Anyone in a large international company tasked with reporting on environmental, safety, health, sustainability, corporate responsibility, or whatever other related performance you might be reporting on, knows just how difficult this can be.  While it is true that more companies are reporting, the increased visibility doesn’t mean more resources are being allocated to do it that the task has gotten any easier.  In general, top executives want the kudos and the good public reputation that comes with consistent reporting and high-ranking by any of the dozen or more active rating organizations that have sprung up over the past decade.  While I think some people collecting these data and putting it into a coherent report see the possibilities to use company performance to spur action and innovation within companies, these people are generally not respected or appreciated, and the data is not capitalized upon by executive leadership.  Reporting is seen as a communications exercise and the underlying data is not used to change business practices.

I was interested to see a recent post by Kate Schrank of Sustainability Partners on the Global Reporting Initiative’s (GRI) G4 initiative.  I thought the post summed up what many in industry have said since the inception of CERES and the implementation of the first iterations of the GRI – “Don’t ask for Too Much at Once.”  I remember attending an early GRI summit in the late 1990’s with a colleague from DuPont where we were one of a very few industrial representatives in a sea of NGO’s, independent parties, and governmental or international agencies.   My impressions then were pretty much what Kate has found by polling companies about the G4 Initiative.  From an industrial perspective, my perception has always been that people who don’t work in industry absolutely don’t trust industry.  So the philosophy is that if industry can be forced into reporting on a whole range of business practices, then the trust level will increase.  The interesting thing to me is that despite more widespread and more comprehensive sustainability reporting, I don’t see that trust is increasing.  But, I do see that the pressure to report more and more is increasing.

Having said that, I don’t see the lack of trust changing all that much, no matter how much is reported, how comprehensively data is reported and how much of the reporting is validated by “independent” third parties.  Let’s take the case of financial reporting as an analogy.  Despite a tremendous amount of detailed financial accounting and reporting, despite auditing of these data by “independent” third parties, and despite all the rules and regulations (e.g., Sarbanes-Oxley), we still had Enron (pre-S-O), we still had the major real estate junk bond scandal that led to the current recession and worldwide debt crisis (post-S-O.) and we continue to have revelations that some banks and investment firms are playing fast and loose with other people’s money leading to the loss of 2, no 4, no…billion dollars. 

It’s also interesting on another level, for as complex as financial reporting has become, reporting through the supply chain is infinitely more complex.  I don’t think people working outside of procurement functions generally appreciate the complexity of supply chains, but it is not unusual for some companies to have tens of thousands of first-tier suppliers.  Think about that for a moment.  It is difficult enough in large companies to negotiate consistent pricing (say for fasteners, or office paper, or computers) from a single supplier or maybe two or three suppliers, across multiple internal lines of businesses, geographic locations, etc.   And the desire is to have detailed, comprehensive, contextual reporting on a range of sustainability issues.   As Kate pointed out, the struggle to comply with the Dodd-Frank act and the requirement to report on conflict minerals has proven to be a monumental task, and that’s just one issue of many.

My position is that companies need to report on what is material to the company, and frankly, not everything that people outside of a particular company may want to have reported is material to that company.  I also think that most companies do not understand what is truly material to their sustainability, and I’ve written about that in earlier posts.  I also know that a majority of people do not understand risk and get caught up dwelling obsessively on hazard when that is not terribly helpful.  To the extent that reporting can help make visible the true sustainablity risks and opportunities, I think it is a useful and important undertaking.  Unfortunately, we have a way to go before this is the case.

As always, let me know what you think.