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August 12, 2003
Ford's Latest CSR Report Increases Transparency by Using GRI Guidelines
    by William Baue

Ford's decision to base its 2002 Corporate Citizenship Report on Global Reporting Initiative (GRI) guidelines will help analysts get a fuller picture of the company's performance (part one of a two-part article).


Last month, Ford Motor Company (ticker: F) released its 2002 Corporate Citizenship Report , which uses Global Reporting Initiative (GRI) guidelines to disclose social and environmental performance. GRI is an effort of the private sector, investors, analysts, nonprofit organizations and other corporate stakeholders to improve the relevance and reliability of corporate social responsibility (CSR) reporting.

"This report is a quantum leap from what we have seen from Ford in past years," said Pierre Trevet, an analyst with Innovest Strategic Value Advisors who has been following Ford since 1995. Innovest, a firm that researches the link between sustainability performance and financial performance, is in the final stages of updating its ratings of 15 of the largest automobile manufacturers in the world.

"This is the first time Ford has managed to structure and consolidate its sustainability data and reporting for all of its facilities worldwide," Mr. Trevet told SocialFunds.com. "Ford has been using the GRI platform since 2000, but they didn't have the management capacity in-house to collect all the data and to report on everything."

Andrew Brengle, an analyst with KLD Research & Analytics, a socially responsible investment (SRI) research firm, agrees about the report's comprehensive employment of GRI.

"It is a beautiful report in its presentation and Ford makes effective use of the GRI format," Mr. Brengle told SocialFunds.com. "I found all the issues I was looking for, and actually got more than I expected in the 'product' and 'environment' sections."

However, the report does not address all GRI indicators completely.

"In terms of environmental and social cost accounting, the report is actually quite weak," Mr. Trevet points out.

Such lapses may be more apparent when companies use GRI reporting guidelines because the guidelines discourage attempts to sweep issues under the rug. To help readers of its 2002 Corporate Citizenship Report, Ford created an index of GRI indicators that the company does and does not report on.

"We also created a third category, 'partially reported,' for those indicators which we have some information and data available and intend to broaden our coverage," said Rob Frederick of Ford's corporate responsibility department. Mr. Frederick considers the index "one of the real innovations of this year's report."

"Where we haven't reported, we tried to be clear in our reasons why," Mr. Frederick told SocialFunds.com.

Mr. Trevet applauds the report for being transparent, even when it comes to nondisclosure.

"The report has a very strong sense of transparency, which is certainly improved by the GRI platform," said Mr. Trevet.

Reporting on corporate social responsibility is largely a voluntary effort. As such, some senior corporate managers fail to see the benefit of providing data on issues such as diversity, environment, workplace practices, product performance, and corporate governance.

"The companies offering lots of information could open themselves up to criticism for the unfavorable data they provide, while those hiding in the weeds escape detection," said Mr. Brengle. Neither DaimlerChrysler (DCX) nor Honda (HMC) uses the GRI platform, he points out, making it difficult to compare relative degrees of disclosure, while GM does use GRI.

"There is always an element of liability in being transparent," Mr. Trevet agrees. "However, there are also strong liabilities in not being transparent--in our ratings, we really sanction companies that are not transparent."

"Being transparent can be a short-term liability, but long-term I think it will pay off, because the company will have stronger stakeholder capital," Mr Trevet added.

The business case for CSR transparency holds that full disclosure ultimately creates competitive advantage and shareowner value.

"The competitive advantage comes not just from the reporting itself, but our ability to improve performance and meet the rising expectations of investors, customers, business partners and others," said Mr. Frederick. "Reporting enhances our ability to identify and respond to opportunities and risks facing the business, which in turn enhances our competitive position."

Part two of this article will address the limitations and shortcomings of Ford's GRI-based report.

 

 
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