The art of keeping up appearances

Reports into companies' corporate responsibility used to be a triumph of style over substance. But, as Kate Nicholas reports, the PR gloss is substituted by a welcome candour

Summer is in the air and the business community is in confessional mode. Trinity Mirror, BP, GSK, Schroders, BAe Systems and EMI Group are just a handful of the scores of companies to have published reports into their social and environmental records. And during the current reporting period we can expect to see up to 150 companies distributing these fashionable "corporate responsibility reports".

Summer is in the air and the business community is in confessional mode. Trinity Mirror, BP, GSK, Schroders, BAe Systems and EMI Group are just a handful of the scores of companies to have published reports into their social and environmental records. And during the current reporting period we can expect to see up to 150 companies distributing these fashionable "corporate responsibility reports".

Ten years ago only a few boards felt confident enough about their standing on issues such as human rights and the environment to commit them to paper. But today 123 of the FTSE 250 produce some kind of CR report. This rush to disclosure has in turn spawned a whole new industry - from CR consultants to CR awards schemes and a dedicated CR department.

However, the whole concept of CR reporting was greeted with some scepticism. Many of the early efforts were high on production values and low on substance, focusing on charity or "community initiatives" of little relevance. Little attention was paid to addressing key issues about how a company's processes, products and services impact on the environment, the communities in which they operate, suppliers in the Third World and, of course, consumers.

Not surprisingly the media had a field day. As recently as 2004 a survey of media coverage by Echo Research found that journalists dismissed a majority of these reports as "self-congratulatory" and full of "unsupported statements and claims, a triumph of style over substance and selective reporting".

NGOs also remain unsure about their value. Greenpeace campaigns director Blake Lee Harwood says: "Some of them are constructed in good faith as management tools to create internal change, but others seem more designed to project a public image. Others are just weirdly tangential - such as Philip Morris sponsoring TV advertising against domestic violence, which has become a component of their CR. What is all that about?"

The dismissal of these reports as "PR fig leaves" has been widespread. Even the DTI's former minister for corporate social responsibility, Stephen Timms, has warned companies to keep CR policies and reports well away from the PR department in case their pure intentions should be tainted by spin. Which all seems rather unfair on PROs caught between the pressure to be transparent and the unwillingness of boards to sanction the overhaul of polluting plants or unethical use of Third World labour.

Certain companies are ahead of the game. Shell was one of the first to invest in social reporting and its reports are repeatedly held up as examples of best practice. And Co-operative Financial Services scooped last year's Association of Chartered Certified Accountants (ACCA) Award for best sustainability reporting. It also emerged as the top global reporter in the latest survey of social reporting by SustainAbility and the UN Environmental Programme.

Other companies to get a pat on the back include Novo Nordis, BP, British American Tobacco, BAA, Rabobank, Rio Tinto and, of course, Shell. And after three years' silence Nike has recently confounded its critics by publishing a disarmingly candid report that includes full details of its supply chain and the admission that a quarter of its factories are still not meeting minimum standards.

But why the sudden rush to transparency? Patrick Mallon, director for benchmarking and reporting at Business in the Community, puts it down to nothing less than a wholesale rethinking of the purpose of corporate existence. "A lot of companies have mission and vision statements and have realised it isn't just about making money," he says. "Of course, they are there for wealth creation but it is about how they create wealth and what that means to the people who work for companies and other parties."

Company ethics certainly seem to matter to the consumer. About a third of respondents to Mori's most recent corporate responsibility study said that a company's social responsibility affected their purchasing decisions. Seven out of 10 said that they didn't think industry and commerce paid enough attention to their social responsibilities. Three quarters wanted to hear about companies discharging their responsibilities to customers, employees and the environment.

There also now around £4bn of socially responsible screened assets under management - a drop in the ocean compared with mainstream funds but even these fund managers are now becoming interested in CR reports. "It used to be so difficult to get information, but most large companies in the UK are now making a pretty good stab at these reports which makes it so much easier to evaluate companies on these issues," says Dr Craig MacKenzie, head of investor responsibility at Insight Investment. "And now we are getting several reports in the same sector we can make comparison and benchmark companies against each other which enables us to encourage the laggards to catch up with the leaders. It's very positive."

And the rush to report is only likely to increase. The DTI and the EU multi-stakeholder forum on CR keep on making encouraging noises but so far have shied away from making these reports mandatory. But the operating and financial review (OFR) which came into force this month does require companies to assess potentially expensive risks to their reputation as part of its usual annual reporting. As a result, companies will inevitably have to take a long hard look at their environmental and human rights records, and if they like what they see may well decide to go down the route of producing a separate CR report.

Technical purists in the CR arena are delighted that the OFR will effectively take the issue of social reporting out of the hands of corporate communicators and PROs and into that of auditors. Quite rightly they believe that CR should be about building standards as opposed to a marketing tool. But the net result may also be that the much derided but relatively accessible glossy brochures may give way to a tick box mentality, whereby companies meet minimum requirements with the kind of dry unintelligible statistical analysis that is only likely to gather dust.

Such a result would be a considerable setback for corporate accountability. CR reports may be a mixed bag, but they are improving and the fact that they have currently have an audience has forced real change. If they become so dry that they are left unread, the momentum for change will be lost. Perhaps the involvement of PRs isn't such a bad thing after all.

Kate Nicholas is associate publisher of 'PRWeek'