unfortunately, all too

often companies are overly cautious about disclosure only to find their

reputations and stakeholder relationships suffer when the information is

later revealed.

To avoid suspicion, a company should produce a report that identifies

not only significant achievements, but the weaknesses in its performance

and the steps it will take to address them. Data must be presented fairly,

not with distorted graphs or metrics. The information must be reliable

and communicated in a timely manner. Whatever is stated in a sustain-

ability report must be consistent with what is said in the company’sfinan-

cial reports and elsewhere. Report writers must exercise particular care

in this regard. Toassure conformance with securities regulations, writers

should use virtually the same language in the sustainability report as used

in the financial report to discuss potential environmental liabilities and

other sensitive financial issues. A few reporters go so far as to include in

TRANSPARENT SUSTAINABILITY REPORTING 311