Since I worked on my first sustainability report, back in 2001 (we called it a "CSR brochure"), I have spent a truly disturbing amount of time annoying my colleagues with comments like, "Could you believe they didn’t even include a year-on-year comparison of the specific CO2 emissions?" and "But the demographic breakdown isn’t disclosed on a site basis!"
But at the same time, if you ask me to introduce you to a single person who has really read a sustainability report from cover to cover, I fall silent.
I tell jokes: "Who wants to work on the report this year? Don’t all volunteer at once!" and "50% of communications professionals hate producing these reports, and the other half are lying."
Speaking of which, I keep news clippings pinned to my wall with headlines like, "Lies, damned lies, and sustainability reports(1)" and "Howlers and omissions exposed in world of corporate social responsibility"(2).
So why, then, have I spent so much of my professional life producing these things?
Sustainability reporting is implausibly ubiquitous
It seems that at least I’m in good company – has there ever been something so universally groan-producing, yet so universal, as annual reports? According to GRI(3), 6,675 organizations published 20,503 reports as of 2013(4). All told, around 72% of the S&P Index published a formal sustainability report in 2013. And the number is going up. Take carbon reporting alone: the number of companies reporting to the Carbon Disclosure Project increased tenfold in its first seven years (from 350 in 2003 to 3,050 in 2010)(5).
BMT Asia Pacific, a consultancy, put together a good summary of the traditional drivers for reporting, outlining four main influences. First, some companies report because clients are looking for transparency, accountability, and good governance. Second, some companies report because in a competitive environment, they want to show their distinctiveness in products or services, continuous improvement, or to benchmark. Third, some companies report because the government makes it a mandatory requirement. Fourth, many companies report as part of their community relations programs, to show they are a responsible company.
But these traditional drivers are changing with the landscape, just as the motivation for incorporating sustainability into the business model has changed over the years.
No one gets credit for complying with the (de facto) law
In short, sustainability has been moving from something "different from business", to "part of business" to "business". From the 1960s until the1980s, stricter regulations were the main reason for companies to become more sustainable. In the 1990s, cost savings drove climate protection, resource conservation as well as efforts to reduce emissions. In the past decade, corporate sustainability expanded to encompass social responsibility, leading to the commonly accepted definition – "A development is sustainable, if it meets the needs of the present without compromising the ability of future generations to meet their own needs."(6)
Therefore the challenge today is to deeply engrain sustainability into business operations and portfolio management. Companies are starting to explore the dimension of value creation through sustainability along the whole value chain, and, more and more, to drive sustainable solutions through innovation.
In this context, if we put reporting into the typical sustainability pyramid, we see that at the bottom of the pyramid lies "Reducing risk", and that’s where reporting has been stuck for the past decade: as legal or listing requirement, or as a de facto "report or explain" defense against activist non-governmental organizations. Along with increasing numbers of exchanges that require reporting – in the past three years Shanghai, Hong Kong, Mumbai, and others have begun requiring or recommending it – some form of sustainability reporting is necessary if a company doesn’t want to face trial by public opinion.
However, if it is going to be more useful than basic compliance with a de facto law, reporting has to move to the top of the pyramid: "creating value" – in other words, reporting needs to become a differentiator for the business.
BASF’s reporting story reflects the company’s story
This environment makes it very tough for a company like BASF – large, complex, difficult to understand – to decide what, how, when, and how much to report. Therefore we went back to an even more basic question which is: Why? Why do we do what we do? What is at the core of our business?
We have one answer for all of our stakeholders that summarizes the purpose as a company: "We create chemistry for a sustainable future." This is our basic understanding; this explains why we are in business. We combine economic success, social responsibility and environmental protection. Through science and innovation we enable our customers to meet the current and future needs of society. In this way we contribute to solutions for global challenges.
Although this corporate purpose was only articulated in this way in 2011, its development is reflected in the development of our reporting – in short, the gradual integration of sustainability into the core of the business, not as a separate function but as a way of doing business.
From 1989 when we published our first environmental report, to 2008 when we adopted our current globally-standardized system of local reports, our reports have become more focused and streamlined. Today, we put contextual information into our company magazine, Creating Chemistry, while the report focuses on data and analysis. Additionally, we have done a materiality analysis every three years to help us understand where to focus our efforts.
Reporting is extraordinarily difficult – and it’s only the beginning
Publishing our first local report under the global standard, BASF in Greater China 2008, uncovered several inter-related challenges of local reporting. Complex, global organizations require a high level of consistency. Information released outside of the company in any format is instantly global information. From an internal point of view, we are many units. From an external point of view, we are one primary brand. To make things worse, with the archiving power of the internet, inconsistency is easy to "discover".
At the core of our reporting lie the three pillars of sustainability: economy, environment, and society. This never came into question – but every other tiny aspect of local reporting did. Which standard should we use? Which indicators in that standard? All or none? How many years’ history should we include? Should it be an integrated report like the global one or separate? Which countries or sites would be allowed – or required – to have reports? Should the local reports be audited or verified in some way and if so, how? Would we publish only an online report or a paper publication? On what kind of paper? Or an eBook? Or an App? If so, what functionality should it have? What style would our local reports take – that of a "report" or a "brochure"?
Would we discontinue all local brochures when the local reports came out? What would we name our reports? How often should they come out?
Ultimately BASF decided – a decision by the Board of Executive Directors – to set certain large countries and production sites as "Reporting Units", which would report annually. It also covers the reporting metrics to be used, which are a subset of the global reporting metrics. Furthermore, once a reporting unit has begun to report, it cannot stop without approval from the internal sustainability council.
The Board also took the decision to report a sub-set of the GRI metrics that are used in the global report. One crucial point is that although the local reports do not disclose as many metrics as the global report, the local reports must at least touch on all three aspects of sustainability.
However, reporting is only the beginning.
Reports are only useful in the context of a stakeholder relations program
Reports are a valuable resource – in the context of overall stakeholder relations. Although it is not (yet) a legal requirement in any Asian country to publish a local report, our local reports help us address the expectations of vocal stakeholders, have become a standard reference for our in-house communicators to use in their daily work, can be newsworthy in their own right, and provide a basis for discussion with our stakeholders.
Let´s look at stakeholder relations – in context. We identify the stakeholder groups with an interest in the content of our reports. We assign internal owners for each group. We interact with stakeholders based on the specific topic, and we identify the relevant stakeholders on a case-by-case basis. The target is close cooperation within BASF – whether it is response to societal and regulatory pressure, media interaction, or business opportunities. What reporting provides is the data basis for stakeholder engagement – but issuing a report is not a substitute for engagement.
Reporting also provides the data basis for formal information exchange. This can include NGOs´ (paper) magazines, online magazines, Twitter feeds, Email newsletters, and research reports. By settling, once a year, exactly what we disclose and what we do not disclose, we have information at the tips of our fingers that enables us to respond faster, in more detail, and in a more decentralized way than we did before. We are able to host discussions on our own online platforms, such as our external dialogue platform http://creator-space.basf.com
, or to provoke discussions on managed platforms such as our Facebook and Twitter profiles. In these cases, comprehensive reporting data allows consistent substantiation of our messaging, which we do via transparent use of our authorized individual spokespeople.
Additionally, with reporting as our basis, we are able to adopt a more professional style online. When we enter discussions on controversial topics in a calm way based on sound facts, the silent majority can form rational conclusions. In these cases, although we have consistent, approved core messages, our authorized spokespeople are able to have some autonomy to implement them by addressing the issue, not just responding to comments.
On the foundation of this information exchange we also need real life interaction, usually through events and sponsorship. Again, the strong data basis of our global and local reports supports relationship building. There is a continuum from the types of interaction we target with less known stakeholders to familiar stakeholders. For stakeholders who are less known or have a greater tendency towards hostility, we try simply to attend the same conferences or events and find occasions where our goals overlap. Later this may lead to speaking at the same conferences. For a more focused engagement we will sponsor stakeholders’ events, invite them to participate or even speak at our events, or ultimately co-organize projects together.
The future of sustainability reporting
What is the future of sustainability reporting?
Happily, reporting has come a long way from the "CSR brochure". It is becoming more professionalized, more comprehensive, more regular, and more integrated.
However, it is also becoming more frequent, more structured, and more integrated with financial reporting. On the whole, I see all of these trends as positive signs – but they also mean that reporting will require more time, more effort, more expertise, and more resources.
For this reason, I exhort my colleagues in the industry not to stop at reporting: before and after the report is published, take the time to engage in dialogue with stakeholders, using the reporting data as a basis. Let’s make all those reports worthwhile!
(3) Global Reporting Initiative
(4) Governance & Accountability Institute
(6) The United Nations’ Brundtland Report, 1987
Genevieve Hilton has been head of external communications Asia Pacific for BASF, the world´s leading chemical company, since 2008. In this role she is responsible for crisis communications readiness, stakeholder relations, media relations, and external communications strategy for the region.
She was previously a member of senior management at multinational and local public relations firms, most recently at Ketchum Greater China. Based in Asia (Hong Kong and Vietnam) since 1994, she is an active member of the local communications industry and is currently Vice President of the International Association of Business Communicators, Hong Kong Chapter.