26/04/2016

CSR: Sorting the measurability muddle

BY Duncan Haslam

Corporate social responsibility goes by many names and anyone who has anything to do with it would admit that the naming is only the start of the confusion. Companies are all telling their CSR stories differently, many are unsure which reporting trend to follow next.

The fact is, not everyone is in a position to report their CSR in such a way as to become the next Unilever, with its award winning, renowned CSR regime. But neither should they believe that they can opt out of the responsibility of communicating CSR well. Because it really matters to employees, investors, the public and the government.

We’ve been taking a close look at what’s going on and there is a discernible disconnect between what UK law demands to be reported about corporate social responsibility in the strategic report, and how companies are actually reporting. Too few firms are making clear links between CSR and how it is integral to their business model.

For companies to bridge this disconnect, they must understand that UK company law requires the directors to promote the success of the company. If looking at long term or future success, then the consideration of CSR issues is pivotal for companies, as they will eventually lead to internal financial and wider social impacts.

We have looked at a representative sample of 50 FTSE 100 and 250 annual reports and found that businesses aren’t providing CSR information that brings a meaningful understanding to their value proposition or offer to the marketplace. Companies are simply not providing measurable outcomes on CSR issues, since such information needs to be supported by relevant evidence – both quantitative and qualitative to make it worthwhile. Why isn’t this happening?

There is a distinct lack of standardisation in measurement methods (though no shortage of frameworks to rely on). For instance, on an issue as important as health and safely we noticed companies from the oil and gas sector were providing completely different measures for recording health and safety incidents such as…

  • One company reported these incidents through its recordable injury frequency rate, which registered safety breaches and looked at injuries per 200,000 hours worked, not including minor injuries.
  •  Another company measured health and safety incidents through the number of man-hours without loss of working hours (in millions).

These different methods make it difficult for investors to interpret such information on an industry specific level.

And this measurability muddle is apparent throughout the reporting of other CSR issues too. Gather has identified three areas where organisations can start to sort things out quickly and effectively.

In employee relations, most companies do not provide figures that can help investors realise effectiveness in maintaining employee retention. Only 7 companies provide retention figures in relation to their total workforce. We suggest that providing figures is absolutely necessary for all companies as a way for investors to measure industry specific or wider market employee retention performance.

On anti-bribery and corruption disclosures, most companies fail to state on a numerical basis whether any whistleblowing cases or corruption cases have occurred. Only six companies provide such information.

On water management, we looked at industries where water usage and wastage are significantly related to a company’s business model and found again that companies fail to provide standardised and measurable figures on an industry specific and wider basis. We recommend that companies should provide quantitative, not percentage figures as to levels of water wastage and usage. We also think that companies should explain their methodology behind this.

One company for instance looks at how since 2012 it has reduced it’s water footprint by 2% since 2010. It provides no details as to how this information was gathered, and no absolute numbers. Therefore how can this be compared against another firm which states that it has reduced water consumption by 22% against a 2009 baseline year and also provides no absolute numbers.

In a world where everyone can see everything and compare everything online, providing constituent CSR and behavioural evidence in a way that stands up to scrutiny, especially when compared to others is not just a nice to have. It is essential part of differentiation in a crowded market and of building trust between organisations and their stakeholders.

For further examples of how to sort out the measurability muddle and for case studies of companies who are doing it well and to best practice standards, please read our white paper.

To find out more about the implications of this paper for you, please contact mario@gather.london.